Tax structure and Types

Tax and Finance Tips

Tax structure

We all are aware of the fact that we have to pay tax to our government in one form or the other and this is the reason why it is important to understand the state and country law for tax payments. Every person who is earning has to pay income tax to the government and he is required to show the income sources. Apart from income tax, there are various types of tax which a person has to pay and they are elaborated below:

Personal Income Tax

The personal income tax in India is similar to other countries world wide. The tax is deducted based on the total income earned by a person through all sources. This is some percentage which is calculated to get the total amount to be deducted. An annual income below 100,000 INR is not taxable while the income which exceeds 100,000 to 1.5 million INR is taxed at 10%. If the earning id between 1.5 millions to 2.5 millions, then the tax will be deducted at 20% rate. The income which is more than tax may fall under 30%-40% of the total income.

If the income is through stock market, the total tax will be calculated as per 20% of the annual income. The income tax for non-citizens will be decided as per the type and source of income. Royalty and technical service fees are taxed at 10% of the total income. All other person incomes are taxed at 30%.

Sales Tax

Like any country India also imposes a sales tax on the goods sold and bought. However, the tax ranges as per the types of goods and this is the reason the amount may vary. The tax on precious stones and bullion is 1%, on bulk consumption goods such as cell phones, computers, sneakers and other items will be at 4%. It there are any uncategorized items, the amount of tax will be 12.5%. There is tax on tobacco, petroleum and liquor; however, food, board and room are not taxed. State governments a regulatory control on them and this is one of the reasons why the taxes may vary from state to state. You should know them as per the state law.

Tax on Corporate Income

There are various forms of this type of tax in India and this is one of the reasons why it is important to understand if you are already or going to start a new venture. For domestic corporations in India, the income tax rate is 35% along with 2.5 % surcharges. The tax has implications on those foreign organizations which have bases in India such as Microsoft, HP and IBM. These companies have to pay for 40% of the total income along with 2% of the surcharges. This income tax policy also requires that the people living in this country should pay income tax on all income such as work done on other countries and if the person has worked for the corporation which is situated in a foreign country including telecommunications work.

What is capital gain tax

Income-tax act, 1961 consists of Section 45 to 55A for capital gains. All of these sections give information related to the profits, gains and other related information. Below mentioned are some of the requirements of income tax charge as per the capital gains:

• There should be any capital asset
• There has to be a capital asset transfer
• The transfer should have been in effects since previous year
• The person responsible should have gains from this type of transfer of capital asset

There are mainly two types of capital gain as elaborate below:

Short-term gains / long term gains

The capital gains which are received after selling the capital assets help for over three years which also includes 1 year for mutual funds and listed securities can be considered to be long-term gains and these types of gains get taxed at lower rates as compared to short-term gains.

The improvement costs and cost of acquisition are associated with cost inflation index at the time of calculating these taxable long-term capital gains. It results in the deduction of indexed acquisition costs from considering the sale gains.

For long-term gains, tax rate is imposed at 20% flat rate for foreign companies as well as individuals. The rate for any domestic company is 30%. It has been observed that the long-term capital gains on shares/ bonds transferred and issues in foreign currency are taxed at 10% which has been notified by Indian Government.

What is capital Gain?

This is a form of an income which is earned by selling the property or any investment. This income can be represented including a farm, house, work of art or a family business. It is a well known fact that if a buyer buys the property at lower rates and sells at higher rates, then the buyer makes profits. The capital asset sale and the profit hence made will be considered as a capital gain. It is also noticed that this is a profit for one time and cannot be considered as a regular source of income including house rent or monthly salary. This is one of the reasons that it is not considered to be recurring type income source for individuals or group of bodies.

What are capital assets?

All kinds of properties including immovable, movable, intangible and tangible which are owned by an assessee is known as a capital asset. It may or may not be associated with his profession or the business. Below mentioned are some of the assets which are not considered as capital asset:

• Consumable stores, Trading stock and raw materials which are stored for a business or professional purposes
• Costly stones, jewelry, gold and silver
• Gold Deposit Bonds
• Land for agriculture in any state in India
• Special bearer bond or specified gold bonds

Before filing for capital gain tax, you need to be aware of the documents which you need to produce. You must take advice from a tax consultant.

