Businesses and individuals pay tax on earned income to sustain the economy under the regulation of the central government. It is a consistent source of income for the government to invest in developmental areas of the nation. Government initiates the funds’ flow to develop infrastructure, healthcare, education, agriculture, and other welfare schemes for native residents. For an easy evaluation of the payable tax, the individuals can use an income tax calculator. This tool helps you to calculate tax amounts based on the financial budget of the session and the income of the taxpayers.
Types of taxes
- Direct tax – The individuals or entities having access to multiple sources of income and generating higher revenues are liable to pay higher taxes. Therefore, tax implications are directly proportional to revenue generation.
- Indirect tax – Unlike direct tax, indirect tax is not levied on the income but on the goods and services. Manufacturers, importers, exporters, and individuals indulged in the purchasing of goods and services pay indirect tax to the government. Indirect taxes are circulated and used again for the benefit of the consumers.
Service tax, excise duty, value-added tax, customs duty, stamp duty, entertainment tax, security transaction tax fall in the perimeter of indirect taxes.
In India, the taxation law started in the year 1960. There have been continuous amendments in the laws to strengthen the financial ability of the nation.
INCOME RANGE LIABLE FOR PAYABLE TAX
The Ministry of finance revises the financial budget every year. The Union budget emphasizes different pillars of the nation to equilibrate the stability in every sector. Income tax calculator India helps in the computation of the payable interests based on the profitability and the duration.
The income of the individuals is grouped into different categories that are referred to as tax brackets or tax slabs. Although direct taxes are deducted every month from the income of the individuals that can be calculated using a tax calculator. Income tax functions are based on the tax slabs in India. However, the paid taxes are calculated annually.
Individual taxpayers are categorized into:
- Residents and non-residents – Below 60 years of age
- Resident senior citizens – 60-80 years of age
- Resident super senior citizens – 80 years and over
- For individuals with an annual income up to Rs. 2.5 lakhs annually are exempted from paying the tax in the new tax regimes.
- Taxpayers with annual income ranging from Rs. 2.5 – Rs. 5 lakhs have to pay 5% tax.
- The range between Rs. 5 lakhs and 7.5 lakhs is relieved to pay from 20% to 10% tax in the revised budget.
- 15% taxation is levied on the income range from Rs. 7.5 lakhs – Rs. 10 lakhs.
- An interest rate of 20% is charged from the individuals earning from Rs. 10 lakhs – Rs. 12.5 lakhs.
- On the income from Rs. 12.5 lakhs – 15 lakhs, the individuals pay 25% tax.
- There is no change in the taxation rules on the annual income above 15 lakhs, that is 30%.
CALCULATION OF CORPORATE TAXES
Corporates are independent legal entities that pay taxes under Income Tax Act. Either domestic or foreign companies, both are liable to pay taxes. The only difference is, a native company is charged on its universal income while a foreign company pays taxes on the revenue generated only in India.
Companies and businesses pay taxes on the business profits, capital gains, rental property benefits, and other profitability from interests and dividends.
Corporate Tax Slabs:
- Businesses with a turnover of up to 400 crores pay 25% tax excluding surcharge and cess.
- If the companies have opted for section 115 BA (tax profits on the life insurance of the businesses) will also be taxed 25%.
- Those who have opted for section 115 BAA are liable to pay at a 22% interest rate.
- Section 115 BAB allows businesses to pay at 15% interest.
- Ordinary companies or businesses have to pay a huge 30% taxation on their profits.
Section 115 BA, 115 BAA, and 115 BAB permits companies to pay taxes at different rates with surcharge and cess at additional rates.
TAXATION PLANS IN INDIA
The finance ministry analyzes the financial efficiency of the taxpayers and plans the strategies for the funds’ regulation to scale up the economy. Effective tax planning is a measure of the strength of the country. It allows the reduction of the income tax liabilities for the taxpayers.
In India, the taxpayers save their taxation in multiple ways mentioned in the sections from 80C to 80U under the income tax act, 1961. With the objectives of reduction in overall tax liability, economic stability, economic growth, litigation minimization, and productive investment, the reduction laws are implemented.
Methods of tax planning:
- Short term – The tax plans are executed at the end of the fiscal year. This methodology doesn’t partake in long-term commitments.
- Long-term – Tax planning is enforced at the beginning of the fiscal year and followed throughout the year. It proves to come to fruition in the long run.
- Permissive – This allows the enforcement of the deductions plans under the provisions of Indian Taxation Laws.
- Purposive – With the use of tax-saver instruments, purposive tax planning ensures that the individuals get the benefits from the investments.
IMPACT OF PAYABLE TAX ON INDIAN ECONOMY
Indian economic growth has surged to 20.1% in the April-June quarter of the current fiscal year. Certain factors impact the economy. However, the payable taxes hugely impacts our economy.
According to a 2021 report, the GST collection reached a huge figure of Rs. 1,16,393 crore in July. The steel sector is the major taxpayer in India. This sector solely contributes 43% of profits to the economy. The tax profitability is invested for developing robust management in the country.
Every individual contributes to economic growth through direct and indirect taxes. Taxpayers refer to the tax slabs and the income tax calculator helps in the correct evaluation of the taxes as per the interest rates of the relative financial year. To save yourself from tax evasion, deduct your taxation liabilities with an efficient platform. A team of professionals helps in the facilitation of safe investment to grow funds or assets to meet your financial objectives.