Tax

Introduction
• Budget
• A financial plan for a defined period of time
• It includes planned sales volume, revenue, resource
quantities, costs and expenses
• Union / State Budget
• Is an annual financial statement presenting the proposed
revenues and spending of the government for a financial year
• The Finance Minister presents it to be passed by the
legislature (approved by President of India) / assembly
(approved by Governor of the State)
• Finance Bill
• Is a legislative bill proposing the changes to taxes, duties, etc.
• Annual Finance Act
• Every Finance Bill is assented by the President of India to
become the Finance Act
• Through this Act, Central Government gives effect to financial
proposals at the beginning of every financial year
• This Act renews itself every year
• The existing policies, new policies, as well as changes made to
the existing policies are all included here
 Terms
• Tax
• Is a compulsory payment levied by government on its citizens
and business firms. It is charged on individuals, incomes,
wealth, services and sales (goods)
• Fee
• Is a voluntary payment to government for special services
rendered by government in public interest, but rendering a
specific advantage on the person paying it
• Duty
• Is charged on goods (Excise and Customs)
• Levy
• Is an action word representing charges
• Fine
• Is a penalty for non-compliance
• Cess
• Is a tax on tax for specified purposes (Surcharge, Education)
• Imposition
• Is for specific purpose

• Tax Rate
• Rate at which amount to be paid is calculated on the tax base
• Tax Base
• Amount on which tax rate is applicable
 Types of Tax
• Tax can be
• Proportional tax
• Same proportion of tax is imposed on everyone regardless of
their income (Estonia, Latvia, Lithuania, Russia, Ukraine)
• Progressive tax
• Increasing slab rates for increasing incomes are charged.
There is a greater impact on high income individuals.
• Regressive tax
• Decreasing slab rates for increasing incomes are charged.
There is a greater impact on low income individuals.
(Denmark, Sweden, Norway, Netherlands, Switzerland)
 Classification of Taxes
• Taxes can be classified as (1) Direct Taxes (2) Indirect Taxes
• Direct Taxes
• Is imposed on a person on his income / profits or property
• Is a tax levied on income or profits of the person who pays it
• The burden to pay tax cannot be shifted to others and is
borne entirely by the person that pays it
• Indirect Taxes
• Is imposed on a transaction
• Is a tax collected by an intermediary from the person who
bears the ultimate economic burden of the tax
• The intermediary later files a tax return and forwards the tax
proceeds to the government with the return