What is house and property tax

Everyone has a dream to own a house for himself, so making a home or owning a home is one of the most important events in one's life. It is a kind of investment and it will pay when you need money and when you are in a problem. As you know the price of property is growing day by day and selling of a good house becomes the hot sale for the property dealers. In today's market, every one wants to have own house or property, which gives return in future when the rates become much higher than what have you paid at the time of buying property. In present time great deals are there in the real estate market so you should choose the best deal for yourself for the sake of investment, and they are specially meant for the buyers. Most of the times, people fail to see the tax benefits on the purchase of your home.

Every one has his own reasons to buy the homes, some have to buy the home and put that for the rental purpose, some save this as investment purpose and few of them buy homes as they want to start their family. One reason to own a house is that you can save your money which you have to pay for the renting purpose. When you pay amount for the purchase of the house then that money considered to be as your principal balance of the loan. The interest of the principal balance will not come back in cash but it will benefit you in another way which is as the same as the money back offer. If your loan amount is below one million dollar then it can cancel the taxes which you have to pay every year. This is detachable of the centralized taxes which you pay on your salaries every year.

This means that you will not get the money back in cash when you get the tax returns but it means that it is a deductible amount from your taxable income you earned. It becomes a great advantage to the persons who want to buy their own home as they are free from paying any kind of rents on a home, other benefits is of getting easy loans for the first time home buyers. The government has made provisions for those who are going to buy the home for the first time for themselves to give them ten thousand dollars.

It is very necessary to understand that when you make money then you have to spend at least some amount of money for the purpose of paying interest for the home loans. It is automatically deducted from your salary so that you can consider it as if you never earned that amount ever. This is an ideal way to save your precious money by paying home loan interest or tax; otherwise your money will be deducted in an income tax. For more information, you can get in touch with the tax consultant.

Wealth Taxation

The wealth taxation is India is applicable to all citizens of the country and is also called the wealth tax act, 1957. This is also considered to be direct taxes of the country. It is paid on the benefits of property ownership and the person who owns the property has to pay for the wealth tax for the time period for which he retains the ownership. It must be noted that the person has to pay for wealth tax even if it is not gaining any income.

How to pay for the wealth tax in India

The person who pays for the wealth tax is called an assessee and he may belong to the categories mentioned below:

• A Hindu undivided family
• Non corporate taxpayers
• A representative of dead individual, or administrator and the executor
• A Company
• An agent of Non-resident
• A body of individuals or as association of persons

It should be noted that the tax will be considers on the total income earned from the collections of Joint family in case of a Hindu Undivided Family. However, in case of non-corporate payers, they are supposed to pay the tax as per the existing tax rate as their accounts are being audited.

Wealth Tax Chargeability in India

The domicile status of a person is one of the primary factors for that person to pay for wealth tax. According to this act, the assessee’s domicile status and the status of the same needed for income tax payment should be similar. The other factor on which the wealth tax is calculated is the status of assessee. This means that it does not make any difference whether he is a non-citizen or a citizen of the country, he has to pay for wealth tax; however, if the wealth is located outside India, it will not be taxed.

Wealth Tax chargeable assets

Below mentioned are the assets on which the wealth tax has to be paid by the assessee:

• Guesthouses, urban farmhouse, residential house and commercial property
• Automobiles for person purposes
• Precious items such as utensils, bullions, jewelry and furniture
• Aircrafts, Yachts and boats which are used for non-commercial purposes
• For the cash in hand which exceeds 50,000 for Hindu undivided families and individuals
• Urban land which is under the authority of cantonment board or municipality and having a population over 10,000.

For filing for the wealth tax, the procedure is same as that of procedure for filing the income tax. A return of wealth form A has to be filled by the person and after reading it thoroughly; he must provide the correct information. It is highly recommended that the person must check all the documents required before filing for wealth tax form and the information is given in the Form A. You can also get the help from an attorney or a person who has complete information and knowledge about how to file for wealth tax. This will save your time and efforts.

Impact of HSA - Health Saving Account

Disclaimer