What are The Benefits of Paying Taxes in India?

Taxes are the basis of the economic strength of any country.  The government of any country is able to operate public services on the basis of the revenue received.  Be it the arrangements for national security or the construction of basic infrastructure or the operation of public welfare schemes, the government is able to discharge its specific responsibilities on the basis of the income received from the tax.  It is also the sacred duty of a good citizen to pay his tax obligations on time and participate in the economic security of the country.  Certainly the tools of tax management should be used by every citizen. But paying tax also has many advantages.  Which is also necessary for every person to understand.

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What is tax?

The tax is levied in each country.  It is a mandatory financial fee, which is levied by the government of a country by the citizens or institutions of the country.  Its purpose is the mobilization of economic resources by the government for the operation of the country's systems.  The government has the main authority to determine the tax.  They get this right by the constitution of the country.  Taxes are levied by laws passed by legislatures at the central and state levels.  Failure to pay taxes can also become grounds for compensation and punishment.

What are The Types of Income Taxes in India?

There are mainly two types of taxes in India first direct tax and second indirect tax.

1. Direct Taxes: Direct taxes are those taxes which are paid directly to the government by an individual or entity.  This tax is directly levied on any person or organization, so it cannot be paid by any other person or organization.  In India this tax is administered by the Central Board of Direct Taxes.  Examples of direct tax are income tax, gift tax etc.

Read blog : What are The Types of Income Tax? How are They Imposed?

Some of the major direct taxes are as follows:

Income Tax: This tax is levied on the taxable income earned by any individual.  Which includes salary, profit from business, rent received from house and investment etc.  The Income Tax Act came into force in 1961 for the collection of income tax.  Several measures of tax relief have also been included in this Act for investments in specific sectors.  Provision for penalty etc. has also been made for not filing income tax return on time.  Arrangements have also been made for those who are not able to file income tax returns within the stipulated time frame.  Tax relief can also be found by making investments as directed under the Income Tax Act by filing income tax returns within the time limit.

Corporate Tax: Corporate tax is levied on the profits or income received by the corporate from the conduct of business.  This tax is levied on domestic as well as foreign companies operating in the country.  Income tax is levied on companies according to the income and entity of the corporate under the Income Tax Act 1961.

Dividend Tax: Dividend tax is levied on dividends received from equity or mutual funds.  Under the new system from April 1, 2020, dividend tax is now being levied on the shareholders.  Earlier this tax was levied by the Government of India on companies in the form of Dividend Distribution Tax.

Securities Transaction Tax: It is a direct tax levied on the purchase and sale of securities listed on the Indian stock exchanges. The securities mentioned by the Securities Transactions Act include derivatives, equities, bonds, etc.

Capital Gains Tax: Capital gains tax is a tax levied on the gain of the sale of an investment asset.

Gift Tax: Gifts received by an individual were taxed under the Gifts Act 1958.  But it was abolished in 1988.  Then tax on gift was reintroduced in the right of the beneficiary under Section 56(2)(5) of the Income Tax Act, 1961.

Wealth Tax:

With the aim of reducing economic inequality in the country, the provision of wealth tax has been made with the aim of increasing the participation of rich people in direct tax.  Wealth tax is administered by the Wealth Tax Act 1957.  Under this, one percent tax is levied on individuals, Hindu undivided families, companies whose income exceeds 30 lakh rupees annually.  This tax was abolished in the budget of FY 2017 and replaced with an additional surcharge of 2 per cent on individuals having taxable income of Rs 1 crore or more in a financial year.

1.Perquisite Tax: Perquisite tax is a tax levied on various incentives and benefits given by corporations to their employees.  These benefits include rent free accommodation, water, electricity, medical reimbursement etc.

2. Indirect Taxes: These are those taxes which are levied on the seller of products or service provider.  These taxes are not imposed directly on an individual.

