Know Everything About Taxes?
A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent.
Most countries have a tax system in place to pay for public, common or agreed national needs and government functions. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes based on annual income amounts. Most countries charge a tax both on corporate income and dividends. Countries or subunits often also impose wealth taxes, property taxes, sales taxes, valueadded taxes, payroll taxes or tarrifs.
The legal definition, and the economic definition of taxes differ in some ways such as economists do not regard many transfers to governments as taxes. For example, some transfers to the public sector are comparable to prices. Examples include, tuition at public universities, and fees for utilities provided by local governments. Governments also obtain resources by "creating" money and coins, through voluntary gifts, by imposing penalties, by borrowing, and also by confiscating wealth. From the view of economists, a tax is a nonpenal, yet compulsory transfer of resources from the private to the public sector, levied on a basis of predetermined criteria and without reference to specific benefit received.
In modern taxation systems, governments levy taxes in money; but inkind and corvée taxation are characteristic of traditional or precapitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as the Ghana Revenue Authority,
Canada Revenue Agency, the Internal Revenue Service in the United States, Her Majesty's Revenue and Customs in the United Kingdom or Federal Tax Service in Russia. When taxes are not fully paid, the state may impose civil penalties or criminal penalties on the nonpaying entity or individual.
Purposes and effects
The levying of taxes aims to raise revenue to fund governing or to alter prices in order to affect demand. States and their functional equivalents throughout history have used money provided by taxation to carry out many functions. Some of these include expenditures on economic infrastructure, military, scientific research, culture and the arts, public works, distribution, data collection and dissemination, public insurance, and the operation of government itself. A government's ability to raise taxes is called its fiscal capacity.
When expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts.Governments also use taxes to fund welfare and public services. These services can include education systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public
According to the proponents of the chartalist theory of money creation, taxes are not needed for government revenue, as long as the government in question is able to issue fiat money. According to this view, the purpose of taxation is to maintain the stability of the currency, express public policy regarding the distribution of wealth, subsidizing certain industries or population groups or isolating the costs of certain benefits, such as highways or social security.
Effects can be divided in two fundamental categories:
Taxes cause an income effect because they reduce purchasing power to taxpayers. Taxes cause a substitution effect when taxation causes a substitution between taxed goods and untaxed goods. If we consider, for instance, two normal goods, x and y, whose prices are respectively px and py and an individual budget constraint given by the equation xpx + ypy Y, where Y is the income, the slope of the budget constraint, in a graph where is represented good x on the vertical axis and good y on the horizontal axes, is equal to py/px . The initial equilibrium is in the point, in which budget constraint and indifference curve are tangent, introducing an ad valorem tax on the y good y Y), the budget constraint's slope becomes equal to py/px. The new equilibrium is now in the tangent point with a lower indifferent curve.
Why does the government charge taxes from citizens?
In fact, any government has to spend a lot of money on the citizen service that provides services to people and institutions living in their jurisdiction. It includes roads, electricity, water and security and administration expenses. Subsidy or help given to farmers and poor people on different facilities etc. is also included in these expenses.
How many types are tax?
Taxes are taken in two ways to meet government expenditure in the whole world including India. Take part of the first person's income, that is, direct. Income tax (IT) or income tax comes in this category. Another way of taxing is to impose taxes on the use of services and goods, that is, indirect or indirect taxes.
The largest tax in direct tax or direct tax is Income Tax (IT) or Income Tax. According to the rules already fixed every year, the government charges income tax from all the citizens and institutions of the country, whose income is worth the tax.
People file an Income Tax Return (ITR or ITR) only to pay income tax.
What is constitutional provision?
In the Schedule 7 of Indian Constitution, the Central Government has been empowered to recover tax from people whose income is from sources other than agriculture.
These taxation will be calculated on the terms and conditions of the citizens and institutions of the country, details of these are given in the Income Tax Act 1961 and Income Tax Act, 1962.
The central government's Central Board of Direct Taxes (i.e. CBDT) also issues instructions in this regard from time to time. To fill Income Tax Return (ITR), ITR forms issue CBDT only.
Agricultural income in section 10 (1) of the Income Tax Act (ITA) is excluded from income tax or income tax. The income of agricultural income will be considered, it has been mentioned in section 2 (1A) of the Income Tax Act.