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Direct tax collected In India

A direct tax is a tax that is paid by an individual or an organization to the imposing entity, or to be precise, Direct Tax is the one which is paid to the Government by taxpayers. These taxpayers include people and organization both. Also, it is directly imposed by the Government and cannot be transferred for payment to some other entity.

With Direct Taxes, especially in a tax bracket system, it can become a disincentive to work hard and earn more money, as more money you earn, the more tax you pay.

Income Tax- It is imposed on an individual who falls under the different tax brackets based on their earning or revenue and they have to file an income tax return every year after which they will either need to pay the tax or be eligible for a tax refund.

Estate Tax– Also known as Inheritance tax, it is raised on an estate or the total value of money and property that an individual has left behind after their death.

Wealth Tax– Wealth tax is imposed on the value of the property that a person possesses.

However, both Estate and Wealth taxes are now abolished.

The Central Board of Direct Taxes in India

The Central Board of Direct Taxes or the CBDT, which was formed as the result of the Central Board of Revenue Act, 1924 looks after the Direct Taxes in India. This department is part of the Department of Revenue in the Ministry of Finance and is responsible for the administration of the direct tax laws. Besides that, the Central Board of Direct Taxes also provides inputs and suggestions for policy and planning of the direct taxes in India.

The latest data of tax collection as per the Central Board of Direct Taxes (CBDT) was released. The data reveals that Maharashtra, Delhi, and Karnataka contribute 61% of the country’s total revenue from direct taxes. Including the contribution of Tamil Nadu and Gujarat will aggregate to 72% of the total revenue.

Direct taxes include income tax paid by individuals and corporate tax paid by firms. It is a general notion that more revenue collection implies higher income. It also implies better employment opportunities and greater ease-of-doing-business. Greater revenue collected states are also those that have greater avenues for economic activities.

It was found that the large and populous states like Uttar Pradesh, Bihar, and West Bengal fare poorly. Bihar, the third most populous state accounts only 0.65% to the total direct tax collection. Uttar Pradesh, the most populous state and West Bengal, the fourth most populous state contributed to 3.12% and 4% of the total tax collection. 

The poor collection of taxes shows the absence of formal sector employment and corporates. It also shows that the working population in these states are not part of the salaried class. If they were a part of the salaried class, the revenue from income tax would have not been so low as compared to the population of these regions

So if we assume the total direct tax collected in India would be 100/-how much would each state contribute

Maharshtra:38/-, Delhi:13.5/- ,Karnataka:10/-

  1. Tamil Nadu : 6.7/-
  2. Gujarat: 4.6/-
  3. Andhra Pradesh :4.3/-
  4. West Bengal:4/-
  5. Uttar Pradesh:3/-
  6. Haryana : 2.4/-
  7. Odisha: 1.2/-
  8. Madhya Pradesh: 1.8/-
  9. Kerala: 1.6/
  10. Rajasthan:24/-
  11. Punjab : 1.1/-
  12. Bihar:0.65/-
  13. Telegana:0.46/-
  14. Jharkhand:0.5/-
  15. Assam : 0.56/-
  16. Goa:0.3/-
  17. Jammu and Kashmir:0.16/ Himachal:0.25/-
  18. Chhattisgarh: 0.25/-  Uttarakhand : 0.3/-Chandigarh : 0.25/- 19.Meghalaya: 0.08/- 20. Tripura:0.03/-

Finance Bill 2020

The Finance Bill 2020 has been passed by the Lok Sabha on 23 March 2020 and also duly returned by the Rajya Sabha. There were significant changes made to the original Finance Bill 2020 which was introduced in the Lok Sabha on 1 February 2020.

The Lok Sabha passed the Finance Bill by voice vote with 40 amendments amidst the coronavirus pandemic. On March 27, President Ram Nath Kovind gave assent to amend the Finance Bill 2020 and now it became the Finance Act 2020.

In the Union Budget 2020-2021, the government proposed to spend INR 30,42,230 crore in the next Fiscal Year which is 12.7% higher than the revised estimate of the year 2019-2020. After the Financial Bill 2020 has passed in the Lok Sabha, these proposals have been given effect.

What is a Finance Bill?

As per Article 110 of the Indian Constitution, Finance Bill is a Money Bill having a Memorandum containing explanations of the provisions included in it. The Finance Bill can only be introduced in Lok Sabha. However, Rajya Sabha can recommend amendments to be made in the Bill and it is up to Lok Sabha to accept or reject the recommendations. The bill must be passed by the Parliament within 75 days of its introduction.

Importance of Finance Bill

All the elements included in the Finance Act associated with a particular Financial Year are of course important. Even so, there are particular elements that take precedence over the others. The most important element is the rules laid down in the Act with respect to Income Tax Rates. Every year, the Act lays down in detail all the associated provisions related to Income Tax in the country. Since this applies to a large number of taxpayers, it is considered one of the most important elements.

The Finance Act is responsible for laying down the tax slabs that applies to taxpayers. The Act includes various details related to – Income through salary, agricultural income, tax slabs for senior citizens, tax slabs for very senior citizens, income Tax Surcharges, taxes chargeable to companies and advance tax.

These are a few important elements included and elaborated upon in detail in the Finance Act for a particular year.

Direct taxes

The Finance Act for a particular financial year also includes the amendments that have been made with respect to Direct Taxes. The Amendments made under various sections are noted down in this section of the Finance Act and each amendment of every section is noted down separately. Also included in the Finance Act are the details of the insertion of new sections, if any.

List of important amendments in the Finance Bill 2020

1- Additional excise duty on Petrol and Diesel by up to Rs 18 per litre and Rs 12 per litre respectively as and when required.

2- The original Finance Bill proposed to reduce the time spent in India by the Indian citizens or people of Indian origins to qualify as Indian tax resident from earlier 182 days to 120 days in 2019. Now, the Finance Act states that the 120-day rule will not apply to those citizens having Indian-sourced income less than INR 15 lakh in the relevant Fiscal Year. 

3- The Tax Deducted at Source or TDS rate on payment of dividend to non-residents and foreign companies have been set at 20% after the amendment. 

4- In the original Finance Bill, the dividend received by the shareholders was taxable. However, after the amendment, the dividends received by the shareholders will not be taxed if DDT has been paid as per the original law with effect to April 1. 

5- After the amendment, 1% of TDS has been imposed on e-commerce transactions. 

6- Finance Act, 2020 has extended reduced tax withholding rate of 2% to royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films.