Budget Terms Explained: Apart from the income tax slab, there are some important announcements in the budget which affect the pockets of the common people.
Budget Terms Explained: Individuals pay income tax, corporate tax is paid by companies. These are direct taxes, which most people understand because the government collects them directly from the taxpayer or the company. Although there is another category of tax, which we all pay, but many times we do not feel that we have paid any tax. This is because we do not give this tax directly to the government. This tax is usually hidden in the prices of goods or services. We all pay this indirect tax.
The tax that the government levies on income and profits is direct tax and the tax that it collects on goods and services is indirect tax. Indirect tax can be understood as if you have purchased any goods from the market, then the price you are paying includes tax.
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Direct Tax
- Direct tax is collected directly by the government on income and profits. Income tax, security transaction tax and capital gains tax come under this in India. Income tax is to be paid on the income earned in a financial year.
- Security Transaction Tax (STT) is payable on the sale and purchase of shares. Whether you gain or lose on the purchase and sale of shares, you have to pay security transaction tax.
- Apart from income tax and STT, capital gains tax is also collected by the government directly. This tax is to be paid on the profit made on the sale of a property or on exit from investments. Short term capital gains tax or long term capital gains tax is to be paid according to the holding period.
- Companies pay corporate tax on profits from business.
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Indirect Tax
- Direct tax is paid to the government on income and profits while indirect tax is collected by the government on goods and services. Direct tax is paid directly to the government.
- Custom duty is paid by the importer or exporter on the goods which are imported or exported into the country. Its effect on the common people is such that if the government increases this duty on gold, then jewelery can become expensive because now you will have to pay more tax.
- Excise duty is imposed on things made in India. Till June 30, 2017, most of the goods used to come under it, but after the introduction of GST (Goods and Services Tax), it includes tobacco products, air fuel, natural gas, petrol-diesel i.e. excise duty is still levied on these things. . The effect of excise duty on the common people is such that due to this, the common people have to bear the brunt of expensive oil. Tax is almost half of the price we all pay for petrol and diesel.
- Individuals or businessmen have to pay GST on the supply of any goods or services. GST is a part of all the things we buy every day.
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