Wednesday, February 22, 2012

Introduction To Indian Taxes ? A Brief Guide | NY Essay

A. Introduction
India taxes Indian source income as well as the foreign source income of its residents, subject to tax treaty and other relief. The foreign source income of non-residents or individual persons not ordinarily resident in India is only taxed if received in India. In certain circumstances, income arising outside India may be deemed Indian income.

The tax system is schedular. Taxable income is ascertained according to the rules for the particular class of income and then aggregated to determine total taxable income. Tax changes are introduced by annual Finance Acts preceded by the ?Budget? statement, usually in February. The ?previous year? basis of assessment is used.
The tax year ends on 31 March for all taxpayers.
B. Types of taxes
Besides income (including capital gains) taxes, India levies taxes on wealth. Wealth tax is levied at 1% on amount in excess of Rs 1,500,000. Foreign nationals are taxed only on their Indian wealth. There is no gift tax and death duty.

Indirect taxes include excise duties, service tax, central value added tax (VAT) covering manufacturing activities and local taxes e.g. sales tax, property tax, octroi and state excise taxes and state VAT covering trading of goods. Customs duties are levied on imports at specified tariff rates. Transfer of assets attracts stamp duties.
C. Residence rules
The Indian Income Tax Act, 1961, classifies every taxpayer (individuals and companies) as either resident or non-resident. Individuals can have ordinary resident status as well. Individuals resident and ordinarily resident in India pay income tax on their worldwide income. Non-residents and Resident but Not Ordinarily Residents pay Indian income tax on Indian source income and on foreign income if received in India.
An individual is resident in India, in respect of a particular tax year, if he satisfies any one of the following conditions:
- He is in India for at least 182 days in the relevant tax year; or
- He is in India?

Source: http://nyessay.com/taxes/introduction-to-indian-taxes-a-brief-guide/

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