Tax may be defined as a "pecuniary burden laid upon individuals or property owners to support the government, a payment exacted

by legislative authority. A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority". Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent. As India is quasi-federal, the power to levy taxes rests both with the centre and the states and other local bodies. The division of these duties is done under the 7th Schedule of Article 256 of the Constitution of India. List I contains items which only the centre can levy tax on for example Income Tax, List II enumerates the taxes that the states can levy like stamp duties and entertainment tax. But unlike laws, the List III has no heading of taxes as no tax can be levied by both the states and the centre. Some of these taxes are collected but the Centre but the proceeds are shared with the states too, this is the Central Pool of Tax. On the other hand some taxes like certain excise duties are levied by the Central Government but it is the duty of the states to collect them. Thus the tax structure of India is very particularly structured and any tax which is not backed by a law or exceeds the powers of the government levying it can be struck down by the courts and declared unconstitutional. Taxes are also classified into Direct or Indirect. Direct Taxes are those which are levied by the government directly on the individual (juristic or real) and are paid directly to the government. These cannot be shifted by the individual to anyone else. Some of the direct taxes levied in India are Income Tax, Property Tax, Corporation Tax, Inheritance Tax and Gift Tax. 1. Income Tax- Income Tax Act, 1961 imposes tax on the income of the individuals or Hindu undivided families or firms or co-operative societies (other than companies) and trusts (identified as bodies of individuals associations of persons) or every artificial juridical person. The inclusion of a particular income in the total incomes of a person for income-tax in India is based on his residential status. There are three residential status, viz., (i) Resident & Ordinarily Residents (Residents) (ii) Resident but not Ordinarily Residents and (iii) Non Residents. All residents are taxable for all their income, including income outside India. Non-residents are taxable only for the income received in India or Income accrued in India. Not ordinarily residents are taxable in relation to income received in India or income accrued in India and income from business or profession controlled from India. Income tax can be used for raising the revenue for the government and other objectives like growth, economic stability and redistribution of income. India follows the system of progressive taxation, which means that the tax rate increase as the taxable amount increases. But unfortunately, in India, the base for income tax is very narrow. It is further narrowed by the number of deductions and reliefs the government allows, such as: - Savings, mutual funds, insurance, charitable contributions etc. 2. Corporation Tax- Again according to the Income Tax Act 1961, registered companies and business organisations are taxed on their income from their worldwide transactions. Though corporate incomes are taxed at a flat rate, there are provisions

for various types of rebates and exemptions for them. Over the years various rebates have been applied and removed, by the budget of 1991-92 the corporate tax was increased but as per the recommendations of the Chelliah Committee, the rate was brought down to 35% in 1994-95. In the Budget 2013-14, the rate was raised from 32.45% to 33.99%. Tax exemptions are given to induce investment activity and thus economic development, but they are often misused by companies to evade tax. A lot of incentives given to companies have led to prosperous companies paying zero corporation tax. This situation was handled by levying a minimum alternate tax (MAT). MAT is based on book profits, but these too are manipulated by companies leading them to evade tax and cheat the government out of the tax levied. 3. Property Tax- Property tax or 'house tax' is a local tax on buildings, along with appurtenant land, and imposed on owners. This tax is levied by the states and not the centre. There are different rates for properties occupied by owners and ones that are rented out. Land under control of the centre is exempted from tax instead a 'service charge' is permissible under executive order and so are foreign missions without any insistence on reciprocity. Some states give reductions in the rate to special categories of people, for example, the State of Karnataka gives reduction in rates for properties owned and occupied by defence personnel. The usual tax base is the annual rateable value, an area based rating. The owner occupied or non-rent producing property is assessed on cost and a percentage of this is converted to the ARV. Vacant land is exempted from this assessment. 4. Inheritance Tax- An inheritance tax or estate tax is a levy paid by a person who inherits money or property or a tax on the estate (total value of the money and property) of a person who has died. It existed in India between 1953 and 1985. The Estate Duty Act 1953 levied the tax on property inherited after death or on anticipation of death of an individual. It applied to agricultural land only in States that agreed to it. In the Amendment of 1984, agricultural land was removed from the purview of the act in certain states. The amendment of 1985 removed all forms of estate tax including agricultural lands in the states of Uttar Pradesh and Rajasthan. Thus this tax was completely abolished. 5. Gift and Tax- The gift Tax Act of 1958 introduced Gift Tax in India except in the state of Jammu and Kashmir; it covered gifts more than 25,000 in the form of cash, draft, cheque or others if given by individuals who were not blood-relatives. There were certain exemptions allowed such as donations given by and to charitable institutions, gifts to wife etc. Gift tax act was abolished on and after October 1 1998. Under the Income Tax Act 1961 under section 56 (2). According to it, the gifts received by any individual or Hindu Undivided Family (HUF) in excess of 50,000 or immovable property with stamp duty exceeding 50,000 and movable property whose fair market price exceeds the same amount in a year would be taxable . It includes exemptions under this include inherited assets, wedding gifts, gifts from blood relatives and gifts under 50,000, or gifts from charities, trusts and universities. Indirect Tax is a tax collected by an intermediary from the person who bears the ultimate economic burden of the tax. The intermediary later files a tax return and

