Tax can be defined as a fee that is legally imposed on individuals and corporations by government bodies at regional, state and national levels to financially aid government activities. Taxes are levied by the Municipal, State and Central Governments and legally backed-up by the Constitution, the Parliament and the Legislative Assembly. Tax is crucial for the country’s progress, development and sustenance.

The different types of taxes that are levied by the government can be broadly classified into Direct and Indirect taxes. A wide array of taxes falls under these two categories, but some taxes that you must know about include:

1. Property Tax

Property tax is the tax that is paid by the owner of a property semi-annually or annually to the municipal corporation or the local government of the locality. It is a direct tax that is imposed on tangible properties like land, house, shops, rented properties, business buildings etc. It comprises of water, lighting and drainage taxes.

In India, the amount collected through property tax is used for the development of the local infrastructures like repairment of roads, construction of schools, maintenance of sanitation systems etc.

2. Professional Tax

Professional tax can be defined as the tax that is imposed by the state government on all salaried individuals. Since professional tax is levied by the state government, the calculation of the tax and the amount collected varies from one state to another.

Each state declares a slab on the basis of which the tax is collected. However, the maximum amount of professional tax collected from an individual cannot exceed Rs. 2500.

3. Education Cess

Cess is a type of tax that is additionally levied on another tax by the central government to raise funds for a specific purpose. The Indian government levies education cess at 2% on the basic tax liability of every individual so as to fulfil its commitment of providing and financing basic and quality education to the poor people of India.

To provide secondary and higher education as well, the government levies an additional 1% cess to collect the fund.

4. Stamp Duty

Stamp duty is the tax payable under Section 3 of the Indian Stamp Act, 1899 on legal documents during the transfer or property or assets. Stamp duty is a legal tax that acts as evidence of any sale or purchase of a property. It is levied by the state government and thus, its rate varies from one state to another.

The amount of stamp duty levied depends on the property’s value during its registration. Usually, it is paid by the buyer during the purchase of a property. However, in case of property exchange, it is shared by the buyer and the seller.

The fund collected from the aforementioned taxes along with numerous other taxes imposed on individuals by the government help in the growth and development of the economy in the long run.

Click here to visit our personalized online advisor that gives you the financial expertise you need.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



Trending Articles

Article Links

How to Calculate Income Tax

Income Tax Benefit

Tax Saving Investment

Tax Saving Investments Under 80C

What is Tax

Latest Articles

abc-of-taxes
abc-of-taxes

Income Tax Slab for Senior Citizen: Rates and Exemptions

Read More
Posted on 24 March 2020
abc-of-taxes
abc-of-taxes

How to Get Tax Rebate in India?

Read More
Posted on 24 March 2020
abc-of-taxes
abc-of-taxes

Section 80D Of The Income Tax Act For Health Insurance

Read More
Posted on 24 March 2020

Featured Articles

image abc-of-personal-money
abc-of-personal-money

Are Millennials Any Different When It Comes To Planning Financials?

Read More
Posted on 05 February 2020

Relevant Articles

image abc-of-retirement-planning
abc-of-retirement-planning

What is PRAN (Permanent Retirement Account Number)

Read More
Posted on 27 March 2020
image abc-of-retirement-planning
abc-of-retirement-planning

Key Highlights in Transferring Your EPF Balance to NPS

Read More
Posted on 25 March 2020
image abc-of-retirement-planning
abc-of-retirement-planning

Why Ignoring to plan for Retirement can be Financially Damaging?

Read More
Posted on 25 March 2020