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.
Value Added Tax (VAT), stamp duty, state excise, land revenue and profession tax are levied by the State Governments.
Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.
Indian taxation system has undergone tremendous reforms during the last decade. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India.
In case of direct taxes (income tax, wealth tax, etc.), the burden directly falls on the taxpayer.
According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the Finance Act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year.
Assessee means a person by whom (any tax) or any other sum of money is payable under the Income Tax Act, and includes –
(a) Every person in respect of whom any proceeding under the Income Tax Act has been taken for the assessment of his income (or assessment of fringe benefits) or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;
(b) Every person who is deemed to be an assessee under any provisions of the Income Tax Act;
(c) Every person who is deemed to be an assessee in default under any provision of the Income Tax Act.