What is Direct Tax? Meaning, Types & Examples in India

Written by : Knowledge Centre Team

2025-12-10

1110 Views

7 minutes read

Introducing BSE 500 Enhanced Value 50 Fund with Promise4Wealth

50 High-Potential Companies, One Smart Decision

Name is required Name should be Valid

Mobile Number is required Mobile Number should be Valid

Email is required Email should be Valid

DOB is required DOB should be Valid

Annual Income*

< 3 3-5 5-7 7-10 > 10

Annual Income is required

I agree that even if my contact number is registered with NDNC / NCPR, I would still want the Company to contact me on the given number and email id for the clarifications/product information sought by me and agree that I have read and understood the Privacy Policy and agree to abide by the same.

Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

Every person who earns an income from a job, property, business, profession, investments, etc. has to pay a direct tax to the government. The Indian Government takes direct tax from the taxpayers in three different forms -c income tax, corporate tax, and capital gains tax.

However, without efficient tax planning, you might end up paying more in taxes than you need to. For better tax planning, you must first know the meaning of direct taxes.

What is the Meaning of Direct Taxes?

Before we learn how you can save taxes, first let us look at the meaning of direct taxes.

Direct taxes are the taxes that the government receives directly from individuals or entities. Thus, as a taxpayer, you can’t pass on the responsibility of paying direct taxes to another person or entity.

Different Types of Direct Taxes in India

There are broadly 3 types of direct taxes levied by the government:

Income Tax: It is the tax that the Government of India levies on the taxpayers whose income during the previous financial year falls under the income tax slab.
Corporate Tax: The income tax which is paid by the domestic and foreign companies on their income to the Indian government is referred to as the Corporate Tax.
Capital Gains Tax: Capital gains occur when you sell a long-term capital asset, like a property, jewellery, paintings etc. Such gains attract capital gains tax. You can have two types of capital gains – long-term and short-term, based on the holding period of the asset.

You may end up paying taxes under any one or more of these heads. The basis of division is the rate of tax which could differ based on the type of direct tax.

Save Taxes While Building Long-Term Wealth

Full Name* Please enter correct name Please enter the Full name

Enter your mobile number* Please enter valid mobile number Please enter Mobile Number

Email* Please enter valid email Please enter Email

...Read more Consent is required

Why you Might be Paying More Taxes than you Should?

Bad tax planning is a single term that can sufficiently define excess outflows under direct taxes. Bad tax-planning may arise out of any or all of the following:

Lack of knowledge of Indian tax laws and tax saving options
No tax saving or lack of long-term investing
Bad investments, i.e., investing only for higher returns

Double Taxation & Direct Tax for NRIs

Double taxation is a situation where you pay income tax twice on the same source of income. The problem of double taxation may occur when your place of residence and receipt of income is different. In such a scenario, the income tax of the place of accrual plus the place of residence may apply.

Since NRIs are more likely to have two tax jurisdictions, the problem of double taxation is common with NRI income tax.

You avoid the problem of double taxation with the help of Double Taxation Avoidance Agreement (DTAA) provisions.

DTAA is signed between India and another country(s).
It allows non-resident taxpayers to avoid paying tax on their incomes in two jurisdictions.
Currently, India has signed double tax avoidance treaties (DTAAs) with more than 80 countries of the world.
Apart from that, the different ways of tax-saving are the same for the residents as well as non-residents.

How to Save Tax Legally?

Efficient tax planning is very important so that you can avoid overpaying taxes. Overpayment of taxes can put a huge burden on your savings and may hamper your savings growth. Here are the different ways you can avoid being overtaxed:

1. Tax Saving Investments

Tax-saving investments are an effective way to reduce your tax liability while building assets with your savings. You can invest in various instruments on which you can claim deductions on your taxable income.

Here are some types of tax-saving investments:

You can claim deduction under section 80C of the Income Tax Act for your contribution to the following schemes and investments:

Life insurance policy
PPF, EPF, and superannuation funds
Equity-linked saving scheme (ELSS)
Sukanya Samriddhi Yojana (SSY)
National Saving Certificate (NSC)
Senior Citizen Savings Scheme (SCSS)
Unit Linked Insurance Plan (ULIP)
Tax saving Term Fixed Deposit for at least 5 years
Infrastructural bonds (e.g., NABARD bonds)
National Pension Scheme (NPS) Tier I account

The maximum limit of deduction available under this section is Rs 1.5 lakhs. However, for NPS and Atal Pension Yojana, you can claim an additional deduction of up to Rs 50,000.

2. Tax Saving Expenses

Apart from the investments, the following expenses also qualify for the deduction under section 80C:

The principal amount paid towards a home loan
Stamp duty and registration charges for the purchase of house property
Tuition fees
Subscription to an IPO of a Public Limited Company

The maximum limit of deduction available under section 80C is Rs 1.5 lakhs including the investments. However, if you are a senior citizen, you can claim up to Rs 2 lakh for repayment of home loan principal under this section.

3. Medical Insurance for Family & Parents

The premiums that you pay for a medical insurance policy are eligible for deduction u/s 80D of the Income Tax Act. You can buy a health insurance for your family and parents.

Your parents will be considered a separate family for this deduction. Thus, you can claim deductions for two policies under this section.

Also, the section allows senior citizens to claim the expenses incurred for medical expenses if they do not have health insurance cover.

The limit of deduction is as follows:

If the insured are below 60 years of age: Rs 25,000
If the insured are 60 years of age or above: Rs 50,000

This limit also includes a preventive health check-up expense of up to Rs 5000.

