Finance Categories
Few Words about Income Tax
Finance is an integral part of an economy. The government of an economy also has to make expenditures for the betterment of the people of the country, for developing infrastructure, for the growth of the country, for solving various problems relating to unemployment and various other activities. Therefore, the government also needs finances in order to solve the problems of the economy. Government has many sources of income, and tax forms an important source of income for the government. It is an integral part of public finance of the government of our country.
Tax may be defined as a compulsory payment by the citizens of a country to the state. The state imposes taxes on the citizens in order to cover the expenses incurred by it in the common interest of its citizens. It is a charge which is imposed by the government in order to raise revenue from services or facilities provided by it, income, sales, property, wealth, etc. It is mandatory for everyone to pay tax. The government imposes tax on individuals, firms, companies, cooperative societies, etc.
Everybody is bound to pay income tax if the total income is more than the maximum exemption limit. In fact, if a citizen is liable to pay a tax, but does not pay it, the government may take legal action against him or her. The State can impose taxes on any basis. Thus, income taxes are imposed on the citizens on the basis of incomes. A tax does not involve an exchange relationship. Although the state imposes taxes in order to cover the expenses of running the government, there is no specific promise given by the State as to the benefits that the citizens may expect in return.
A tax is always imposes a burden on taxpayer. However, sometimes a person is able to shift the burden of taxation. Depending on whether the burden of tax can be shifted or not, there are two types of taxes, they are direct tax and indirect tax.
Government & Tax