Understanding Taxation For Young Adults

To be quite honest, most young children and teenagers do not know what taxation means. Nor do they know how to calculate it.

Why?

The answer to that question is that the schools do not teach them to do so. Schools rarely teach anything about the real-world world. So the next level of them understanding leads them to go online to find the answers that they need. But then another problem is encountered, they do not know the right questions to ask which in turn leads to more confusion.

So this topic gives you a brief understanding of the whats, whens, whys, hows, and wheres.

India has a well-developed tax arrangement with noticeably distinguished authority between Central and State Governments and local bodies. Central Government charges taxes on income (except the tax on agricultural income, which the State Governments can impose), customs duties, central excise and service tax.

Value Added Tax (VAT), stamp duty, State Excise, land revenue and tax on professions are charged by the State Governments. Local bodies are authorized to levy a tax on properties and for utilities like water supply, drainage etc.

Why is tax charged?

Taxes are levied by governments on the general public to produce income for undertaking projects to boost up the economy of the country and to raise the standard of living of its citizens.

The authority of the government to levy tax in India is derived from the Constitution of India, which assigns the command to charge taxes to the Central and State governments. All taxes levied within India need to be supported by a supplementary law passed by the Parliament or the State Legislature.

Taxes in India are of two distinct types:

1. Direct tax: these are the type of taxes that are paid directly by you, as a citizen. They are charged directly to an individual or an entity and most importantly, it cannot be transferred to anyone else.
2. Indirect tax: these are the type of taxes that are imposed on services and goods. They are different than the direct tax in the way that the tax is collected by an intermediary, the person selling the product.

It is easy to calculate the amount to be paid by using the calculator specifically designed for income tax which is available online.

Filing tax returns:

Income tax for any individual needs to be filed by the 31^st of July of the Assessment Year for the income earned in the previous financial year. For example, for income earned during 31^st March ’16 to 1^st April 2017, the tax needs to be filed by 31^st July 2017.

So essentially, ever year, a tax payer has to comply with the below two elements:

1. Income Tax Payment
2. Income Tax Returns Filing

Failure or delay in ant of the above before the due date attracts interest and penalties.

Conclusion:

Now with the basics of taxation in your mind, everything else is available online on the internet. India is a fast progressing country, and with everything being digitalized, it is now possible to pay income taxes online by visiting the official website for an easy and hassle-free experience.