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Overview of Direct Taxes in India

Direct Tax is tax paid directly to the government by taxpayers on income and capital gains. Net direct tax collections in India have steadily increased over years, exceeding targets. The main forms of direct tax are corporate income tax, personal income tax, capital gains tax, and securities transaction tax. Corporate tax rates are 35% for residents and 40% for non-residents, with additional education and wealth taxes. Capital gains are taxed at 20% for long-term assets held over three years and the corporate tax rate for short-term assets. Personal income tax applies to incomes over Rs. 100,000 with a 10% surcharge on tax for incomes over Rs. 850,000.

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6 views1 page

Overview of Direct Taxes in India

Direct Tax is tax paid directly to the government by taxpayers on income and capital gains. Net direct tax collections in India have steadily increased over years, exceeding targets. The main forms of direct tax are corporate income tax, personal income tax, capital gains tax, and securities transaction tax. Corporate tax rates are 35% for residents and 40% for non-residents, with additional education and wealth taxes. Capital gains are taxed at 20% for long-term assets held over three years and the corporate tax rate for short-term assets. Personal income tax applies to incomes over Rs. 100,000 with a 10% surcharge on tax for incomes over Rs. 850,000.

Uploaded by

Fajjiraj
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© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Direct Tax 

is the tax paid to the government directly by the assessee like the Income Tax or the Capital Gains Tax.
There has been a steady rise in the net Direct Tax collections in India over the years. 

All the collections of the direct taxes in India like the Corporate Tax, Personal Income Tax, Securities Transaction
Tax, Banking Cash Transaction Tax, and the Fringe Benefit Tax have been going through a healthy ascent. For
instance, in the current year the personal income taxes collection have increased with the rate of TDS being higher
than the previous years. Overall, as per the estimates of the Budget of the financial year 2006-07, the target of Direct
Tax growth rate was estimated to be 27.5%, but so far it has exceeded this limit and reached 41.2%. At present, the
net Direct Tax collection of India is at Rs.610.30 billion, which is estimated to rise to 42% over Rs.429.80 billion as it
was in the last financial year. This growth in the rate of Direct Tax reflects a continued increase in the economy, high
tax compliance, and better tax administration.

One of the main forms of Direct Tax is the Taxes on Corporate Income, under which the companies residing in this
country pays a tax on their global income arising from all sources. The payment of the tax follows the provisions of
the Income Tax Act. On the other hand, the non-resident companies pay the Direct Tax on the income obtained from
an India-based business connection. The resident companies pay a tax at the rate of 35% with a surcharge of 2.5%
while for the non-resident companies the basic tax rate goes up to 40% along with the same 2.5% surcharge. Along
with these the corporate companies also pay an education tax at the rate of 2% and a wealth tax at the rate of 1%.
Moreover, a Minimum Alternative Tax at 7.5% also requires to be paid by the Domestic corporations. 

The Capital Gains Tax is another important form of Direct Tax in India which is payable on capital gains received
upon the sale of assets. If the capital assets are in possession for more than three years and regarding the shares,
stock exchange securities, mutual fund units the time frame for possessing the asset is one year. The basic tax rate
of the long-term capital gains is fixed at 20% while for the short-term capital gains the rate is fixed at the normal
corporate income tax rate. A rate of 10% is fixed on the transfer of equity shares from which the short-term capital
gain emerges. 

Personal Income tax is another type of Direct Tax, which is under the Central Government controlled by the Central
Board of Direct Taxes. The taxpayer is required to pay a tax if the income level reaches above Rs. 100,000. If the
income reaches Rs. 850,000 there is a surcharge of 10% imposed on the total tax. 

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