Why Pay Tax in India?
Understanding taxation in India can be daunting, but understanding the ‘why’ behind it is crucial. As an Indian citizen, there must be a common question in your mind, “Why pay tax in India?”. From driving economic growth to funding important public services, taxation plays a significant role in building our nation.
In this blog, we shall delve into the question “What is income tax,” and the significance of paying taxes on the nation.
What Is Tax?
Tax is a compulsory contribution made by the citizens of a nation, in this case, India, towards the development and growth of the country. The government of India collects the tax money. The contribution proceeds are invested in improving infrastructure, providing basic amenities, and improving the overall standard of living.
Why Pay Tax In India? Benefits
In India, taxes apply to various aspects of life, such as income, imports, exports, services, land, food, entertainment, and more. Here are a few benefits of taxation.
● Economy
Direct taxes paid by Indian citizens are a major and primary source of income for the government for all its major activities. The country’s economy is highly dependent on and influenced by these tax payments. Not only does it aid in economic development and welfare programs, but it also influences investment and savings behavior.
● Building Nation
As mentioned above, taxes are the government’s primary source of income. All significant government projects, such as infrastructural development, educational progress, healthcare provisions, defense, and more, are funded by the taxes paid by the citizens. In a country like India, these projects are of significant importance due to the size and density of our population.
● Government Schemes
Various development and growth schemes initiated by the government use the proceedings received from various taxes. These schemes include start-up loan programs, gas concessions, healthcare programs, water supply, rural development, industrial development schemes, environmental conversation, etc.
● Balance Of Economy
The flow of money and capital is important for an active economy. With taxes and tax benefits, balance becomes possible. For example, tax incentives for certain investments or savings schemes encourage individuals to save more or invest in specific sectors like insurance, loans, etc. However, it is wise to consult an investment or share market advisory firm to make a more informed investment decision.
What is Income Tax?
An individual has to pay a specific percentage of their income to the Government of India as Income Tax. The Government of India is currently following a progressive tax system, where the percentage of tax payable increases, as well as an increase in income.
The current tax slabs are segregated as follows:
| Income Tax Slabs (New Regime) | Income Tax Slabs (Old Regime) | ||
| Yearly Income (in ₹) | Income Tax Rate | Yearly Income (in ₹) | Income Tax Rate |
| 0 – 2,50,000 | NA | 0 – 2,50,000 | NA |
| 2,50,001 – 5,00,000 | 5% above ₹2,50,000 | 2,50,001 – 5,00,000 | 5% above ₹2,50,000 |
| 5,00,001 – 7,50,000 | 10% above 5,00,000 + ₹12,500 | 5,00,001 – 10,00,000 | ₹12,500 + 20% above ₹5,00,000 |
| 7,50,001 – 10,00,000 | 15% above 7,50,000 + ₹37,500 | Above 10,00,000 | ₹1,12,500 + 30% above ₹10,00,000 |
| 10,00,001 – 12,50,000 | 20% above 10,00,000 + ₹75,000 | ||
| 12,50,001 – 15,00,000 | 25% above 12,50,000 + ₹1,25,000 | ||
| 15,00,000 and above | 30% above 15,00,000 + ₹1,87,500 | ||
Note: The tax schedules outlined herein are for AY 2023-2024 for individuals below 60 years.
Different Types of Taxes
Mentioned below are a few important types of taxes:
- Income tax
- Corporate tax
- Sales tax
- Custom duty
- Property tax
- Capital gains tax
- Goods and services tax
- Gift tax
- Service tax
- Entertainment tax
Wrapping It Up!
Understanding the significance of taxation is more than just fulfilling compliance. It acts as a cornerstone for nation-building. By embracing taxation responsibilities and ensuring timely and correct payment, you can contribute to India’s development.
Since taxation forms the backbone of India’s progress, you fulfill your civic duty and pave the way for a brighter future.
Reference links:
Income Tax – Definition, What is Income Tax, Advantages of Income Tax, and Latest News – ClearTax
Why is Income Tax imposed in India? Here’s all you need to know (okcredit.in)
Importance of Tax: Know About the Benefits of Paying Taxes (canarahsbclife.com)
Why Paying Taxes Matters: A Crucial Role in Nation Building (taxguru.in)
Pay Income Tax, Importance of Taxation, Why Should We Pay – ABC of Money (adityabirlacapital.com)
Types of Taxes in India: Direct Tax and Indirect Tax (cleartax.in)
Salaried Individuals for AY 2023-24 | Income Tax Department
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