Tax Structure in India

2939 WordsAug 4, 201012 Pages
TAX STRUCTURE IN INDIA Introduction: India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies. Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax. The Tax Structure in India is quite strong and follows the financial year. The taxation under the tax structure in India is applicable for any kind of income pertaining to a person working as an employee under the public sector units, private sector units, foreign companies in India, Departments of the State Governments of India, and Departments of the Central Government of India or self-employed individuals…show more content…
Long-term capital gains are concessionally taxed at lower rates. Residents are taxed on their worldwide income. Subject to treaty exemptions, nonresidents are taxed only on income that is received in India or that arises in India or is deemed to arise in India. India follows the "classical system," under which corporate income is taxed both to the corporation and upon distribution to the shareholders as dividends. However, dividends received by one domestic company from another domestic company are not taxed in the hands of the recipient company to the extent it distributes the dividends to its shareholders within the time allowed for filing its tax return. Geographical source of income Generally, income arises in India if it becomes due in India. This depends on where the income-producing asset is located, where the services giving rise to the income are performed, where the sale is affected, and other considerations. In addition, the Income Tax At specifically mentions that the following income is deemed to arise in India: * Income arising directly or indirectly through or from any business connection in India; through or from any property, asset or source of income in India; or through the transfer of a capital asset situated in India. * Salaries earned in India, even if paid outside India. *
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