Direct taxes, as stated earlier, are taxes that are paid directly by you. These taxes are levied directly on an entity or an individual and cannot be transferred onto anyone else. One of the bodies that overlooks these indirect taxes is theCentral Board of Direct Taxes (CBDT), which is a part of the Department of Revenue. It has, to help it with its duties, the support of various acts that govern various aspects of direct taxes.

Some of these acts are:

Income Tax Act:

This is also known as the IT Act of 1961 and sets the rules that govern income tax in India. The income, which this act taxes, can come from any source, like a business, owning a house or property, gains received from investments and salaries, etc. This is the act that defines how much the tax benefit on a fixed deposit or a life insurance premium will be. It is also the act that decides how much of your income you can save through investments and what the slab for the income tax will be.

Wealth Tax Act:

The Wealth Tax Act was enacted in 1951 and is responsible for the taxation related to the net wealth of an individual, a company, or a Hindu Unified Family. The simplest calculation of wealth tax was that if the net wealth exceeded Rs. 30 lakhs, then 1% of the amount that exceeded Rs. 30 lakhs was payable as tax. It was abolished in the budget announced in 2015. It has since been replaced with a surcharge of 12% on individuals that earn more than Rs. 1 crore per annum. It is also applicable to companies that have a revenue of over Rs. 10 crores per annum. The new guidelines drastically increased the amount the government would collect in taxes as opposed to the amount they would collect through the wealth tax.

Gift Tax Act:

The Gift Tax Act came into existence in 1958 and stated that if an individual received gifts, monetary or valuable, as gifts, a tax was to be paid on such gifts. The tax on such gifts was maintained at 30%, but it was abolished in 1998. Initially, if a gift was given and it was something like property, jewellery, shares, etc., it was taxable. According to the new rules, gifts given by family members like brothers, sisters, parents, spouses, aunts, and uncles are not taxable. Even gifts given to you by the local authorities are exempt from this tax. How the tax works now is that if someone, other than the exempt entities, gifts you anything that exceeds a value of Rs. 50,000, then the entire gift amount is taxable.

Expenditure Tax Act:

This is an act that came into existence in 1987 and deals with the expenses you, as an individual, may incur while availing the services of a hotel or a restaurant. It is applicable to all of India except Jammu and Kashmir. It states that certain expenses are chargeable under this act if they exceed Rs. 3,000 in the case of a hotel and all expenses incurred in a restaurant.

Interest Tax Act:

The Interest Tax Act of 1974 deals with the tax that was payable on interest earned in certain specific situations. In the last amendment to the act, it was stated that the act does not apply to interest that was earned after March 2000.

By definition, indirect taxes are those taxes that are levied on goods or services. They differ from direct taxes because they are not levied on a person who pays them directly to the government, they are instead levied on products and are collected by an intermediary, the person selling the product. The most common examples of indirect tax Indirect tax can be VAT (Value Added Tax), Taxes on Imported Goods, Sales Tax, etc. These taxes are levied by adding them to the price of the service or product, which tends to push the cost of the product up.

GST - Goods and Service Tax::

The Goods and Services Tax (GST) is the largest reform in India’s indirect tax structure since the market started opening up about 25 years ago. The GST is a consumption-based tax, as it is applicable where consumption takes place. The GST is levied on value-added goods and services at each stage of consumption in the supply chain. The GST payable on the procurement of goods and services can be set off against the GST payable on the supply of goods and services, the merchant will pay the applicable GST rate but can claim it back through the tax credit mechanism.

Investment and consumption incentives:

The tax system is used to influence economic activity by encouraging certain investments and consumption patterns.

• Encourages investments: Specific deductions on investments like life and health insurance premiums help individuals reduce their tax burden while simultaneously encouraging them to save.
• Steers consumption: Indirect taxes, like those on harmful products such as tobacco, are used to discourage their consumption.
• Boosts disposable income: For individuals, the optional New Tax Regime offers simplified, lower tax rates with fewer exemptions, which can result in higher disposable income for many taxpayers, especially younger professionals.