Income Tax News: Do You Know What Direct Taxes Are? Check Types and How It Impacts Individuals

Income Tax News: Union minister Nirmala Sitharaman is scheduled to deliver the budget for the fiscal year 2024–25 on February 1 for the sixth year in a row. Since this year's Lok Sabha elections are approaching, this budget presentation will only serve as a temporary one. Following the establishment of the new administration, the entire budget for the fiscal year 2024–25 will be presented. Try to learn the definition of a direct tax and who is responsible for paying it before this year's budget is presented.

Definition of Direct Tax

A direct tax is one that is paid to the government directly, with no middlemen, by an individual or organisation. It is imposed on and paid for directly by the people or organisations to whom it applies. Income tax, real estate tax, personal property tax, and asset-based taxes are a few types of direct taxes. The taxpayer pays the government directly for these taxes.

Distinction Between Direct and Indirect Taxes

The opposite of an indirect tax is a direct tax, which is imposed on one party (the seller) and paid by another (the customer in a retail setting, for example). Direct taxes are your obligation to pay and cannot be transferred to another person. The reverse is true for indirect taxes. The person responsible for these taxes may transfer or assign them to another individual or entity.

Below are a few categories of direct taxes

Income Tax

The amount of income tax due is determined by the government using different tax slabs based on an individual's age and wages. Every year, the taxpayer must file an income tax return (ITR), which may result in a payment or a refund depending on the return. There may be severe penalties for not filing an ITR.

Wealth Tax

The annual tax payment is dependent upon the ownership and market value of the property. Property owners are subject to wealth tax regardless of revenue generated by their holdings. Wealth tax is imposed on individuals, corporations, and Hindu Undivided Families (HUFs) according to their residential status. Nonetheless, a few of assets are free from wealth tax, including stocks, gold deposit bonds, and homes rented for more than 300 days.

Estate Tax

It is paid according to the value of a person's estate or remaining assets after their death and is also referred to as inheritance tax.

Corporate Tax

Companies, both international and domestic, that generate income in India are required to pay corporate tax. Taxable income includes dividends, royalties, interest based in India, asset sales proceeds, and technical service fees. Other taxes such as the Dividend Distribution Tax (DDT), Capital Gains Tax, Minimum Alternate Tax (MAT), Fringe Benefits Tax, and Securities Transaction Tax (STT) are included in the corporate tax.

Capital Gains Tax

Paid on the proceeds received from the sale of capital assets, which include houses, farms, bonds, stocks, companies, artwork, and bonds.

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