How to Calculate Your Income Tax Based on Tax Slab?

TAX IN INDIA

India, a country with a vast and diverse population always had a structure of direct tax since prehistoric times. The word tax has been derived from the Latin word ‘Taxo’ or ‘Taxare’ which typically means to recognize the value of something. In India, tax has been divided into two categories – Direct Tax and Indirect Tax.

Let us dive into the concept of Direct and Indirect Taxes and look at the details provided below.

Direct Tax is a form of taxation where taxes are directly paid by the people of India to the Government authorities.  The taxes are of state officials. A good taxing system enables the economy to work effectively and efficiently and also strengthens the nation. These taxes are charged from the income of an individual and this results in the improvement of the revenue system of the states. Some direct taxes have been imposed by the Government of India:

ï Income Tax – Income tax is paid by an individual on their respective income. Different incomes have different tax rates. The Income Tax slab rates for the Financial Year 2023-24 or Assessment Year 2024-25 have been discussed below –

Slabs (Rs) Individuals

(<60yrs)

Senior Citizen

(>60 yrs and <80yrs)

Super Senior Citizen

(<80yrs)

Upto 2,50,000 Nil Nil Nil
2,50,001 – 3,00,000 5% Nil Nil
3,00,001 – 5,00,000 5% 5% Nil
5,00,001 – 10,00,000 20% 20% 20%
Above 10,00,001 30% 30% 30%

 

  • Security Transaction Tax (STT)   –  These taxes are imposed on the stocks that are listed on renowned stock exchange boards. The tax amount is imposed on the stock value which increases the value while transacting.
  • Corporate Tax – The companies which are established in India and are performing operations on the ground of India, have to pay tax to the Government to continue its operations. The taxes are levied on the profit incurred by the business. Similar to income tax slab rates, companies also have different slab rates on which the taxes are to be paid.

As everything deals with both pros and cons, direct tax also has both advantages and disadvantages.

Pros:

Inflation – Direct tax acts as a significant way to curb inflation. During monetary inflation, the Government increases the rates of taxes on goods and services to reduce its demand which in turn controls the inflation.

Balance in the economy – There is a fixed income slab rates for every individual which creates a balance between both the economic and social life.

Cons:

Direct tax comes with various disadvantages but the biggest cons is the filling of Income Tax Return every year for tax eligibility and tax refund.

Indirect Tax is never imposed on the income, profit, or revenue of an individual but is levied on the goods and services by the Government and it can be transferred from one taxpayer to another. Beforehand, indirect taxes meant paying extra charges on any goods or services. Goods and Service Tax (GST) is one of the indirect taxes imposed by the Government of India. Other indirect taxes that have been levied earlier are:

  • Central Excise Duty – These taxes were imposed on the manufacturers who used to transfer their taxes to the retailers and wholesalers.
  •  Custom Duty – These taxes were imposed on the goods imported from other countries and it was paid by the ultimate consumers or retailers.
  • Sales Tax – These taxes were levied on the retailers who would shift their burden to consumers by charging extra amounts on the goods and services as sales tax.
  • Service Tax – These taxes were imposed on the consumers for providing services.

Here, we conclude that both direct and indirect taxes are equally important for the upliftment of society economically and socially.

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