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August 10, 2009
India has a well developed tax structure with a three-tier federal structure, comprising
– Union Government,
– State Governments
– Urban/Rural Local Bodies.
The power to levy taxes and duties is distributed among the three tiers of Governments, in accordance with the provisions of the Indian Constitution.
The main taxes/duties that the Union Government
Empowered to levy are Income Tax (except tax on agricultural income, which the State Governments can levy), Customs duties, Central Excise and Sales Tax and Service Tax.
State Government
The principal taxes levied by the State Governments are Sales Tax (tax on intra-State sale of goods), Stamp Duty (duty on transfer of property), State Excise (duty on manufacture of alcohol), Land Revenue (levy on land used for agricultural/non-agricultural purposes), Duty on Entertainment and Tax on Professions & Callings.
Local Bodies
The Local Bodies are empowered to levy tax on properties (buildings, etc.), Octroi (tax on entry of goods for use/consumption within areas of the Local Bodies), Tax on Markets and Tax/User Charges for utilities like water supply, drainage, etc.
Since 1991 tax system in India has under gone a radical change, in line with liberal economic policy and WTO commitments of the country. Some of the changes are:
ᅡᄋ Reduction in customs and excise duties
ᅡᄋ Lowering corporate Tax
ᅡᄋ Widening of the tax base and toning up the tax administration
Direct Taxes
Personal Income Tax
Individual income slabs are 0%, 10%, 20%, 30% for annual incomes upto Rs 50,000, 50,000 – 60,000, 60,000 – 1,50,000 and above 1,50,000 respectively.
Corporate Income Tax
For domestic companies, this is levied @ 35% plus surcharge of 5%, where as for a foreign company (including branch/project offices), it is @ 40% plus surcharge of 5%. An Indian registered company, which is a subsidiary of a foreign company, is also considered an Indian company for this purpose.
Depreciation and interest deductions:
Depreciation rates
Rates (%)
Plant and Machinery
Furniture and Fittings
Vehicles (Other than for commercial use)
Pollution Control Equipment
Energy Saving Devices
Intangible assets
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