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Corporate tax, income tax, security transaction tax, wealth tax, and others belonging to union tax are types of direct tax levied on profits or capital by corporations or similar legal entities. Such taxes are sometimes imposed on national levels but can also be imposed on state or local levels. This article will discuss the different types of taxes collected exclusively in the unions.
Corporate Tax
This tax is directly levied on the full income amount or the profits earned while conducting a business. This business can be foreign or domestic. The rate at which the tax is imposed as per the Income Tax Act, 1961 is referred to as the corporate tax rate.
Corporate Tax in India
In India, tax can be levied on different types of corporations. It can be international as well as domestic corporations. For example, all Indians pay tax on every item they purchase or their income; likewise, corporation tax is also levied on every business. Every individual or business has to pay some portion of the amount to the government in the form of corporate tax, corporation tax, or incorporation tax.
Income Tax
Income taxes are those taxes that both the state and the central can collect. However, these taxes are based on different things. A person’s income in a complete financial year decides that person’s income tax. Based on the income, tax not only gets calculated, but it is also decided if the person needs to pay income tax or not. This is also a type of direct tax collected exclusively by the union.
Security Transaction Tax
This tax is the tax related to any company’s securities or stocks. Whenever you buy or sell any company’s stock from the stock exchange market, a tax gets paid to the union tax collector. Being a direct tax, security transaction tax is also a union exclusive tax.
Wealth Tax
This is a tax levied on an individual’s personal assets. It includes property, bank balance, cash, real estate, pension plan, and insurance. Tax is owed to the union based on the total valuation of a person’s assets.
Union Excise Duty Tax
This is a type of indirect union tax for goods manufactured in India. These taxes are also known as sin taxes. Petroleum and gasoline products have this tax levied on them. Taxes on tobacco and alcohol also come under the union excise duty tax.
Who Owes Corporate Tax?
People liable to pay corporate taxes include:
All companies that generate profit from India by doing some kind of business.
Companies that have established themselves in India but are internationally based.
Companies and businesses that earn the title of an Indian citizen by themselves.
All incorporated corporations in India.
Types of Corporations
The two types of corporations include:
Domestic Corporation
These corporations are companies that are based in India. All these companies should be established under India’s Company Act, 2013. These corporations are also called domestic corporations. A company that focuses on an international border is also called a domestic corporation if it is completely based in India and comes under the management of India.
Foreign Corporation
These companies are located internationally outside of India. If any part of the company or branch is located overseas, it is called a foreign corporation. Understanding the differences between domestic and foreign corporations is important. Domestic corporations have to pay the corporate tax concerning their universal incomes and profits. In comparison, foreign firms have to pay taxes only on the income that they are earning through Indian operations.
Calculating Different Types of Taxes
For income tax, the total income of a person in a complete financial year gets calculated, and based on that, it is decided if the person comes under taxation and how much if so. There is no tax union takes from any person directly for union excise duty tax. However, the tax gets applied on the product, which indirectly gets paid by a person. So, for different types of taxes, the calculation differs.
Conclusion
In this article, we learned about different types of union taxes. This form of tax is levied on the profits that a company earns. Then the taxes are paid on the firm’s taxable income. This tax will include revenue cost minus prices of goods sold with general and administrative expenses, and operating costs, among other things. Other taxes levied by the state are sales tax and vat, professional tax, stamp duty, entertainment tax, and capitation taxes.
