Close

Buy a Life Insurance Plan in a few clicks

Now you can buy life insurance plan online.

Kotak Assured Savings Plan

A plan that offer guaranteed returns and financial protection for your family.

Kotak Guaranteed Fortune Builder

A plan that offers guaranteed income for your future goals.

Amit Raje Amit Raje
Close

Get a Call

Enter your contact details below and we will get in touch with you at the earliest.

  • Select your Query

Thank you

Our representative will get in touch with you at the earliest.

Tax Structure in India

Read this article to understand the tax system in India, the types of taxes and the authorities involved in determining the flow of tax in India. Click here to know more.

  • 9,186 Views | Updated on: Jun 05, 2024

The government imposes taxes to fund various projects related to infrastructure, public schools, military production, and law enforcement, among others, for the overall development of the nation.

The tax system in India is a three-tier structure, which includes the State Government, Central Government, and local authorities such as municipal corporations. It is important to note that taxes in the country cannot be levied unless it is passed as a law.

Types of Tax in India

An equitable and efficient tax structure ensures that the burden of taxation is distributed fairly among citizens and businesses, promoting economic stability and development. The tax system in India consists of two types of taxes in India – direct tax and indirect tax.

Direct Tax

A direct tax is imposed on individuals and corporate entities. Such a type of tax is borne solely by the taxpayer and is dependent on the income group in which the taxpayer falls. The lower income group assumes a lower tax liability and vice versa. Some common types of direct taxes include income tax, wealth tax, gift tax, and capital gains tax. There are two major types of direct tax in India – Income tax and corporation tax.

  • Income Tax: Income tax is a progressive tax levied on an individual’s or entity’s income. The rates vary based on income slabs. The Income Tax Act governs the provisions related to income tax.
  • Corporate Tax: Corporate tax is imposed on the income earned by companies and other corporate entities. The Finance Act determines corporate tax rates, which can vary based on the type of company and its turnover.

Indirect Tax

Indirect taxes, on the other hand, are those which are levied through goods and services. Earlier, there were numerous indirect taxes in play, such as Value Added Tax, octroi, entry tax, entertainment tax, and Central Sales Tax, among others.

  • Customs Duty: Customs duty is levied on goods imported into India. It helps regulate imports and protect domestic industries.
  • Excise Duty (Replaced by GST): Excise duty was imposed on the production of goods within India. With the implementation of GST, it has been subsumed under the new tax regime.
  • The Goods and Services Tax (GST), which came into effect on 1st July 2017, replaced the tax structure in India. The main aim of GST was to eliminate the cascading effect of taxes on the sale of goods and services. This, in turn, had a direct impact on the cost of goods. As the cascading effect of the tax was removed, the cost of goods decreased.
  • The GST regime eliminated around 17 taxes and imposed just three taxes – namely, Central GST (CGST), State GST (SGST), and Integrated GST (IGST).
  • Central GST: This tax is levied on intra-state sales and is collected by the Central Government.
  • State GST: This tax is imposed on intra-state sales and is collected by the State Government.
  • This means that for any sale within a state, say within Tamil Nadu, CGST is levied in addition to SGST. Therefore, the revenue will be shared equally between both the State and the Central Government.
  • Integrated GST: This tax is applicable to an inter-state sale, for instance, a sale transaction between Tamil Nadu to Maharashtra. It is collected by the Central Government.

Other Taxes

Apart from direct and indirect taxes, there are various other taxes and levies, such as:

  • Property Tax: Property tax is levied on real estate properties based on their value. Local municipalities and authorities collect this tax.
  • Capital Gains Tax: Capital Gains tax is applicable when an individual or entity sells an asset (like property or stocks) for a profit. The tax rate depends on the holding period of the asset.
  • Securities Transaction Tax (STT): STT is levied on the purchase or sale of equities and other securities traded on stock exchanges.
  • Dividend Distribution Tax (Abolished): Dividend Distribution Tax, previously levied on companies distributing dividends, was abolished in 2020. Instead, dividends are now taxed in the hands of recipients.

Revenue Authorities in India

There are various bodies governing and regulating the tax system in India. The following are the two main revenue authorities in the country.

Central Board of Direct Taxes

This body is responsible for providing inputs regarding planning and policies about direct taxes. The Central Board of Direct Taxes is a part of the Department of Revenue in the Ministry of Finance.

Central Board of Indirect Taxes & Customs

This body is also part of the Department of Revenue in the Ministry of Finance. It was renamed from the Central Board of Excise and Customs, based on the proposal by Finance Minister Arun Jaitley. This revenue authority assists the government in formulating policies in relation to GST, along with central excise levy and customs functions.

Final Thoughts

The tax structure in India has undergone numerous modifications in the past years. There have been changes with regard to the standardization of income tax rates and easier governing laws. Due to this, the government has achieved results such as higher compliance with tax laws, enhanced enforcement, and ease of paying taxes.

Key takeaways

  • A direct tax is imposed on individuals and corporate entities.
  • Goods and Services Tax (GST) replaced the tax structure in India.
  • The GST regime eliminated around 17 taxes and imposed just three taxes – namely, Central GST (CGST), State GST (SGST), and Integrated GST (IGST).
  • The Central Board of Direct Taxes is responsible for providing inputs regarding planning and policies about direct taxes.
Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Kotak Guaranteed Fortune Builder

Download Brochure

Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.

  • Guaranteed@ Income Benefit for upto 25 years
  • Flexibility to choose income period
  • Premium break for females on child birth or any listed specific illnesses
  • Life cover for the premium payment period
  • Enhance your life cover with rider offerings

ARN. No. KLI/23-24/E-BB/1201

T&C

Download Brochure

Features

  • Increasing Life Cover*
  • Guaranteed^ Maturity Benefits
  • Enhanced Protection Through Riders
  • Tax Benefits
  • Dual Benefits: Guaranteed^Maturity + Death benefits

Ref. No. KLI/22-23/E-BB/999

T&C

Buy Online
Kotak Guaranteed Fortune Builder Kotak Guaranteed Fortune Builder

Kotak Guaranteed Fortune Builder

Guaranteed Income for bright financial future

Invest Now
Kotak Assured Savings Plan Kotak Assured Savings Plan

Kotak Assured Savings Plan

Guaranteed Lumpsum returns for achieving life goals

Invest Now

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.