Sources of gov Incomes:

Sources of gov Incomes:

1)Direct tax

        It is a tax applied on individuals and organisations directly by the government. The taxes that are directly paid to the government by the taxpayer.

E.g.  income tax, Corporation tax, Wealth tax, Capital Gains Tax etc.

2)Indirect tax

        It is not levied directly on the income of the taxpayer, but is levied on the expenses incurred by them. The incidence and impact of taxation does not fall on the same entity. It can be shifted from one individual to another.  It is collected by the government from manufacturer or retailer. The eventual tax amount is paid by the buyer of the goods and services.

1)Direct tax

1) Income Tax

        Income Tax is paid by an individual based on his/her taxable income in a given financial year. Under the Income Tax Act, the term ‘individual’ also includes Hindu Undivided Families (HUFs), Co-operative Societies and Trusts.

2)Corporation Tax

       Corporation Tax is paid by Companies and Businesses operating in India on the income earned worldwide in a given financial year. The rates of taxation vary based on whether the company is incorporated in India or abroad

3)Wealth Tax

        Wealth tax is applicable on individuals, HUFs (Hindu undivided families) or companies on the value of their assets in a given financial year on the date of valuation. It is taxed at the rate of 1% of the net wealth of any assets exceeding Rs 30,00,000. Net wealth includes unproductive assets like second residential property not rented out, cars, gold jewellery or bullion and land.

4)Capital Gains Tax

An individual earns profit by selling of capital assets are taxable under Capital Gains Tax.  Capital assets include stocks, bonds, residential property, precious metals etc. It is taxed at two different rates based on how long the property was owned by the taxpayer – Short Term Capital Gains Tax and Long-Term Capital Gains Tax.

2)Indirect Taxes

1. Sales Tax

        It is levied on the sale of movable goods. It is collected by the central government and state government. In inter-state sales Central government tax is levied on inter-state sales called Central Sales Tax or CST.  In intra-state (between the states) sales the state government levied tax is called Value Added Tax or VAT.

2)Service Tax

          It is levied on the service provider by the government.  Service provider eventually it collects from the end user at the time of provision of such service.

 

3)Excise Duty

           It is levied on production of manufacture goods Once goods are manufactured; it is directly paid by the manufacturer to the Central Government.

4)Custom Duty:

         It is levied on imported and exported goods. The rates of customs duties are either specific or on ad valorem basis i.e. it is based on the value of goods.

5)Stamp Duty:

        It is levied on the selling/transfer of immovable property located in the state. It is charged by the State Government.  It is varying in rates.

6)Entertainment tax:

        It levied only by the respective state government on all financial transactions related to entertainment. Ex. Tax on video games, movie shows, amusement parks, sport activities.

GST

       GST have a single unified tax system, which means that a single tax rate is applied throughout the country. A country with a unified GST system merges central taxes (e.g. sales tax, excise duty tax and service tax) with state-level taxes.

      India established a dual GST (CGST and SGST) structure in 2017, this was the biggest reform in the country' tax structure. The main objective of incorporating the GST was to eliminate double taxation, which cascades from the manufacturing level to the consumption level.

        The earlier tax system with no GST, then tax is paid on the value of goods and services and margin at every stage of the production process. It bears higher costs for goods and services which eventually would be paid by the end consumer.

India has, since launching the GST on July 1, 2017, implemented the following tax rates. 

 

 

Tax rate at 0%: Certain foods, books, newspapers, homespun cotton cloth, and hotel services. 

Tax rate at 0.25%: Applied to cut and semi-polished stones.

          

Tax rate at 5%: Tax on household necessities such as sugar, spices, edible oil tea, and coffee.

                                                                                                                                                         

Tax rate at 12%: Tax on computers and processed food.

Tax rate at 18%: Tax on hair oil, toothpaste, soap, and industrial intermediaries.

Tax rate at 28%:  Tax on luxurious products including refrigerators, ceramic tiles, AC, motorcycles, aerated drinks, cigarettes, cars.

Where rupee Comes from (major Sources):

1)  Income Tax

2)  Corporation Tax

3)  Custom duty

4)  Union Excise Duties

5)  GST and other Taxes

6)  Non-Tax Revenue

7)  Non-debt capital receipts   

8)  Borrowing and other Liabilities

*Components of Non-Tax Revenue:

         There are several services provided by the government that generate the income sources in the form of non-tax revenue to the government.

Here are examples of some components of non-tax revenues are as follows:        

1) Interest:

           It comprises of a) interest of loans given to states and union territories for non-plan     

    schemes and planned schemes. b) interest on loans advanced to Public Sector Enterprises   

    (PSEs), Port Trusts and other statutory bodies etc.

 2)Dividends and profits:

         This includes dividends and profits from PSEs( Public Sector Enterprises )as well as the transfer of surplus from Reserve Bank of India (RBI).

                                                                            

3)Petroleum license

                                                                                                                                

4)Power supply fees:

            This includes fees received by Central Electricity Authority from the supply of power     

      under the Electricity (Supply) Act.

    

5)Fees for Communication Services:                                                                      

            This mainly includes the license fees from telecom operators on account of spectrum   

     usage charges that licensed Telecom Service Providers pay to the Department of Telecom   

     (DoT).

    

6)Broadcasting fees:                                                                                                                            

         It includes license fee paid by DTH operators, commercial TV services, commercial FM

     radio services etc.

7)Road, Bridges usage fees:                                                                                                        

         This includes receipts through toll plazas on account of the usage of national highways,

   permanent bridges etc.

8)Examination fees:                                                                                                                             

        This includes fees paid by applicants of competitive examinations conducted by the     

   Union Public Service Commission (UPSC) and Staff Selection Commission (SSC) to fill up   

   vacancies in government offices.

9)Fee for police services:                                                                                                          

        This includes fee received for supplying central police forces to state governments and    

    other parties like Central Industrial Police Force (CISF) to industries etc.

10)Sale of stationery, gazettes etc:                                                                                       

         This includes receipts under Stationery and Printing relating to the sale of stationery, gazettes and government publications etc.

11)Fee for Administrative Services:

         This includes fees received for providing services like audit services, issuance of passport and visa etc.

*Non debt capital receipts (NDCR) of the union government include:

1)Recoveries of loans and advances given to state governments, Union territories and foreign    

    governments.

2)Disinvestment proceeds.

Where Rupees goes to:

1) Centrally sponsored scheme

2) Central sector scheme

3) Interest payments

4) defence

5) Subsidies

6) Finance commission and other transfers

7) State' share of taxes and duties

8) Pension

9) Other expenditure

By.........

S.M.Racahawad.

srachawad370@gmail.com.