Direct taxes are levied on individuals and companies by the country's supreme tax body. Direct taxes are directly paid by those on whom it is imposed. For instance, taxpayers directly pay income tax, property tax, tax on assets and gifts to the government.
What is Direct Taxes?
Direct taxes are imposed on the basis of individuals ability to pay principle, which says that those individuals or entities having access to more resources and earning a higher income need to pay higher taxes. The direct rules are framed such that taxes turn out to be a method to redistribute money in the country.
Direct taxes are transferable to another person or organisation. The companies and individuals on whom the direct taxes are applied are solely responsible for paying the taxes. Failure to pay taxes on time may result in fines and imprisonments.
Direct tax system, based on the brackets system, may turn out to be discouraging as it imposes higher taxes on those working hard to earn a higher income. Hence, people, with the view of needing to pay higher taxes, may settle and cap their productivity to reduce their outgo.
Indirect taxes are another form of taxes that are indirectly imposed on individuals when they make transactions on goods and services. Indirect taxes are collected from retail and wholesale dealers on a periodic basis.
Who is eligible to pay?
Income tax can be filed by filling applicable forms. Salaried individuals earning less than Rs 50 lakh a year through income from salary, residential property, other sources, and agriculture, should file their taxes by filing ITR-1 form.
Individuals and HUfs with no income from gains and profits of profession and business must file their taxes by filing ITR-2 form.
Individuals and HUFs with income from gains and profits of profession and business should file their taxes by filing ITR-3 form.
Individuals, HUFs, firms (excluding LLP) having an overall income of less than Rs 50 lakh with income from profession and business computed as per Sections 44AD, 44ADA, and 44AE, should file their taxes by filing ITR-4.
For entities and persons other than companies, individuals, and HUFs should file their taxes by filing ITR-5.
Those companies that are not claiming exemptions under Section 11 should file their taxes by filing ITR-6.
For individuals including firms needed to furnish their return under Section 139(4A) or 139(4B) or 139(4D) should file their taxes by filing ITR-7
For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) only
A detailed breakdown of the procedure for filing the tax
In India, possessing PAN card and Aadhaar card is mandatory to file income taxes. PAN (permanent account number) card is issued by the Income Tax Department while Aadhaar card is issued by the Unique Identification Authority of India (UIDAI).
Income tax can be filed by individuals when the window is open. If they fail to file within the deadline, they may file their taxes along with the penalty. Not filing income taxes may result in imprisonment and penalties. Corporate taxes are paid by companies and property taxes are paid by the property owners.