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Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Direct taxes are crucial to a country's fiscal policy, influencing economic behavior and contributing to social and economic goals.
Direct tax is characterized as a form of taxation wherein both the impact and burden of the tax are borne by the same entity. Consequently, the payment of direct taxes cannot be shifted to another individual or entity, placing the responsibility for payment on the organization or individual upon whom the tax is imposed.
Furthermore, the system of direct taxes in India operates on the principle of an individual’s or entity’s financial capacity to pay. As a result, this type of tax typically adheres to a progressive tax structure, where the tax rate increases in tandem with the taxpayer’s ability to pay. A notable illustration of this is evident in the income tax slab rates, wherein individuals with higher incomes are subject to higher tax rates compared to those with lower incomes.
Understanding the various types of direct taxes is essential for comprehending how governments generate funds to finance public services and infrastructure.
Income tax is one of the most common types of direct taxes and is levied on the income earned by individuals, corporations, and other entities. It is progressive in nature, meaning that higher-income earners pay a higher percentage of their income in taxes.
Corporate tax is imposed on the profits earned by businesses and corporations. Like income tax, corporate tax rates can vary, and they often depend on the level of profits generated by the company.
Capital gains tax is applied to the profits earned from selling assets such as real estate, stocks, or other investments. The rates may differ based on the holding period and the type of asset sold.
Inheritance tax, also known as estate tax, is levied on the value of an individual’s estate after their death. The rate may vary based on the relationship between the deceased and the inheritor.
Based on the age and income of the individual, they will be categorized into a specific tax bracket. The following outlines the distinct tax brackets:
Tax slab |
Income tax |
Up to ₹2.5 lakh |
Nil |
From ₹2,50,001 to ₹5,00,000 |
5% of the total income that is more than ₹2.5 lakh + 4% cess |
From ₹5,00,001 to ₹10,00,000 |
20% of the total income that is more than ₹5 lakh + V12,500 + 4% cess |
Income of above ₹10 lakh |
30% of the total income that is more than ₹10 lakh + ₹1,12,500 + 4% cess |
Tax slab |
Income tax |
Up to ₹3 lakh |
Nil |
From ₹3,00,001 to ₹5,00,000 |
5% of the total income that is more than ₹3 lakh + 4% cess |
From ₹5,00,001 to ₹10,00,000 |
20% of the total income that is more than ₹5 lakh + ₹10,500 + 4% cess |
Income of above ₹10 lakh |
30% of the total income that is more than ₹10 lakh + ₹1,10,000 + 4% cess |
Tax slab |
Income tax |
Up to ₹5 lakh |
Nil |
From ₹5,00,001 to ₹10,00,000 |
20% of the total income that is more than ₹5 lakh + 4% cess |
Above ₹10 lakh |
30% of the total income that is more than ₹10 lakh + ₹1,00,000 + 4% cess |
Tax slab |
Income tax |
Up to ₹2.5 lakh |
Nil |
From ₹2,50,001 to ₹5,00,000 |
5% of the total income that is more than ₹2.5 lakh + 4% cess |
From ₹5,00,001 to ₹7,50,000 |
10% of the total income that is more than ₹5 lakh + 4% cess |
From ₹7,50,001 to ₹10,00,000 |
15% of the total income that is more than ₹7.5 lakh + 4% cess |
From ₹10,00,001 to ₹12,50,000 |
20% of the total income that is more than ₹10 lakh + 4% cess |
From ₹12,50,001 to ₹15,00,000 |
25% of the total income that is more than ₹12.5 lakh + 4% cess |
Income above ₹15,00,001 |
30% of the total income that is more than ₹15 lakh + 4% cess |
Direct taxes play a pivotal role in the financial landscape of a nation, providing governments with a direct means of generating revenue. Some of its advantages include:
One of the primary advantages of direct taxes is their progressive nature, which ensures that those with higher incomes contribute a larger percentage of their earnings. This promotes social equity and helps redistribute wealth within society.
Direct taxes, particularly income tax and corporate tax provide a stable source of revenue for governments. The income generated through these taxes is relatively predictable, allowing governments to plan and allocate resources more effectively.
Direct taxes encourage fiscal responsibility among citizens and businesses. Knowing that a significant portion of their income or profits will go towards taxes, individuals and corporations are motivated to manage their finances more prudently.
Governments can use direct taxes to implement targeted policies, such as offering tax credits or deductions to promote specific activities, industries, or social objectives. This flexibility allows for the implementation economic and social policies tailored to the nation’s needs.
Direct taxes are a fundamental component of a country’s fiscal policy, serving as a means to generate revenue, promote social equity, and fund government initiatives. Understanding the various types, rates, and advantages of direct taxes is crucial for policymakers and citizens alike. A well-designed direct tax system contributes to a fair and sustainable financial framework that supports a nation’s economic and social development.
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Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
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.