An Introduction to Taxation
- 1. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 1 Mr. K. GANESHA MOORTHY Assistant Professor, Department of Commerce (Corporate Secretaryship), Ayya Nadar Janaki Ammal College, Sivakasi. An Introduction to Taxation
- 2. Introduction The taxes are the basic source of revenue for the Government. Revenue raised from the taxes are utilized for meeting expense of Government like, provision for education, infrastructure facilities such as roads, dams etc. Taxes are broadly divided into two parts i.e. Direct taxes and Indirect taxes The tax that is levied directly on the income or wealth of a person is called direct tax. Income tax is one of form of direct taxes. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 2
- 3. Meaning Tax is a compulsory financial contribution imposed by a government to raise revenue levied on the income or property of persons or organizations, on the production cost or sale prices of Goods or Services. It is a tax levied directly on a tax payer who pays it to the government and cannot pass it on to someone else. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 3
- 4. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 4 Objectives of Taxation Raising Revenue Reducing Inequalities Developmental Objectives Regulatory Objectives
- 5. Objectives of Taxation Different objectives of taxation may be summarized as under: 1. Objective of Raising Revenue The basic and primary objective of taxation is raising revenue. Enormous amounts needed by the governments for: National defense Creation of infrastructure Social upliftment schemes and Systematic resource mobilization DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 5
- 6. 2. Regulatory Objectives i. Regulating Consumption State can discourage consumption of harmful and undesirable goods by levying prohibitive rates of tax. For example: High rates on tax on Tobacco products, liquors etc., ii. Regulating Production Production may be encouraged by exempting new industries from tax for sometime, reducing tax on capital goods, increasing tax on imported goods to encourage local production. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 6
- 7. iii. Regulating imports and exports Imports of undesirable products can be curbed by imposing prohibitively high import duties. Exports can be encouraged by cutting duties and taxes on export. Duties can be minimized by on materials etc., for manufacturing goods for export. 3. Developmental objectives i. Economic development Economic development is measured in terms of GNP (Gross National Products) i.e., output achieved by all the major sectors of economy like agriculture, industry and services. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 7
- 8. ii. Capital formation Taxation plays a major role in high level of savings by providing different kinds of exemptions form tax on contributions to provident fund, insurance premiums, national savings certificates etc., Capital formation through people’s savings can be encouraged by tax incentives. iii. Increasing employment opportunities Small and medium enterprises usually have maximum potential for employment. Tax concession to start small scale and medium scale enterprises result in creation of jobs in large scale. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 8
- 9. 4. Objectives of reducing inequalities i. Reduction in economic disparities Income levels of individuals vary widely in India. It is claimed that rich are becoming richer and the poor are becoming poorer year by year. taxation can be powerful weapon in tackling income disparities. ii. Reduction in regional imbalances some region may become well developed compared to others in a country. Tax incentives and exemptions to start industries in backward regions can be good method of dealing with the problem. (Urban and Rural regions) DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 9
- 10. Principles of Taxation i. Adequacy Taxes should be first enough to generate revenue required for the provisions of essential public service. ii. Compatibility Taxes should be coordinated to ensure that tax neutrality and overall objectives of good governance. iii. Convenience Tax should be reinforced in a manner that facilitate voluntary compliance to the maximum extent possible. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 10
- 11. Principles of Taxation iv. Efficiency Tax collection efforts should not cause an inordinately high percentage of tax revenue. v. Equity Taxes should equally burden all individuals or entities in similar economic circumstances. vi. Neutrality Taxes should not favor any one group or sector over another and should not be designed to interfere with or influence individual decision making DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 11
- 12. Principles of Taxation vii. Predictability Collection of taxes should reinforce their inevitability and regularity. viii. Simplicity The assessment and determination should be easy to understand by an average tax payers. DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 12
- 13. Thank You DIRECT TAX UNIT – I TAXATION Mr. K. GANESHA MOORTHY, ANJA COLLEGE, SIVAKASI 13