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What is Tax & What are its Types

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Created on
May 2, 2023


What’s Inside

A tax is an obligatory financial levy levied by the government on individuals and business entities in order to support government spending. It is a method for the government to collect revenue and finance various initiatives for the benefit of society. In other words, taxation definition says that it is your contribution to the prosperity and development of your nation. As a result, all levels of businesses and persons subject to taxation, from local to worldwide, must pay tax.

Types of Taxes in India

Here are the details about the different types of tax:

Direct Tax

Direct taxes are those that individuals and organizations pay to the government straight away. These taxes are the distinctive obligation of the taxpayer and cannot be transferred onto any other entities or people under the law. The Central Board of Direct Taxes (CBDT), which is in charge of collecting and administering direct tax income for the government, oversees the administration of direct taxes.

The government determines the tax rates for direct taxes depending on the income or profits produced by people and corporations. These taxes are applied on a graduated scale, which means that people and businesses with wider earnings or profits pay higher tax rates. Income tax, wealth tax, and corporate tax are a few instances of direct taxes.

Indirect Tax

Indirect taxes are collected on the consumption of goods and services rather than on persons or corporations directly. These taxes are contributed by the end user of products and services. Indirect taxes are charged on products and services purchased or sold at various stages of manufacturing and distribution.

Value-added tax (VAT), goods and services tax (GST), excise duty, customs duty, and sales tax are the most prevalent indirect tax categories.

Benefits of Paying Taxes

Paying taxes is an important component of being a responsible citizen since it helps the government offer public services and build facilities that improve the well-being of the nation's residents. Here are a few of the advantages of paying taxes:

Public Amenities and Services

Public services, including healthcare, education, sanitization, transportation, and public safety, are funded in part by taxes. The construction of parks, libraries, schools, and other infrastructure that raises the standard of living for residents is also supported by tax revenue. Additionally, taxes support the military, promoting national security.

Enhanced Quality of Life

The improvement of healthcare and education, which are significant variables affecting the level of living, is rendered feasible by taxation. Better healthcare enables people to have healthier, more productive lives, while great education gives them the information and skills they need to land better jobs and make a greater living.

Public Initiatives

Taxes are used by the government to pay for a variety of public services, including assistance programs for underprivileged residents, pension plans, and unemployment insurance. These programs offer individuals and households who are likely dealing with poverty, unemployment, or other difficult situations cash aid as well as social support.


Paying taxes is not only a legal obligation but also a civic responsibility that contributes to the development of the nation and the well-being of its citizens. Moreover, with Fi Money, you can easily track your income and expenses, making it simpler to calculate your tax liability and file your tax returns accurately. Ultimately, paying taxes is a crucial responsibility for all citizens, and with Fi Money's assistance, it becomes a seamless and straightforward process.

Frequently Asked Questions

What is it called tax?

Tax is a mandatory financial charge that the government imposes on people or companies in order to pay for public expenses, infrastructure improvements, and other crucial services for societal welfare.

What is tax and its types?

A tax is an obligatory financial levy levied by the government on individuals and business entities in order to support government spending. It is a method for the government to collect revenue and finance various initiatives for the benefit of society.

Direct and indirect taxes are two different types of taxes in India.

What is tax in income?

Tax in income refers to the amount of money that an individual or organization is required to pay to the government depending on the income they made during a specific time. It is also known as income tax and falls under the category of direct tax.

Why do we pay taxes?

We pay taxes to support public services, the development of infrastructure, and other crucial services needed for the well-being of society. Taxes are vital to keep the state running smoothly and to give residents the conveniences and public services they need to improve their quality of life.

Who gets paid by tax in India?

Individuals and business organizations are obligated to pay different types of taxes in India as per the Income Tax Act and the funds that are raised through the paid taxes are collected by the Indian government.

Who pays tax in India?

Individuals and entities such as corporate companies, non-profit organizations, individual associations, and development bodies pay taxes in India.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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What is Tax & What are its Types


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