The Benefits and Drawbacks of Income Tax in India

An income tax is a sum that every Indian citizen. Whether an individual or a corporation, is obligated to pay to the Indian income tax authorities for the fiscal year that begins on April 1 and ends on March 31 of the following year. The rate is established by the government.

It is determined using an individual’s or a business’s net taxable income. The government has set various slab rates, i.e. higher and lower slab rates, for the convenience of Indian citizens.

In India, who is liable to pay income tax?

  • Individuals who work for themselves
  • Individuals who earn a living
  • Undivided Hindu Family
  • a group of people
  • People’s Organization
  • Companies or corporate firms
  • Local governments

Regressive, progressive, and proportional income taxation are all options. In India, there are two types of income taxes: direct and indirect taxes.

Taxes that are levied directly on earned income are known as direct taxes. Indirect taxes, on the other hand, are those that are collected on your behalf and remitted to the Indian government. E-commerce entities, theaters, and any other services for which you are required to pay tax are examples of businesses where indirect taxes apply.

In India, there are several advantages to paying income tax.

In India, the advantages of having an income tax can be split into several categories:

Personal advantages

  • Requests for visas

If you want to travel to nations like Canada, the United States, or the United Kingdom, you must produce your last three years’ income tax returns (ITRs) in order to get a visa. Payment of income tax to the government of your home country assures other countries that you are not fleeing the country for the purpose of tax avoidance.

  • Credit approved in a timely manner

When applying for large-ticket loans such as home loans, company loans, or personal loans, timely payment of income tax to the Government of India is critical. The lender will always request copies of ITRs from the loan applicant before authorizing the loan.

  • Proof of income

Filing income tax serves as proof of income for any self-employed professionals, such as freelancers, firm partners, or consultants. It works in situations where professionals do not have a set wage from a corporation. It is essential in all financial and commercial dealings.

Public benefits

  • Acts as the primary source of revenue for the country

The major goal of taxing Indian residents is to raise income for government operations to run smoothly.

  • Various welfare programmes are being launched.

The government is creating and running several welfare initiatives to provide advantages to Indian citizens, ranging from education and health to housing and jobs. The cumulative income tax paid by people is the primary source of funding for all of these government initiatives.

In India, the Disadvantages of Income Tax

  • Inability to carry losses forward

If any of the assessees’ losses were not able to be offset against earned income subject to income tax laws and conditions, they are entitled to carry them forward. If the assessee tries to avoid paying taxes, the losses cannot be carried forward.

  • You’ll have to pay a hefty fine.

If you fail to file your income tax return on time, you will be charged a penalty of Rs 5000. The assessing officer has the right to waive the penalty that has been imposed. Before the penalty is levied, the taxpayer is given a reasonable opportunity to be heard. However, it is always prudent to follow the norms and regulations.

  • Deductions under Chapter VIA

If you do not pay income tax in India, you are not eligible for any tax deductions for investments such as insurance premiums, medical premiums, and so on, as per Chapter VIA.

  • May affect people‚Äôs will to work and save

People may become more discouraged to work hard and save if higher tax rates are imposed on them. They will begin to believe that the more their wages and savings, the higher their tax burden.

  • Inflation

When a commodity is subjected to taxation, the price of that commodity rises as well. It will indirectly raise the cost of manufacturing as a result of the necessity to pay greater wages to workers, which will raise the price of the item even more.

  • Other implications

The payment of income tax is critical in determining a taxpayer’s creditworthiness. If you don’t pay your taxes on time, it might stymie your financial activity in a variety of ways.

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *

No widgets found. Go to Widget page and add the widget in Offcanvas Sidebar Widget Area.