How to Reduce Future Taxes?

A smart way to do efficient tax saving is to invest in those instruments that give you EEE tax benefits. EEE refers to Exempt Exempt Exempt.

Such investments are eligible for the following 3 Tax-exemptions:

Exemption 1: The amount you have invested is eligible for a deduction from your taxable income.
Exemption 2: The interest that has accrued to your savings corpus during the compounding phase is tax-exempt.
Exemption 3: The maturity value you have earned from your investment is also tax-exempt at the time of withdrawal.

EEE benefit applies to mainly long-term investment instruments, e.g. the EPF and PPF, ULIP Life Insurance Policies, and equity-linked savings schemes (ELSS).

EEE Investments with Canara HSBC Life Insurance

The majority of the investment plans with Canara HSBC Life Insurance offer EEE efficiency with taxes. So, if you are looking for a long-term investment you can choose one of the following investment plans as per your goals:

How to Save Tax on Capital Gains?

Short-term capital gains add to your annual taxable income and are taxed at the applicable slab rates. Thus, to save tax on short-term capital gains you need to use the tax-saving investments and expenses. However, long-term capital gains are a different matter.

You do get the indexation benefit on most long-term capital gains. However, in the following situations you can claim exemption on capital gains tax as well:

You buy a new house one year before or within two years of selling your present house
You invest the entire capital gain from the sale of an existing house in constructing a new house within three years of sale
In the case of the sale of other long-term capital assets, you will need to invest the entire sale proceed into the new property
You did not own more than one house property at the time of sale
The new property is situated within India
You do not buy a second house property 2 years before and within 3 years after the sale.

In this case, the amount of capital gain you use for the new house property will be exempt.

You may need to deposit the capital gains in the capital gains account scheme to defer the tax until you have bought the new property.

Invest in Capital Gains Bond

The following bonds will allow you to claim an exemption u/s 54EC of Income Tax Act if you do not want to buy a new property:

Rural Electrification Corporation Limited (REC) bonds
NHAI bonds

These deductions and tax-saving methods should be enough to reduce your additional tax burden. However, the exemptions may vary as per your unique situation. So, do remember to seek professional help in case you feel overwhelmed with the laws.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

What Are Best Ways to Save Tax in India Under 80CC?

Tax Deduction on Salary: How to Deductions to Salary Components?

Recent Blogs

TDS Rate Chart for FY 2025-26 (AY 2026-27)

Latest TDS Rate Chart FY 2025-26 - Section-Wise Breakdown

29 July '26

1229 Views

7 minute read

Looking for the latest TDS rates? Check the complete TDS rate chart for FY 2025-26 (AY 2026-27) covering all sections, thresholds & applicable rates.

Tax Saving

Section 87A Rebate FY 2026-27: ₹12,500 or ₹25,000?

29 July '26

2954 Views

9 minute read

Check eligibility, income limits & latest tax rebate under Section 87A for old & new tax regimes in FY 2026-27.

Tax Saving

E-Filing - File Income Tax Returns (ITR) Online in India 2026

29 July '26

10361 Views

15 minute read

Learn how to file your income tax return online in India with a step-by-step ITR e-filing guide. Understand forms, documents, and the complete process easily.

Tax Saving

Section 80CCD (1B): Deductions Under Section 80CCD of Income Tax Act

29 July '26

1860 Views

7 minute read

Learn about tax benefits under Section 80CCD (1B) for NPS contributions, including additional deductions under Section 80CCD(1B) to maximize your savings.

Tax Saving

Income Tax Slab for Senior Citizens Above 60 Years - Guide 2026

29 July '26

2070 Views

7 minute read

Know the income tax slab for senior citizens above 60 years and tax slabs for senior citizens in India under old and new regimes.

Tax Saving

Step by Step Guide to File ITR 4 (Sugam) Form

29 July '26

1092 Views

4 minute read

Filing ITR-4? Follow this step-by-step guide to file your tax return easily under presumptive taxation for small businesses & professionals.

Tax Saving

Smart Investing for Tax Savings & Where to Invest to Save Tax?

29 July '26

992 Views

12 minute read

Maximize tax savings with smart investment options like ELSS, PPF, and insurance plans. Learn where to invest for tax benefits and long-term growth.

Tax Saving

Penalty for Late Filing of Income Tax Returns

Late ITR Filing Penalty in 2026 - What You Need to Know

29 July '26

1146 Views

7 minute read

Missing the ITR deadline can cost you heavily. Discover the penalties for late filing of income tax returns in 2026 & how to avoid them in India.

Tax Saving

How to Generate an E-Way Bill Online? Easy Guide 2026

29 July '26

1067 Views

6 minute read

Learn the step-by-step process to generate an e-way bill online, understand requirements, and ensure smooth GST compliance.

Tax Saving

Tax Savings - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.

Family Shield: Enhanced Protection

iSelect Smart360 Term Plan

3 Plan options
Life cover till 99 years
Steady income benefit
Block your premium at inception

Fixed Returns, Zero Risks & Worries

iSelect Guaranteed Future Plus

4 Plan options
Life cover + Guaranteed benefits
Accidental death benefit
Premium protection cover

Start Young, Pay Less, Stay Secured

Young Term Plan

Life cover till 99 years
Coverage for spouse
Block your premium rate
Covers 40 critical illness

Popular Searches

New Fund Launched with Promise4Wealth

Reinstate Your Lapsed Policy

Mandatory KYC Update as per PML Rules 2005

We Stand with Families Affected by the Ahemdabad Plane Crash

Direct Taxes: How to Avoid Being Overtaxed?