Business Budget 2021: Income or no income, you are bound...

Budget 2021: Income or no income, you are bound to pay THIS tax to government; Know how and why | Personal Finance News


New Delhi: As Finance Minister Nirmala Sitharaman is soon going to announce the Union Budget 2021, a lot of buzz around taxes have been doing the round. The Union Budget 2021-22 will be presented on February 1 while the Budget session of Parliament will begin on January 29 with the address of President Ram Nath Kovind to the joint sitting of both the Houses. 

For your better understanding, here is all about two taxes in the country that directly or indirectly have an impact in your lives.


What are Direct Taxes?

Direct Taxes are taxes which the assessee (individual, companies) pays directly to the government. This liability cannot be transferred to any other taxpayer. It is directly imposed by the tax authority. There are the different types of direct taxes in the country –Income tax, wealth tax, corporate tax, capital gain tax. So if you are an earning person, you will be paying direct taxes.

What are Indirect Taxes?

There is another tax (indirect tax) that you are liable to pay whether or nor you have an income. Indirect tax, which has been now subsumed by Goods and Services Tax (GST) is the tax that is being imposed by the government for goods and services rendered. This is not taxes on income, but on goods and services. Hence, you are liable to pay this tax irrespective of your employement, earnings or profits.

It is to be noted that the Goods and Services Tax, rolled out in July 2017, has overhauled the indirect tax regime by unifying more than a dozen central and state levies, including excise duty, service tax and VAT.

GST, hailed as India’s biggest indirect tax reform bill since independence, aims to convert India into one common market, prevent tax-on-tax and make goods and services cheaper.

Meanwhile, the CBDT has carried out several major tax reforms in direct taxes in the recent years. In 2019, the Corporate Tax rates were reduced from 30 percent to 22 percent and for new manufacturing units the rates were reduced to 15 percent. Dividend distribution Tax was also abolished.

The focus of the tax reforms has been on reduction in tax rates and on simplification of direct tax laws. Several initiatives have been taken by the CBDT for bringing in efficiency and transparency in the functioning of the IT Department which includes bringing more transparency in official communication through the newly introduced Document Identification Number (DIN) wherein every communication of the Department would carry a computer generated unique document identification number.  Similarly, to increase the ease of compliance for taxpayers, IT Department has moved forward with prefilling of income tax returns to make compliance more convenient for individual taxpayers. Compliance norms for startups have also been simplified.

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