Major Indirect Taxes:

GST: GST i.e. Goods and Services Act was implemented from 2017 to bring uniformity, transparency in tax structure across India.  Under this, taxes like CGST, SGST, UT GST, IGST etc are levied.  GST is levied on each section of the supply chain.  wherever it is used.  About 17 indirect taxes, including service tax, sales tax, have been subsumed in GST.

Stamp Duty: This is also an indirect tax levied by the state governments on the purchase of property.  It is also levied on other financial transactions like purchase of shares, mutual funds, etc.

Toll Tax: The purpose of this indirect tax is to collect funds for road construction and repair activities.  This tax is collected by the state or central governments from those traveling on newly constructed roads.

Entertainment tax: Entertainment tax is levied on activities related to entertainment such as amusement parks, video games, celebrity stage shows, sporting events, etc.

Also read: Some Important Tips for Income Tax Planning.

What are the benefits of paying taxes:

A huge amount of money is required by the government for the operation of various arrangements and activities. With the income received by tax, the government is able to ensure the due discharge of its obligations.  Due to which the people of the country can live their life in a convenient way.  The needs of the government can be seen in the following forms, which can be met by the government from the income received from taxes etc.:

The government needs money to effectively implement and implement schemes related to public welfare which are related to education, housing, employment, poverty alleviation.

Sometimes there is an epidemic or natural calamity in the country.  Huge money is needed for public health and other assistance.

The government also needs huge amount of money for the smooth functioning of public systems.  The government is constantly trying to maintain law and order, crime control, etc.

For the development of agriculture, industry and service sector, the provision of basic infrastructure i.e. roads, electricity, communication, irrigation etc. is necessary.  Strengthening of infrastructure requires huge investment by the government.

For national security, the government also needs money for the modernization of the three parts of the army, army, air force, navy etc.

The government also needs money to implement science and research related projects.

Regular elections are essential for a democratic system.  The government also needs huge amount of money for election related activities.

The government also needs funds for the smooth conduct of public communication and transport activities.

To deal with the problem of economic slowdown etc. and also to implement the plans of economic development, the government needs huge amount of money.

The government also needs huge amounts of money for liabilities related to international financial institutions such as IMF, World Bank and also for diplomatic efforts at the international level.

The government also needs huge amount of money for agriculture, animal husbandry, environmental protection efforts.

Apart from this, there are many personal benefits of paying tax.

If you have documents to file income tax return, then you can get home loan, vehicle loan easily.  Banks get an intuitive idea of ​​your income on the basis of your income tax return and approve the loan easily.

Also, read this blog that is help to file ITR: Points to be kept in mind before filling Income Tax Return

Many foreign consulates ask for documents on your income tax return during the visa interview.  This income tax return is mandatory for UK, USA and Canada.  Your income tax return is supposed to be proof that you are not moving out of the country for tax evasion.  Also, the presence of income tax return documents with you while traveling abroad saves you from many troubles and also becomes the basis of convenience in getting help from the Indian Embassy.

Self employed, freelancers, consultants etc. are not entitled to Form 16.  Income tax return documents are useful as a proof of their income.

Many a times income tax return documents are demanded while applying for government tenders.

Tax refund can also be claimed easily on filing of Income Tax Return.

Life cover or term policy with sum insured ranging from Rs 50 lakh to Rs 1 crore can be availed only by furnishing income tax return.

Self-employed persons are required to produce income tax return receipts to get the benefit of compensation in case of motor vehicle accident.

Short-term or long-term capital losses are usually carried forward to be adjusted against capital gains made in subsequent years.  It can be availed only when Income Tax Return has been filed.

The income tax returns of the candidates for participating in the elections are also demanded by the Election Commission.

Timely payment of tax is the hallmark of a responsible citizen.  The taxpayer lives the life of a citizen, he does not worry about the action of the Income Tax Department.

 In this way, by paying tax, a person not only plays a role in the smooth functioning of the country's systems, but also contributes to the prosperity and development of the country.  Also, payment of tax from time to time establishes a common citizen as a responsible citizen.  The basis of the development of the nation is the payment of taxes from time to time.