Taxation

What is Tax? How many types of tax are there? Please explain it.

The compulsory obligation of payment of some portion of fund out of income and expenses to state is known as tax. In other word, payment done by citizen without expectation of direct benefit is known as tax. 

In more clear term, tax mean any individual, firm or industry compulsory payment to government according to the law. The compulsory monetary income gained by government from its citizen is called tax. The nations main source of income is these compulsory payment from its citizen. In recently announced budget of Rs. 1.532 trillion for fiscal year 2019/20 on jestha 15, 2076 by finance minister Dr. Yubharaj Khatiwada, Rs. 0.981 trillion is expected to finance from tax revenue.

Government run daily and developmental activities through the income gained from tax. Tax payer never expects direct benefit out of tax payment to government. But, government always efforts to access the services like: road, health benefits, educational benefits and security to its payers.

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Types of Tax

Tax is distributed on the basis of taxes area, tax collection body, nature, boundary and rate. On the basis of above facts tax are categorized in two parts:

a) Direct Tax: When the burden, effect and influence of tax is seen in/experienced by individual, then it is known as direct tax. The tax on who levied is responsible for the payment. The burden of this tax cannot be transferred. Income tax, property tax, land and housing tax are the examples of direct tax. In recent budget announcement for fiscal year 2019/20, Rs. 450000 annually income up to for couple is exempted from income tax (note, 1% social security contribution deduction is there always) and Rs. 400000 annually income up to for single is exempted from income tax (here too we have 1% social security contribution deduction).

b) Indirect Tax: When the burden and effect of tax is seen in different individual then it is known as indirect tax. The burden of tax is seen in one party and influence of tax is seen by another party. The burden of tax is transferable in this. The custom duty on goods and service transaction, value added tax (VAT), excise duty are the example of indirect tax.

This non-refundable fund received from citizen will be spend on national development and progress. Tax is the basis of healthy relation between government and citizen. Hence, good use of revenue received as tax in achievement of economic development and growth is indispensable.

Happy reading!