Definition- Tax law is the practice of law that relates to the assessment and
payment of taxes. Tax laws come from a variety of sources....They're based in
federal and state constitutions, laws and regulations. Tax law involves
understanding, implementing and defending the payment or non-payment of taxes.
Taxes in India are levied by the Central Government and the state
governments. Some minor taxes are also levied by the local authorities such as
The authority to levy a tax is derived from the Constitution of India which
allocates the power to levy various taxes between the Central and the State. An
important restriction on this power is Article 265 of the Constitution which
states that No tax shall be levied or collected except by the authority of
law. Therefore, each tax levied or collected has to be backed by an
accompanying law, passed either by the Parliament or the State Legislature. In
2015-2016, the gross tax collection of the Centre amounted to ₹14.60 trillion
History- India has abolished multiple taxes with passage of time and imposed
new ones. Few of such taxes include inheritance tax, interest tax, gift tax,
wealth tax, etc. Wealth Tax Act, 1957 was repealed in the year 2015.
Direct Taxes in India were governed by two major legislations, Income Tax Act,
1961 and Wealth Tax Act, 1957. A new legislation, Direct Taxes Code (DTC), was
proposed to replace the two acts.[when?] However, the Wealth Tax Act was
repealed in 2015 and the idea of DTC was dropped.
Service tax is imposed by the government on all the services
provided by firms and servicing companies in lieu of monetary benefit. The
service tax levied on services is actually borne by the customers which in turn
goes through multiple channels of levying authorities till back to the
government. It is also to be noted that service tax will be applicable on the
taxable services only which is provided or will be provided by the service
provider agreeing upon the concern of actually offering services.
It is a tax levied on services provided in India, except the State of Jammu and
Kashmir. The responsibility of collecting the tax lies with the Central Board of
Excise and Customs (CBEC). From 2012, service tax is imposed on all services,
except those which are specifically exempted under law(e.g. Exempt under
Negative List, Exempt as exclusion from Service definition as per Service Tax,
Exempt under MEN (Mega exemption notification)). In budget presented for
2008-2009, it was announced that all small service providers whose turnover does
not exceed ₹10 lakh (US$14,000) need not pay service tax. Service tax at a rate
of 14 percent( Inclusive of EC & SHEC) will be imposed on all applicable services
from 1 June 2015. From 15 November 2015, Swacch Bharat cess of 0.5% has been
added to all taxable service leading the new Service Tax rate to be 14.5 percent
(Inclusive of EC, SHEC & Swacch Bharat cess). On 29 February 2016, Current
Finance Minister Mr. Arun Jaitley announces a new Cess, Krishi Kalyan Cess that
would be levied from 1 June 2016 at the rate of 0.5% on all taxable services.
The purpose of introducing Krishi Kalyan Cess is to improve agriculture
activities and welfare of Indian farmers. Thus, the new Service Tax rate would
be 15% incorporating EC, SHEC, Swachh Bharat Cess and Krishi Kalyan Cess.
From 2015 to currently, the gross tax collection of the Centre from service tax
has amounted in excess of 2.10 trillion (US$30 billion).
Constitutionally established scheme of taxation
Article 246 of the Indian Constitution, distributes legislative powers including
taxation, between the Parliament of India and the State Legislature. Schedule
VII enumerates these subject matters with the use of three lists:
List - I entailing the areas on which only the parliament is competent to make
# List - II entailing the areas on which only the state legislature can
make laws, and
# List - III listing the areas on which both the Parliament and the
State Legislature can make laws upon concurrently.
Separate heads of taxation are no head of taxation in the Concurrent List (Union
and the States have no concurrent power of taxation).The list of thirteen Union
heads of taxation and the list of nineteen State heads are given below.
Central Government of India
||Taxes as perUnion List
||Income tax:Taxes on income other than agricultural
||Custom Duty: Duties of customs including export duties
||Excise Duty: Duties of excise on the following goods
manufactured or produced in India namely (a) Petroleum crude (b) high
speed diesel (c) motor spirit (commonly known as petrol) (d) natural
gas (e) aviation turbine fuel and (f) Tobacco and tobacco products
||Taxes on capital value of assets, exclusive of
agricultural land, of individuals and companies, taxes on capital of
||Estate dutyin respect of property other than
||Duties in respect of succession to property other than
||Terminal taxes on goods or passengers, carried by
railway, sea or air; taxes on railway fares and freight.
