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Budget and taxes: How they pinch you?

Here is a lowdown on the taxes that you will get to hear in the Budget speech.

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Last Updated: Jan 28, 2020, 07.17 PM IST
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The Budget now is all about direct taxes, which mainly include income tax and its variance.

For long, the Union Budget was more about which goods became costlier and which ones dearer, depending on the tax changes the government of the day would bring about in order to mop up the revenue required for a financial year. Even since GST rollout, merging various levies into one single tax, the Union Budget ceased to have any say on the indirect tax regime, barring import duty. The Budget now is all about direct taxes, which mainly include income tax and its variance.

Here is a lowdown on the taxes that you will get to hear in the Budget speech:


  1. What is direct tax in Budget?
    Direct tax is charged on income, salary or profits of an individual or corporates. In the case of direct tax, the burden can’t be shifted by the taxpayer to someone else. These are largely taxes on income or wealth. Income-tax, corporation tax, property tax, inheritance tax and gift tax are examples of direct tax.
  2. What is indirect tax?
    Indirect tax is a levy where the incidence and impact of taxation do not fall on the same entity. The burden of tax can be shifted by the taxpayer to someone else. Indirect tax has the effect to raising prices of products on which they are imposed. Customs duty, import duty, central excise, service tax and value added tax are examples of indirect tax.
  3. What is GST?
    GST, or goods and services tax, is an indirect tax. The Goods and Services Tax Act was passed by Parliament on March 29, 2017. It is levied on the supply of goods and services. This law has replaced many indirect taxes that previously existed in India. The tax department recently raised GST collection target to Rs 1.15 lakh crore over the next two months and Rs 1.25 lakh crore for March by checking fraudulent input tax credit claims.
  4. What is Long-Term Capital Gain?
    A long-term capital gain is the profit arising from the sale of an investment that has been owned for longer than 12 months at the time of sale. This duration can change depending on the government’s tax law and also from asset class to asset class.
  5. What is Securities Transaction Tax?
    Securities transaction tax (STT) is a levy charged at the time of purchase and sale of securities listed on stock exchanges in India. STT was introduced in the Union Budget of 2004 and implemented from October, 2004. The objective behind the levy was to mitigate tax evasion as the same is taxed at source. Stocks, futures, options, mutual funds and exchange-traded funds come under the ambit of STT. The rate of STT differs based on the type of security traded and whether the transaction is a purchase or a sale.
  6. What is Commodities Transaction Tax?
    Commodities Transaction Tax (CTT) is a levy on exchange-traded commodity derivatives in India on the lines of the Securities Transaction Tax or STT — a tax imposed on the purchase and sale of securities and their derivatives traded on stock exchanges in the local market. CTT was introduced in the Finance Act 2013 and became applicable from July 1, 2013
  7. What is Corporate Tax?
    Corporation tax or corporate tax or company tax, is a levy imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, but a similar tax may be imposed at state or local levels. In September 2019, India slashed corporate tax rates to 22 per cent from 30 per cent for existing companies and to 15 per cent from 25 per cent for new manufacturing companies. Including a surcharge and cess, the effective tax rate for existing companies now stands at 25.17 per cent, down from 35 per cent. Companies can opt for higher tax rates or the new ones.
  8. What is MAT?
    MAT or Minimum Alternate Tax is a levy which is applied to a corporate entity when its taxable income calculated as per the normal provisions in the IT Act falls below 18.5 per cent of book profits. It was introduced to reduce the gap between the tax accountability as per income calculation and book profits. MAT is levied at the rate of 18.5 per cent of the book profits, having gone up progressively from 7.5% in 2000 to 18.5% in 2015. But in the corporate tax rate cut announced in September 2019, the government lowered the MAT to 15 per cent from 18 per cent fixed earlier.

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