Public Finance and Budget

Tax Revenue in India

The amount of money that the government imposes on corporates or an individual indirectly or directly so that the revenue is generated is also taxes. The activity of tax revenue in India is also done to keep in check the black activities.

Tax Revenue in India

Tax Revenue in India

There are two types of taxes that are levied in India. These are direct taxes and indirect taxes. Both the taxes contribute directly to the tax revenue in India.

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Direct Tax

In this, the taxes are directly levied on a person. The major source of tax revenue in India is generated through direct taxes. Some of the common direct taxes in India are income tax, securities transaction tax, corporate income tax, banking cash transaction tax, etc. We will explain to you in brief about some of these direct taxes in India.

Income Tax

The person whose income falls into a particular taxable category has to pay a certain amount of tax. This tax is called income tax. Also, the income tax department in India falls under CBDT.

It is also a part of the department of revenue that comes under the ministry of finance. Also, income tax is one of the key sources of funds that the government uses to fund other activities.

Securities Transaction Tax

This was introduced in 2004 and is levied in the purchase and sale of equities. Thus, the income that is generated by a person through the securities market taxed by the government. Also, this can be through debentures or reselling the stocks. Thus, it is known as a securities transaction tax.

Corporate Income Tax

This is the type of tax that is levied on corporate houses that earns profit in a year. Thus, the corporate income tax is collected from the companies. Also, this amount is based on the net income a company earns by exercising their business activities. Also, this tax is normally accounted for one business year.

Banking Cash Transaction Tax

The bank transaction tax is applicable in the debt or auto credit entries for a bank. Thus, it can be automatically collected through central counterparty in the settlement or clearing process.

Indirect Taxes

When you go the market to buy goods or to a restaurant than you end up paying a certain amount than what you have purchased for. These extra amounts in the bill are because of indirect taxes.

Also, these are collected by various intermediaries. Thus, when the government tax this income that it directly goes into the government’s kitty. Some examples of indirect taxes in India are:

Customs Duty

This is a typical indirect tax that is levied on goods imported to India. Also, it is levied on goods that are exported from India. The basic law that governs the collection of these taxes is the customs act, 1962.

Value-added Tax

The amount that we pay extra when we consume or buy food is called VAT. Currently, GST has replaced this tax.

Service Tax

This is the tax that is imposed by the government of India for the services that are provided in India. Thus, the person that provides the service collects the tax and pays it back to the government.

Practice Questions on Tax Revenue in India

Q. Which of the following tax is levied on every stage of production?

A. Customs duty


C. Income tax

D. None of the above

Answer: B. VAT

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