DECEMBERASIA BUSINESS OUTLOOK9UNDERSTANDING THE METHODS OF TAXATION & ITS RELATION TO A PROFITABLE BUSINESSIMPRESSIONSAn essential part of being a responsible and productive citizen of your country is paying your taxes on time. Tax is essentially your contribution to the country's growth and development and are deducted from an individual's income or added to the cost of certain transactions, services, and goods. In India every tax levied is supported by a law passed by the Parliament or the State legislature. As a result, we pay taxes in various forms that differ depending on how they are implemented and paid to the authorities. It is generally considered as government's most important and largest source of revenue and when collected the government uses that for a variety of projects aimed at the nation's development.Understanding the Methods Involved in India's Tax StructureThe Indian tax system is well-organized, with a three-tiered federal structure. It is made-up of the federal government, state governments, and local municipal governments. When it comes to taxes, there are two types in India: direct taxes and indirect taxes. Income tax, gift tax, capital gain tax, and so on are examples of direct taxes, whereas indirect taxes include value-added tax, service tax, Good and Service tax, customs duty, and so on. The Central Government of India levies taxes such as customs duty, central excise duty, income tax, and service tax while the state governments levy income taxes on agricultural income, state excise duty, professional tax, land revenue, and stamp duty and the local governments are permitted to collect octroi, property tax, and other taxes on various services such as water and drainage supply.Lets now Understand in brief why we pay taxes to the government!Purposes of TaxationDuring the 19th century, the prevalent belief was that taxes should be used primarily to fund the government. They have used taxation for more than just fiscal purposes in the past and continue to do so today, distinguishing between the goals of resource allocation, income redistribution, and economic stability. Economic growth or development, as well as international competitiveness, are sometimes listed as separate goals, but they are usually subsumed under the other three. In the absence of a compelling reason for intervention, such as the need to reduce pollution, the first goal, resource allocation, is advanced if tax policy does not interfere with market-determined allocations. The second goal, income redistribution, seeks to reduce disparities in the distribution of income and wealth. The goal of stabilization implemented through tax policy, government spending policy, monetary policy, and debt management is to keep employment high and prices stable because public expenditures tend to grow at least as fast as the national product, taxes, as the main vehicle of government finance, should produce revenues that grow correspondingly. However, today's entrepreneurs and innovators undeniably contribute to economic growth by growing their businesses from a small scale to a large scale.But the question still remains: how is taxing business beneficial to the country's growth?Is Taxing Business Good for Growth?Profits and gains from business are one of the income tax categories that comes under the Income Tax Act. The Income Tax Act divides taxable income into five categories or heads of income for the purpose of determining a taxpayer's tax liability. After salaries and By: Avinash Barik, Online Content Writer, Asia Business Outlook
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