DIRECT TAX (Syllabus: GS Paper 3 – Economy)

Context: Net direct tax collection in the eight months of the current fiscal touched 58.34 per cent of Budget Estimates (BE) at Rs 10.64 trillion.

Direct Tax

• About: This tax is imposed directly on the taxpayer and is paid directly to the government by the individuals or entities subjected to it.
• The responsibility for levying and collecting direct taxes, as well as formulating other policies related to direct taxes, lies with the Central Board of Direct Taxes.

Types of Direct Tax

• Income Tax: Income tax is a tax charged on the annual income of an individual or business earned in a financial year.
• Corporation Tax: A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities.
• Dividend Distribution Tax (DDT): Dividend signifies the allocation of profits to a company's shareholders.

oThis tax is a specific tax imposed on the dividends disbursed to shareholders by the corporation.

• Securities Transaction Tax: It is a tax on gains made on the domestic stock exchange on securities such as equities, options, and futures.
• Alternate Minimum Tax: It is a direct tax applied to the buying and selling of securities listed on recognized stock exchanges in India.
• Minimum Alternate Tax: MAT is a provision in Direct tax laws to limit tax exemptions availed by companies, so that they pay at least a minimum amount of corporate tax to the government.