Definition of Direct Taxes
A Direct tax can be defined as a kind of charge, which is enforced directly on the tax-payer & paid directly to the government by persons (juristic or natural) on whom it is insisted upon. A direct tax is one that can’t be transferred by the tax-payer to someone else.
Types of Direct Taxes
Some significant direct taxes enforced in India are as follows:
Income Tax: As per the Income Tax Act, 1961, tax is imposed on the income of the individuals or firms or Hindu undivided families or co - operative societies as well as trusts or every artificial juridical person. The addition of a particular income in total incomes of a person for income tax in India is solely based on his residential status. There are 3 residential status, they are:
(i) Resident and Ordinary Residents
(ii) Resident but not Ordinary Residents
(iii) Non Residents
Corporation Tax: In India, business organizations and companies are taxed on the income from their global transactions under the provision of Income Tax Act, 1961. A corporation is considered to be resident in India if it is incorporated in India or if it’s management and control is placed wholly in India. In case of non-resident corporations, tax is imposed on the income which is earned from their business transactions in India or Indian sources depending on the bilateral agreement of that country.
Property Tax: House tax or Property tax is a local tax on buildings, together with appurtenant land, and it is imposed on owners. The tax power is vested in the states & is delegated by law to the local bodies, indicating the valuation method, collection procedures and rate band.
Inheritance (Estate) Tax: An inheritance tax can be defined as a tax which comes up on the death of an individual. It is a tax on the estate. Or it is the total value of money & property, of a person who has died.
Gift Tax: In India, Gift tax is regulated by the Gift Tax Act. The Gift Tax Act was constituted on April 1, 1958. It came into effect in most places in India except Jammu and Kashmir. As per the Gift Act 1958, all gifts in exceeding Rs. 25,000, in the form of draft, cash, cheque or others, received from one person who does not have blood relations with the recipient, were taxable. However, with effect from October 1, 1998, gift tax got pulled down & all gifts made on or after the date were free from tax. However in the year 2004, the Gift act was again revived partially. A new provision was pioneered in the Income Tax Act 1961 under section 56 (2). As per the provision, the gifts received by any individual or Hindu Undivided Family (HUF) exceeding of Rs. 50,000 in a year would be taxable.