||Taxes other than stamp duties on transactions in stock
exchanges and futures markets
||Taxes on sale or purchase of goods other than
newspapers, where such sale or purchase takes place in the course of
inter-State trade or commerce
||Taxes on the consignment of goods in the course of
inter-State trade or commerce
||All residuary types of taxes not listed in any of the
three lists of Seventh Schedule of Indian Constitution
||Taxes as perState List
||Land revenue, including the assessment and
collection of revenue, the maintenance of land records, survey for
revenue purposes and records of rights, and alienation of revenues.
||Taxes on agricultural income
||Duties in respect of succession to
||Estate Duty in respect of agricultural land
||Taxes on lands and buildings.
||Taxes on mineral rights.
||Duties of excise for following goods
manufactured or produced within the State (i) alcoholic liquors for
human consumption, and (ii) opium, Indian hemp and other narcotic drugs
||Electricity Duty: Taxes on the consumption or
||Taxes on sale of petroleum crude, high speed
diesel, motor spirit (commonly known as petrol), Natural gas aviation
turbine fuel and alcohol liquor for human consumption but not including
sale in the course of inter state or commerce or sale in the source of
international trade or commerce such goods.
||Taxes on goods and passengers carried by
roads or on inland waterways.
||Taxes on vehicles suitable for use on roads.
||Taxes on animals and boats.
||Taxes on profession, trades, callings and
||Taxes on entertainment and amusements to be
extent levied and collected by a panchayat or Municipality or a regional
council or a district council.
Income Tax in India
Income Taxis a tax imposed on individuals or entities (taxpayers) that varies
with respective income or profits (taxable income). Income tax generally is
computed as the product of a tax rate times taxable income. The tax collected
by Income Tax Department for central government.
Goods and Services Tax (India)
Goods and Services Taxis a indirect tax collected on supply of goods or
# Central Tax: Portion of Tax to central government on intrastate sales.
# State Tax: Portion of Tax to state on intrastate sales.
# Integrate Tax: tax for interstate sales.
Customs duty is a tax on import & export of goods inIndiawith specific rates
on certain types of goods. Customs authorities are rightful in checking accurate
details of the items exported or imported along with the origin of the item and
duly validated rates & structure. Custom duty measures the value of the items in
the context of the tax applicable to such item and is much higher on certain
types of items including sin goods i.e. liquor & imported cigars.
Custom Duty is an indirect tax levied on import or export of goods in and out of
the country. When goods are imported from outside, the tax known as import
custom duty. When goods are exported outside India, the tax is known as export
custom duty. The tax collected by theCentral Board of Indirect Taxes and
Local Body Taxes
Local Body Tax, popularly known by its abbreviation as LBT, is the tax
imposed by the local civic bodies of India on the entry of goods into a local
area for consumption, use or sale therein. The tax is imposed based on the Entry
52 of the State List from the Schedule VII of the Constitution of India which
reads; Taxes on the entry of goods into a local area for consumption, use or
sale therein. The tax is to be paid by the trader to the civic bodies and the
rules and regulations of these vary amongst different States in India. The LBT
is now partially abolished as of 1 August 2015.
Property tax, or 'house tax,' is a local tax on buildings, along with
appurtenant land, and imposed on Possessor (certainly, not true custodian of
property as per 1978, 44th amendment of constitution). It resembles the US-type
wealth tax and differs from the excise-type UK rate. The tax power is vested in
the states and it is delegated by law to the local bodies, specifying the
valuation method, rate band, and collection procedures. The tax base is the
annual rental value (ARV) or area-based rating. Owner-occupied and other
properties not producing rent are assessed on cost and then converted into ARV
by applying a percentage of cost, usually six percent. Vacant land is generally
exempt. Central government properties are exempt. Instead a 'service charge' is
permissible under executive order. Properties of foreign missions also enjoy tax
exemption without an insistence for reciprocity. The tax is usually accompanied
by a number of service taxes, e.g., water tax, drainage tax, conservancy
(sanitation) tax, lighting tax, all using the same tax base. The rate structure
is flat on rural (Panchayat) properties, but in the urban (municipal) areas it
is mildly progressive with about 80% of assessments falling in the first two
Primary taxation issues facing the governments world over include;
# Taxes on income and wealth (or estates).
# Taxation of capital gains versus labour income.
# Eco tax (short for Ecological taxation) refers to taxes intended to
promote environmentally friendly activities via economic incentives.
# Tax evasion and avoidance leading to reduced government revenue.
# Due to an inefficient tax system in many underdeveloped countries, the
majority of small businesses are not taxed.
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Tax laws in India