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Taxes in India are broadly of two types: direct and indirect tax. Direct tax comprises wealth tax, health tax, and most prominent the income tax.
Central excise, sale tax, service tax are forms of indirect tax, all which now have been replaced by a comprehensive The Goods and Service Tax Act, 2017.
What the law says
Direct taxes are levied on the income of individuals and non-individuals. The income tax which is a type of direct tax is governed under The Income Tax Act, 1961. This is complex legislation having 300 Sections with several subsections. This Act undergoes a lot of amendments every year through a Finance Act passed by the Parliament. The income is divided into broadly 5 categories which includes Income from salary, Income from house property, Profits and gains of business or profession, Capital gains and Income from other sources. Different rates of taxes are applicable to the income of individuals and non-individuals ( company, partnership, etc.).
Indirect tax comprises central excise, sale duty and service tax which now have been replaced by GST Act of 217. This Act has replaced many other forms of indirect taxes.
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Victims of taxation
Fault or evasion from paying taxes can cause heavier penalties and imprisonment. As in the case of income tax, there are severe penalties and imprisonment for up to 7 years is prescribed in the Income Tax Act, 1961.
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