forwards the tax proceeds to government with the return. Indirect taxation is policy often used to generate tax revenue. Indirect tax is so called as it is paid indirectly by the final consumer of goods and services while paying for purchase of goods or for enjoying services. Indirect tax is broadly based since it is applied to everyone in the society whether rich or poor. The tax payer who pays the tax does not bear the burden of tax; the burden is shifted to the ultimate consumers. In the case of a direct tax, the taxpayer has to bear the burden of tax personally; in case of indirect tax the taxpayer and the tax bearer are not the same person. Some of the Indirect Taxes levied in India are:1. Customs Duties-The Customs Act was formulated in 1962 to prevent illegal imports and exports of goods. Besides, all imports are sought to be subject to a duty with a view to affording protection to indigenous industries as well as to keep the imports to the minimum in the interests of securing the exchange rate of Indian currency. Duties of customs are levied on goods imported or exported from India at the rate specified under the customs Tariff Act, 1975 as amended from time to time or any other law for the time being in force. 2. Service Tax- The service providers in India except those in the state of Jammu and Kashmir are required to pay a Service Tax under the provisions of the Finance Act of 1994. The provisions related to Service Tax came into effect on 1st July, 1994. Under Section 67 of this Act, the Service Tax is levied on the gross or aggregate amount charged by the service provider on the receiver. However, in terms of Rule 6 of Service Tax Rules, 1994, the tax is permitted to be paid on the value received. The interesting thing about Service Tax in India is that the Government depends heavily on the voluntary compliance of the service providers for collecting Service Tax in India. 3. Sales Tax- Sales Tax in India is a form of tax that is imposed by the Government on the sale or purchase of a particular commodity within the country. Sales Tax is imposed under both, Central Government (Central Sales Tax) and State Government (Sales Tax) Legislation. Generally, each State follows its own Sales Tax Act and levies tax at various rates. Apart from sales tax, certain States also imposes additional charges like works contracts tax, turnover tax and purchaser tax. Thus, Sales Tax Acts as a major revenue-generator for the various State Governments. From 10th April, 2005, most of the States in India have supplemented sales tax with a new Value Added Tax (VAT). 4. Excise Duties- An excise tax is a tax levied by the central government on goods manufactured without regard to its sale in. A buyer collects the excise tax or excise duty from the purchaser at the time of sale of a product. The excise duty is levied on all products specified in the Central Excise Tariff Act, 1985 (CETA). The excise tax can be based on the value of goods or a fixed rate tax. Based on the notifications issued by the Central Government of India, some products are fully exempted from excise duty. The Central Government levies excise duties on commodities other than alcohol and narcotics. 5. Value Added Tax (VAT)- The practice of VAT executed by State Governments is applied on each stage of sale, with a particular apparatus of credit for the input

VAT paid. VAT in India classified under the tax slabs are 0% for essential commodities, 1% on gold ingots and expensive stones, 4% on industrial inputs, capital merchandise and commodities of mass consumption, and 12.5% on other items. Variable rates (State-dependent) are applicable for petroleum products, tobacco, liquor, etc. VAT levy will be administered by the Value Added Tax Act and the rules made there-under and similar to a sales tax. It is a tax on the estimated market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on to the consumer. Under the current single-point system of tax levy, the manufacturer or importer of goods into a State is liable to sales tax. There is no sales tax on the further distribution channel. VAT, in simple terms, is a multi-point levy on each of the entities in the supply chain. The value addition in the hands of each of the entities is subject to tax. Indias tax structure is quite extensive. Now almost every fair conceivable direct and indirect tax is levied. In terms of the ratios of tax proceeds to national income, India is one of the highly taxed countries. The ration of direct to indirect tax is lower than that of developed countries due to the majority of the population being impoverished, it was 18: 82 in 1980-81 but rose to 28: 72 in 2002-031. Since in India the base of direct taxes has not been adequately expanded and the personal income tax is not tapping the whole potential there is considerable scope for raising revenue proceeds from direct taxes.

REFERENCES 1. Indian Economics- Mishra and Puri 2. mospi.nic.in , MOSPI- Ministry of Statistics and Programme Implementation

Amaresh Bagchi, Strengthening Direct Taxes- Some Suggestions Economic and Political Weekly, February 18-25, 1995, p 380.