Indian Taxation System

It is a discretionary fiscal policy. The discretionary fiscal policy is adopted when the government intervenes in it to make some changes. If the tax rates are changed, it is beyond the existing fiscal policy. For instance, the reduction in tax rates on income of people will lead to increase in consumption level.

It is regressive tax. In the progressive tax, the tax rate increases with the increase in income. In regressive tax, the tax rate decreases with the increase in income. Hence, the regressive tax is opposite of progressive tax.

It is income tax. The rate of income tax increases with the increase in income in India. Hence, the poor have to pay no income tax and the rich have to pay high rate of tax. Hence, it is equitable in nature in India.

It decreases the gap between haves and have-nots. When the policy of progressive taxation is followed, the rich have to pay higher rates of tax and the poor have to pay low rates of taxes. The rich have the capacity to pay high rates of tax, because even after paying high rate of tax they are left with sufficient income. But if more income is withdrawn from the rich and spent for welfare of the poor, it can decrease the gap between haves and have-nots to some extent.

It is professional tax.The professional tax is the tax paid for practicing any profession like practicing by chartered accountants doctors. The incidence of professional tax is not on two different persons, but on one person as the person who practices the profession has to pay this tax from out of the income earned from his or her profession.

It is match box. The match box is an essential item, which is to be used by rich as well poor people. The match box is used to lit the fire. As the poor people have already less money, they take paying tax as a burden. The rich people have more money and as such they do not feel burden even if tax on match box increases. So, tax on match-box is unjust in nature for the poor people.

This statement is true about income tax. The income tax is progressive in nature in India, as the rate of income tax increases with the increase in income. The poor have to pay no tax and the rich have to pay more tax.

It is shifted. The value added tax is paid on the value added at each stage in goods and services from the production to retail stage. For instance, the wheat is converted into flour, which is the value added in the wheat. The person who adds the value by converting it into flour pays the tax, but finally charges it to the person to whom the flour is sold. Hence, its burden is shifted.

It is excise duty.The excise duty is levied heavily on products, which are harmful for health such as alcohol, tobacco, liquor etc. Heavy duty is charged on production of such harmful products so that its prices increase and people are discouraged to consume them.

It is sales tax. The sales tax is to be paid at the time of purchase of goods and is included in the price of goods. For surviving at least a person will purchase the essentials items like wheat. Hence, he has to pay sales tax on wheat purchased. Hence, it is not necessary that a person must come under taxable capacity to pay sales tax.

It is an example of transfer payments. The disability payment is the money given by the government to the person who is unable to work because of the disability. Transfer payment is the money given by the government to its citizens for social welfare. The disability payment is also given as part of social welfare, hence it is an example of transfer payment.

It is when manufacturer uses the cigarettes for his own consumption. When the manufacturer uses the cigarettes for his own consumption, he has to pay the excise duty to the government. He can shift the burden of cigarettes to another person only if cigarettes are sold. As the manufacturer is using the cigarettes for his own consumption, the impact and incidence of the tax will fall on one person that is the manufacturer.

It is Income Tax. For paying income tax, a person gets nothing in return at the time of paying tax. As income tax is not charged on goods and services, the person gets nothing in return of paying income tax.

It is Municipal Tax.The municipal tax is imposed in every city on the property owned by every person. The owner of property has to pay this tax and it is levied by the Municipal Corporation of the city. As it is levied on property owned by a person, nothing can be purchased in return of Municipal Tax.

Imposing higher taxes on consumer goods is not a method to achieve desirable level of price. The consumer goods are the goods, which are purchased by the average consumer like clothing, food, automobiles etc. If higher tax is imposed on consumer goods, average man has to spend a large portion of his income in the taxes and he will be left with very little money. Hence, it is not desirable to put higher taxes on consumer goods.