Direct Tax Collection

News: India’s direct tax collections in the first two and a half months (April – June) of 2021-22 stand at nearly Rs. 1.86 lakh crore, which isdouble the collections over the same period of last yearthat was affected by the national lockdown. The collections last year over the same period were Rs. 92,762 crore.

Details:

  • It includes Corporation Tax collectionsof Rs. 74,356 crore and Personal Income Tax inflows, which include the Security Transaction Tax of Rs. 1.11 lakh crore.
  • The jump in the direct tax collections reflects healthy exportsand a continuation of various industrial and construction activities.
  • It is expected that GDP (Gross Domestic Product)will record a double-digit expansion in Quarter 1 of 2021-22.

Direct Tax:

  • A direct tax is a tax that a person or organization pays directly to the entity that imposed it.
  • An individual taxpayer, for example, pays direct taxes to the government for various purposes, including income tax, real property tax, personal property tax, or taxes on assets.

Some examples of Direct Taxes:

Corporation Tax:

  • Corporation tax is a direct taximposed on the net income or profit that enterprises make from their businesses.
  • Companies, both public and privately registered in India under the Companies Act 1956, are liable to pay corporation tax.
  • This tax islevied at a specific rate according to the provisions of the Income Tax Act, 1961. In September 2019, India slashed corporate tax rates to 22% from 30% for existing companies and to 15% from 25% for new manufacturing companies.
  • Including a surcharge and cess, the effective tax rate for existing companies now stands at 25.17%, down from 35%.

Security Transaction Tax (STT):

  • It is a direct tax charged on purchase and sale of securitiesthat are listed on the recognized stock exchanges in India. Both purchaser and seller need to pay 1% of share value as STT.

Dividend Distribution Tax (DDT):

  • Dividend refers to the distribution of profits to shareholdersof a company. Thus, the dividend distribution tax is a type of tax that is payable on the dividends offered to its shareholders by the corporation. In the Union Budget for 2020-2021 the DDT was withdrawn from the tax paid by the dividend payer. Instead, from April 2021 on, dividends would be taxed in the hands of the recipients, i.e. shareholders of the distributing company. The proposed rate is 10% for dividends paid to shareholders resident in India and 20% if paid to foreign investors.

TDS/TCS:

  • Tax Deduction at Source: A person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.
  • Tax Collection at Source: It is an additional amount collected as tax by a seller of specified goods from the buyer at the time of sale over and above the sale amount and is remitted to the government account.