A compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions. Tax revenues finance government activities, including public works and services such as roads and schools, or programs such as Social Security and hospital facilities.
Benefits/objectives of tax
There are two major types of tax objectives
- Revenue purpose
- Non-revenue purpose
- There are some major non-revenue objectives.
- To strengthen anaemic ( growing stage) enterprises against foreign by granting them tax exemptions or provide other growth incentives.
- To protect local industry against foreign competition by increasing import tax.
- To discourage some undesirable products.
- To promote science and inventions, education system.
- Fair distribution of wealth.
- To run and administer government.
- As a tool for implementation of policies.
Types of taxes
- There are generally two types of taxes Direct and indirect
- Direct tax :A tax that is directly imposed on a tax payer ( i.e ) on salary-proporty- capital gain-business or other source
- Indirect tax :A tax that is not directly imposed but is collected in other form is called indirect tax .E.g General sales tax.
Characteristics of a Tax
- A tax is a payment made by taxpayers, which are used by the government for the benefit of all citizens.
- A tax is not levied in return for any services rendered by the government to the taxpayers. In other word, the essence of tax is the absence of a quid pro quo.
- It is compulsory contribution imposed by the government on the people residing in the country. Since it is a compulsory payment, a person who refuses to pay a tax is liable to punishment.
- But a tax is to be paid only by those who come under its jurisdiction.
- Similarly, persons who buy a commodity which carries a tax on it, pay the tax while others do not pay.
types of tax regimes(tax principles)
These are the 4 principle on the basis of which tax is charged
And each principle has its own characteristics
- Normal tax regime
- Separate block of income or Separate tax regime
- Final tax regime
- Minimum tax regime
Tax Return means filing of documents contain details of person income/cash flow as an expense during the year that have been recieved/inccured from salary, rent, capital gain or business activity to tax collection department
Types of returns
1-Sales tax return
2-Income tax return
There are further two types of sales tax return on the basis of month/year:
- Monthly return (each month)
- Annual return(combine 12 month)
Inome tax return
- Income is taxed on annual basis(12 month period)