The various types of taxes to improve the economic standards of the country are:
Income tax
The tax imposed on individuals as per their income or the profit earned by them. The tax rate depends on the amount received by the individual. If the income is more then the tax rates are more and vice-versa. The individuals have to maintain a file for their income tax returns annually which are duly reviewed by the income tax officials. Higher income earners often tend to hide their actual income so that they can pay lower taxes to the government. The various types of income taxes are individual income tax, business income taxes and state and local income taxes.
Inheritance tax
When a person dies, his estate and properties are inherited by his heir for which he must pay an inheritance tax based on the portion of inherited estate. All the assets of the deceased person get transferred to his beneficiary. It is the responsibility of the heir to pay the inheritance tax on his own. There are certain laws in which inheritance tax can be exempted in certain cases. Spouses of the deceased need not pay the inheritance tax. Similarly, the estate received as a charitable donation from the deceased person is also exempted from paying tax. Parents, children, grandparents, relatives, siblings of the deceased person must pay the inheritance tax.
Direct and indirect tax
Direct taxes are non transferable taxes imposed on income and profits while indirect taxes are transferable taxes imposed on goods and services. Direct taxes are paid directly by the concerned person to the government. Indirect taxes are paid by one person but can be recovered by another person. The different types of direct taxes are income tax, corporate tax, wealth tax and so on. The various types of indirect taxes are excise duty, sales tax, custom duty, entertainment tax, service tax and so on.
Capital gains
Capital gains Tax is imposed on the profit gained from the sale of property or an investment. Capital gains are levied on the sale of precious stones, real estate, bonds, stocks, antiques, shares and so on. The tax rate depends on the amount of profit gained by the individual on selling the above mentioned products and also on the amount of money he makes annually. The tax will be charged only if there is profit earned by selling them, otherwise you are not indebted to pay such tax.
Tax imposed on small scale business
Any enterprise is supposed to pay a certain amount of tax depending on the profit earned by that enterprise. The tax rate depends on the format of the business undertaken by the individual. Moreover businessmen can deduct their tax rates by investing in life insurance, provident fund investments, medical insurance premiums and so on. One must be aware of the various ways to deduct tax rates so that the money saved can be utilized to run the business smoothly. Domestic businesses must abide by the laws and regulations related to Taxation while indulging in import and export business.
Value added tax
It is the tax that is levied on the goods and services while keeping in mind the amount of money that is involved in the process of production and distribution of such goods and services. If we consider a product then the very first step that comes to the mind is that the required raw materials is sold to a factory where a certain amount of tax is added, then again the factory sells it to the wholesaler by adding the tax, it is sold to the retailer with tax and finally it is sold in the market including tax.
Insurance tax
The premium paid by the individual to avail either life insurance or vehicle insurance coverage is collected by the insurance provider who pays the tax directly to the government. The amount of money received by the individual as the part of the insurance or settlement, that money is not taxed so one has to pay a premium to the insurance provider. In case your insured vehicle gets damaged, the losses would be paid by the insurance company. Similarly if a person dies, the insurance provider is liable to pay the amount to the immediate heir of that deceased person.
Payroll tax
The employer deducts a certain amount of tax from the employee which is then paid to the government on behalf of the employee. The tax is based on the salary, wages or the tips paid to the employee for his services. The revenue earned by the government through these taxes is used in the maintenance of social security, transportation policies and so on.
Retirement tax
After retirement an individual receives money from pension or social security. So the amount of money a person receives when he has retired from his job also has tax. The amount of tax deduction will depend on your sources of retirement income annually. After the tax deduction the amount received by you will be the only source of money on which you have to live on for the rest of your life.
Social security tax
When an employee as well as the employer pays a certain amount of tax to the government then it is utilized to maintain the social security of that particular country. The social security tax is given to the retired persons, the disabled ones and also the survivors of drastic incidents. These are also paid to the spouse on the death of the husband or to the dependent child who has lost his parents.
Sales tax
The amount of tax added to the cost price of the goods or services which is then paid by the consumer while purchasing the product or services. Businesses keep a record of taxes that are taken from the consumers and are liable to pay a certain amount to the government either monthly or annually. Companies need to apply for the permits of sales tax before deduction of taxes from consumers to the Taxation department of the state. The sales tax of the various commodities varies as per the state government.
State and local tax
You are required to pay taxes to the federal government, states and many local municipalities. State and local taxes are deducted from the wages received by an individual. For deduction of the minimum amount of money as tax you should have a proper knowledge of how to handle it. Hire an expert who would help you to file your tax returns annually in a manner that you need to pay only the bare minimum charges for your tax.
Goods and Service tax
It is an indirect tax which is imposed on the supply of every goods and services. The production, maintenance and distribution of such goods involves a lot of money which is then remitted with the help of taxes paid by the consumer.
Wealth tax
A person who possesses several assets must pay a certain amount of tax to the government for all his possessions. Wealth tax includes assets like possession of buildings or land, vehicles, jewelleries, yachts, boats, aircrafts and so on. Non-productive assets come under this type of tax. The productive assets like mutual funds, fixed deposits, savings bank accounts and so on are excluded from wealth tax.
Property tax
A person who is the owner of a property or land has to pay tax to the local government where the desired property is located. When a person is purchasing a property then also he must be aware of the tax laws applicable for that property. The government uses the amount to fund sewer and water facilities , roads and transportation, education and electricity services, play parks and other community services.
Consumption tax
Everyone has to spend their money either in buying items required for daily use or fashionable accessories. The tax imposed on the money spent by individuals which is not earned is known as consumption tax. It helps the government to raise their capital profits and dividends. The examples of consumption taxes are excise tax, sales tax and so on.
Regressive tax
The equal amount of tax paid by all the individuals irrespective of their income is the regressive tax. People with higher income will not be affected by paying such taxes but the same rate will definitely affect the individuals with lower income. Here the middle class people are sufferers who have to pay more tax than their actual income.
Progressive tax
This type of tax varies with the income of the people. A person who is earning more money needs to pay more tax than the person whose income is comparatively low. This will not affect the middle class people since they are paying as per their ability.
We have tried our best to provide you with the maximum information regarding Taxation but if you still want to know more about them, do take our experts guidance who will also update you regarding the acts related to the different types of Taxation and what are the consequences if the rules are violated by the individuals.
