Question

What types of taxes do we pay throughout the year and to whom?

Answer 1

Basically there are two type of taxes that we pay to government for development of nations .We can classify the types of taxes into two broad areas-

1. Direct taxes
2. Indirect taxes

Direct taxes are taxes which are directly imposed and paid to the government. A few taxes which are included in direct taxes are

1. Income tax - paid by most of us. Each individual whose income exceeds the tax limit, (based on the prevailing rate) is required to pay this tax to the government.
2. Capital gains tax - tax on gain in assets or investments. For example: if you own a house and want to sell it, the gain made out the sale transaction is taxable. Capital gains = Amount received on sale - Cost of the investment
3. Corporate tax - this tax is levied on corporate or companies which are a separate legal entity (separate from its shareholder/owners). They are charged on interest, royalties, fees for services provided, etc.. There are many more taxes which are included in this such as MAT, FBT, DDT, STT, etc..
4. Wealth tax - this tax is on the benefits derived from ownership of a property. The property will be taxed every year on its current market value.

Indirect tax- this is a type of tax where the impact of taxation does not fall on the same entity. Here, the tax can be shifted by the taxpayer to another. This tax is directly proportional to the increase in the price of goods and services. Initially, we had service tax, customs duty, value added tax, etc.. but recently with Goods and Service Tax coming in effect, we only have one tax that is GST for all the goods and services we consume