Definition : Definition A charge imposed by government on the annual gains of a person, corporation, or other taxable unit derived through work, business pursuits, investments, property dealings, and other sources determined in accordance with the state law
A tax levied on the annual earnings of an individual is called personal income tax. Personal Income taxes are levied by the central government. Classification of income : Classification of income Salary / remuneration
Income from house property
Income from business/profession
Gifts / charity
Capital gains Laffer Curve : Laffer Curve The rate of taxation at which maximal revenue is generated.
Tax rate Progressive , Regressive and Proportional TAX : Progressive , Regressive and Proportional TAX Tax imposed so that the effective tax rate increases as the economic well being increases.
The effective tax rate decreases as the economic well being increases.
The tax rate is fixed as the economic well being increases. Budget 2007 : Budget 2007 No income tax is applicable on all income up to Rs. 1,10,000 per year. (Rs. 1,45,000 for women and Rs. 1,95,000 for senior citizens)
From 1,10,001 to 1,50,000 : 10% of amount greater than Rs. 110,000 (Lower limit Rs. 1,45,001 for women and 1,95,000 for senior citizens)
From 1,50,001 to 2,50,000 : 20% of amount greater than Rs. 1,50,000 + the full tax on the first slab.
Above 2,50,000 : 30% of amount greater than Rs. 2,50,000 + the full tax on the first two slabs. Budget 2008 : Budget 2008 *A surcharge of 10 per cent of the total tax liability is applicable where the total income exceeds Rs 1,000,000. Personal Income Tax Brackets : Personal Income Tax Brackets Share of tax revenue : Share of tax revenue Impact on GDP : Impact on GDP 25 million tax payers in country
Income tax contribution to GDP is 3%
Productivity declines as the tax rate increases
Tax to GDP ratio is 7.3% Tax / GDP ratio trend : Tax / GDP ratio trend Why low Tax to GDP ratio : Why low Tax to GDP ratio Majority of tax revenues is from indirect taxes
Industrial sector(25% to GDP) contributes 65% of tax receipts
Service sector(58% to GDP) is marginally taxed
Agriculture sector is tax free Why is the tax-GDP ratio important? : Why is the tax-GDP ratio important? If the new government is talking about increased public investment in agricultural, education, healthcare and so on, where is the money going to come from?
Increasing private sector participation is one way of achieving this objective.
By involving agriculture and service sector under tax net. Surcharge and Cess : Surcharge and Cess Surcharge
A 10% surcharge (tax on tax) is applicable if the taxable income (taking into consideration all the deductions) is above Rs. 10 lakh. The limit of 10 lacs was increased to Rs. 1 crore (Rs. 10 million) with effect from 1st June 2007 for corporate assessees.
All taxes in India are subject to an education cess, which is 3% of the total tax payable. Some countries that are not taxed : Some countries that are not taxed Monaco
UAE Tax Penalties : Tax Penalties Section 142 (1) and section 143 (2) of the Indian Income Tax act 1961 lays down certain regulations regarding tax penalties.
The commissioner decides on the defaulters . Revenue : Revenue Income tax Conclusion : Conclusion Should personal income tax be abolished : Should personal income tax be abolished Contribution to the government is negligible.
People will save more money.
Greater industrial growth.
GDP expected growth rate is 8.8% and major contributors are services and manufacturing sectors