The Government of India collects several Crores in taxes every year. These collections are used to undertake development projects to help boost the country’s economy and improve the standards of living of the citizens. Payment of tax benefits the payers on multiple levels including improving of infrastructure, supporting the society, and promoting general welfare activities.
We tend to spend our income on various services and goods that enhance our quality of life but can also leave behind severe financial strain. To ease this financial burden, the government provides the option of income tax saving through waivers, refunds and rebates on taxes levied on our income and spends.
What are the types of taxes in India?
Taxes in India can be categorized into 2 types – Direct Taxes and Indirect Taxes, which are further sub-divided into other types. Within the Income Tax Act of 1961, there are different sections that govern these taxes. Let’s define each in brief –
1. Direct Taxes are paid by individuals and legal entities directly to the government. Direct taxes cannot be transferred by one individual or entity to another individual or entity. The Central Board of Direct Taxes (CBDT) overlooks direct taxes. Direct Taxes include the following taxes:
2. Indirect taxes are levied on services/ products, collected by the seller of the service/ product. This tax is indirectly collected by the retailers from the buyers of these services/ products. There is only one indirect tax collected by the government, called the Goods and Services Tax or GST.
How can you save taxes?
Furnishing of inaccurate income details is called evasion, but to take benefit of exemptions, deductions and incentives provided under Income Tax Act, one must resort to tax minimization. Saving tax legally requires ‘tax planning’ for taking advantage of all exemptions, deductions, and benefits.
Some of the popular tax benefits include:
There are number of other benefits provided under the Income Tax Act. All the above points can help one reduce their tax burden substantially for a stipulated financial year. Also, it is advised you read carefully about the various provisions offered by the government to help you save taxes, before making an investment or making a major purchase.
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