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Answer Posted / gayathriprasad
INCOME TAX
INCOME TAX, it is a Direct Tax collectd by the governemnt,
as the name suggests, is a tax on the income of an
individual. the persons liable to pay this tax are
determined based of the provisions of the come Tax Act. In
India, the income Tax Act classififes the income of
individuals into 5 different sources.
1) Income form Salaries.
2) Income from business and profession.
3) Income from house property.
4) Capital Gains.
5) other income.
According to the taxation laws in India, every company has
to pay a tax on income earned. Financial statements
prepared by an organisation, in accordance with the Income
Tax Act, may differe from the Statutory forms adopted by
the organisation. In India, the sttutory reporting form for
a company is defined by the companies Act, 1956.
TDS(TAX DEDUCTED AT SOURCE) is one of the modes of
collecting Income Tax.
SALES TAX
Sales Tax is a Indidrect tax on goods, is a levy on
purchases and sale of goods. it is levied under authority
of both central legislatin (Central Sales Tax) and state
governments' Legislations (Local Sales Tax). Central Sales
Tax is governed by the Central Sales Tax Act, 1956 which
covers inter-state transactions of sale of goods as well as
transactions of import of goods or export of goods. it
provides for the levy, collection and distribution of taxes
on sales of goods in the course of inter-state trade of
commerce.
A dealer shall be liable to pay tax under this Act on a
sale of any goods effected by him in the course of inter-
state trade or commerce, notwithstanding that no tax would
have been levidable (whether on the seller or purchaser)
under the Sales Tax law of the ppropriate state if that
sales had taken place inside that state.
The Local Sales TAx is government the respective Stte Sales
Tax Acts under which tax is levied on intra - stte
transactions of sales.
VAT (VALE ADDED TAX)
It is an indirect tax n goods, introduced in lieu of sales
tax. its objective i to ensusre a fair and uniform system
of taxation. the bsic premise of VAT is to tax the "true
value" added to the goods, at each stage of the transaction
chain. this ultimatelly reduces
1) Tax paid to the government
2) Cost/Tax passed on to the consumer.
As against sales tax, which is a single-point tax, VAT is a
multi-point tax. under a slaes tax regime, the vlaue of
goods to be taxed at each stage is computed as basic cost +
profit margin + sales tax paid at earlier stage. VAt does
away with the cascading effect of tax, by allowing a set
off for input tax, i.e. tax paid at the earlier stages on
purchases.
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