There are two main categories of taxes in India. While direct taxes like income tax are charged directly, indirect taxes like the goods and service tax are charged indirectly.
This blog takes a deep dive into the different types of taxes in India. The aim is to give the readers a comprehensive guide to the Indian Tax structure.
Different Types of Taxes in India
India has a three-tiered tax system. They are- the state, the national government, and local municipal entities. Direct and indirect taxes are the two main categories of taxes in India. Let’s examine these two tax categories and understand the distinction between direct and indirect taxes.
Direct Tax
Taxpayers pay direct taxes to the government directly. They are not transferable to another individual or organisation. Every assessment year, direct taxes are assessed and under the different components of this taxation, taxpayers may also be eligible for certain advantages.
- Income Tax
Among the different types of taxes, one of the most commonly known tax systems is the Income Tax.
It is levied on income generated within a fiscal year. The tax is levied on individuals and other statutory persons, like firms and limited liability partnerships.
The various tax slabs are represented in a tabular form below.
| Total Income per annum (₹) | Rate of tax (%) |
| 0-4 lakhs | NIL |
| 4-8 lakhs | 5 |
| 8-12 lakhs | 10 |
| 12-16 lakhs | 15 |
| 16-20 lakhs | 20 |
| 20-24 lakhs | 25 |
| Above 24 lakhs | 30 |
Due to rebates, no tax is payable for income up to ₹12,00,000. In the case of salaried individuals, this benefit might reach as high as ₹12,75,000.
- Perquisite Tax
The term “perks” refers to any benefits or privileges that companies may provide their staff. These benefits might include access to a company-provided home or a company-provided vehicle.
Unlike the various types of taxes in India, the method utilised to collect this tax is the determination of how the individual or the corporation obtained that benefit.
For instance, a company-provided vehicle used for both official and personal reasons is tax deductible, but a vehicle used only for official purposes is not.
- Corporate Tax
A direct tax imposed on an organisation’s earnings from operations is the corporation tax. This tax applies to both public and private businesses. Both international corporations and domestic businesses must pay corporate tax.
The table below shows the types of taxes applicable to various companies.
| Particulars | 2024-25 | 2025-26 |
| Domestic Company | ||
| Companies with total turnover or gross receipts under ₹400 crores in PY 2021-22 | 25% | – |
| Companies with total turnover or gross receipts under ₹400 crores in PY 2022-23 | – | 25% |
| Other companies | 30% | 30% |
| Foreign Companies | ||
| Fees for providing technical services following an agreement made after February 29, 1964, but before April 1, 1976, and where such agreement has, in either case, been approved by the Central Government, or royalties received from the Government or an Indian business in accordance of a contract made with the Indian body after March 31, 1961, but before April 1, 1976. | 50% | 50% |
| Other | 40% | 40% |
- Securities Transaction Tax
Profits from securities like futures, stocks, and options, that are traded on the domestic stock exchange market are subject to the securities transaction tax levied by the government.
- Capital Gains Tax
It is levied on the proceeds of the sale of a capital asset. Capital gains go into one of two categories based on the duration:
| Particulars | Holding period in months |
| Short term | |
| Transferred before July 2024 | Not more than 36 |
| Transferred on or after July 2024 | Not more than 24 |
| Long term | |
| Any asset | Equal to or more than 36 |
Indirect Tax
The second category among the types of taxes in India is indirect taxes. When goods and services are consumed, an indirect tax is imposed. The government collects this tax on vendors and sellers of products and services. Consequently, they transfer the liability to purchasers.
- Sales Tax
Anything made in India or imported from elsewhere is subject to a sales tax. This tax is one among the various types of taxes in India.
It is placed on the seller of the goods, who then adds the tax amount to the product’s price to collect it from the buyer. Generally speaking, each Indian state has its own sales tax.
- Goods and Service Tax
The GST is levied on the price of some products and services provided in the nation. It was enforced on July 1st, 2017. When a consumer purchases something from the firm, they pay the whole sales price, which includes the GST.
Among the different types of taxes in India, GST is the most commonly known. One of the most crucial things to keep in mind is that the GST has merged a number of India’s indirect tax systems, including:
- Services tax
- VAT or Value added tax
- Stat excise duty
- Purchase tax
- Octroi
- Central Excise tax duty
- Custom Duty
One of the types of taxes imposed on commodities brought in from abroad is customs duty. The objects’ weight, measurement, price, and other pertinent characteristics are taken into consideration while calculating the tax. Its objective is to ensure that goods entering the country are duly taxed and compensated for.
Conclusion
In India, there are several kinds of taxes. Every individual has to bear a tax burden in some form or other. However, individuals can make prudent financial planning to minimise the tax burden and make the best of the prevalent laws. A keen comprehension of the different types of taxes promotes this financial prudence. Modern technologies have crafted various applications and mechanisms to make this process of financial planning easier.
Financial management apps can help individuals make the best of their resources and earn optimum future growth.
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