Direct taxes are those which are paid directly to the government by the taxpayer.

Examples of Direct Taxes In India:

  • Income tax.
  •  Corporate tax.

    1. Income Tax

  • Income tax is the most common and most important tax that an Indian must pay.
  • It is charged directly on the income of a person.
  • The rate at which it is charged varies, depending on the level of income.
  • It’s charged to individuals, co-operative societies, firms, companies, Hindu Undivided Families (HUFs), trusts and any artificial judicial person.
  • Income tax is charged on an income known as “taxable income”, which is                                                   Taxable income = (total income) – (applicable deductions and exemptions).

The different heads of income under which income tax is chargeable are:

  • Income from house and property.
  • Income from business or profession.
  • Income from salaries.
  • Income in the form of capital gains.
  • Income from other sources.

It is levied differently for different people depending on their residency status.

       2. Corporate Tax

  • Levied on companies who exist as separate entities from their shareholders.
  • Foreign companies are taxed on income that arises, or is deemed to arise, in India.
  • It is charged on royalties, interest, gains from sale of capital assets located in India, fees for technical services and dividends.
  • Includes Minimum Alternative Tax (MAT) which was introduced to bring Zero Tax companies under the income tax net, whose accounts were made in accordance with the Companies Act.
  • Incudes Dividend Distribution Tax (DDT) which is a tax levied on any amount declared, distributed or paid as dividend by any domestic company. International companies are exempt from this tax.
  • Includes Securities Transaction Tax (STT) which is a tax levied on taxable securities transactions. There is not surcharge applicable on this.