Direct Tax

Introduction

• A Direct tax is one that is paid to the government directly by an organization or an individual. 
• It is the type of tax that has incidence and impact both at a similar point—the individual who is hit, the same individual bleeds.
• This tax liability has to be paid by the taxpayer in question and cannot be transferred to any other entity for payment. 

Characteristics of Direct Taxes

• Direct taxes are progressive and highly elastic in nature.
• Individuals bear the burden of paying taxes.
• Individuals are taxed directly based on their ability to pay.
• If there is a lack of proper collection administration , direct taxes can be evaded.

Direct Taxes in India

• Income Tax: Income tax is levied on one’s earnings in a financial year, i.e., between 1 April and 31 March. Tax slabs are the brackets that determine the tax to be paid based on the annual income of an individual. 
• Corporate Tax: Imposed on net income of a company registered in India under the Companies Act 1956. There is no separate tax called corporate tax. It is also an income tax. But its contribution to the income tax is large. Hence, it is shown in a separate head. 
• Equalization Levy: It was introduced in the Finance Act, 2016 as a measure of tax evasion.  It is levied on foreign companies over cross-border digital transactions.  It is intended to address the disparity in tax treatment between domestic companies and foreign companies that are able to earn without being subject to income tax on those profits, neither in a state where the premiums are collected nor in the state of residence. 
• Minimum Alternate Tax: Aimed at bringing those companies under tax net which try to escape corporate tax or pay very low tax by using provisions of the tax laws.  If the total income of a company calculated after availing all eligible deductions is less than 30% of its book profit, the company shall be charged a minimum tax as a percentage of its total income.