Indirect taxes and Direct taxes are the two main classifications of taxes. Direct taxes are the taxes which are paid directly to the government, such as income tax, whilst indirect tax includes taxes paid indirectly to the government, such as goods and services tax. The income tax is a direct tax, whereas the Goods & service tax is classified as an indirect tax. Read the full article to know more about ITR and GST filing distinctions.
What are direct taxes?
These taxes are paid directly to the Indian government. The government imposes a direct fee on the entity or the person responsible for paying it. Various taxes, such as income tax and TDS, are included in the direct taxes.
Types of Direct Taxes in India
The Indian Constitution Bill includes several direct tax categories. Below, we define:
Income Tax:
In India, this tax is well-known. The taxpayer whose income exceeds the specified taxable limit is responsible for paying this tax. The taxpayers must pay taxes at the appropriate rates. If your income exceeds INR 2,50,000, you are exempt from paying income tax returns under the F.Y. 2018–19 income tax rate. However, you must pay 5% tax as income tax up to INR 5 lakhs of income if your earnings are higher than 2.5 lakhs. For total income up to 3.5 lacs, there is a rebate of $2500 available.
Corporate Tax:
The income of corporate entities in our nation is subject to corporate tax, often known as corporation tax. International and domestic taxation companies are distinguished in India.
Fringe Benefits Tax:
Tax paid on fringe benefits given to employees by the employer, or "fringe benefit tax." It is determined separately from income tax based on the taxable value of the offered fringe benefits.
Securities Transaction Tax:
The primary goal of the Securities Transaction Tax (STT) was to prevent tax evasion on income from capital gains obtained through the trading of securities. This tax is imposed when securities listed on Indian stock exchanges are bought or sold.
Capital Gains Tax:
The tax that the person or business must pay when selling any capital asset, such as real estate, stocks, bonds, and precious materials, is known as capital gain tax. It is assessed on the difference between the sale price and the purchase cost (or indexed cost).
What are indirect taxes?
A tax that can be transferred from the party legally responsible for paying it to the government to another party is referred to as an indirect tax.
Kinds of Indirect Taxes in India
In the Indian Constitution Bill, there are several kinds of indirect tax. Below, we define:
Sales Tax:
The State Government imposes transaction taxes on intrastate sales, while the Union Government applies taxes on interstate sales. This type of tax is levied on merchandise sales. This tax is split into three categories: sales made between states, sales made during import/export, and sales made inside states.
Value Added Tax:
The state government is in charge of collecting this kind of tax. As an illustration, if we buy a product, we must pay the government an additional value-added tax. The VAT rate is chosen based on the item's type and the state.
Excise Duty:
Additionally, there is an indirect tax imposed on domestically made goods. Custom Duty has nothing to do with this tax. Excise duty is also known as central VAT.
Service Tax:
Taxpayers must pay service tax, an indirect tax, on services they have paid for. The telephone, interior designers, advertisements, health centres, banking and financial services, maintenance services, and consulting services are a few examples of paid services.
Custom duty:
Customs duty is the tax that is imposed on imported goods from foreign countries. The consumers cover the cost.
What is meant by ITR filing?
Income Tax Return Filing, also known as ITR Filing, is the process of submitting an income tax return to the income tax department. The filing of an ITR (Income Tax Return) is a declaration of a person's earnings from one or more sources. It contains details on the total amount of taxes paid.
ITR filing is a requirement for anyone who makes more than INR 2.5 lakhs in a year (General tax Payer category). ITR filing is generally done from April to July. The Income Tax Department will charge interest, pursue legal action, impose penalties, and inspect unfiled tax returns.
What is the process of ITR filing online?
Step 1: Visit the website and log on to the portal.
Step 2: Download the relevant ITR form
Step 3: Enter details in Form 16 after downloading the relevant ITR form
Step 4: Calculate the necessary tax information.
Step 5: Verify the information provided.
Step 6: Submit your return.
Step 7: A digital signature
Step 8: ITR verification confirmation
Step 9: e-verify Return
What is meant by GST filing?
The Goods and Services Tax is A fundamental action that connects the government and the taxpayer in filing a return. GST is a fundamental consent/report, and each business registered under the GST Act/regime must submit a return. Tax authorities use this to determine tax liabilities. When submitting the return, the taxpayer must include information such as tax payments, disclosure of tax liabilities, business activity details, and any other information that the government may require.
What is the main distinction between ITR filing and GST filing?
The main distinction between GST and income tax filing is that GST is levied on the goods and services consumed, while income tax is levied on an individual's income. The GST is essentially an indirect tax, and IRT is a direct tax
ITR filing is a direct tax paid to the government, whereas Goods and Service Tax is an indirect tax paid to the government.
While income tax is charged on salaries, real estate, capital gains, and other things, GST is set on the goods and services purchased or rendered.
What are the advantages of goods and services tax registration?
The following are the primary advantages of goods and service tax registration:
Formally acknowledged as a provider of goods or services.
Keeping accurate records of the taxes paid on the input goods and services can be used to pay the GST payable when the business supplies goods, services, or both.
Legally able to charge his customers taxes and give customers or beneficiaries a tax credit for taxes paid on the goods or services they received.
What steps are involved in a new registration for the goods and services tax?
- Check out the GST website.
- Click “Register Now” under the “Taxpayers” page to register.
- When you choose “New Registration,” you will be taken to a screen where you must enter information such as your name, permanent account number, state, district, etc.
- Click “Proceed” after precisely completing the form.
- The enlisted mobile number and email address will get an OTP. Fill out the necessary field with it.
- A ‘Temporary Reference Number’ will be given to you. Note down this number.
- You must repeat these procedures whenever you enter the portal. Moving on to the next step, choose "Temporary Reference Number" instead of "New Registration" and input the captcha information.
- Once more, an OTP will be sent to the registered phone number and email address. Access it.
- The application status is displayed as draughts on the following page. You could select the edit icon.
- To proceed to verification, choose your category and submit the necessary documentation for the company's location, authorised signatories, and more.
- Once verification is complete, you will get an "Application Reference Number" on your mobile number. The procedure to apply for a GST number is now complete.
We hope that we were able to address all of your concerns about the distinction between ITR filing and GST filing. We have a specialised team of top CAs who can help you with your ITR and GST filing processes. Contact Lawgical India immediately to receive the best online legal services.
