Taxation Laws

Taxes in India are levied by the Central Government and the state governments. Some minor taxes are also levied by the local authorities such as the Municipality. The authority to levy a tax is derived from the Constitution of India which allocates the power to levy various taxes between the Central and the State. An important restriction on this power is Article 265 of the Constitution which states that "No tax shall be levied or collected except by the authority of law". Therefore, each tax levied or collected has to be backed by an accompanying law, passed either by the Parliament or the State Legislature. In 2015-2016, the gross tax collection of the Centre amounted to 14.60 trillion (US$220 billion).

As per article 246 of the constitution of India allotted the legislative power included the taxation between the State Legislature and the Parliament. Schedule VII, allotted also the subject matters with the following list-

  • The first list is entailing the area where the parliament is only competent to make the laws,

  • The Second list is entailing the area where the stated legislature can make this type of laws.

  • The Third list is entailing the area where both the Parliament and State Legislature can make law.

Union and State have no power for Taxation. .The List of Taxation and   State Legislation are under mentioned here.


Serial No

 Parliament of India


Taxes in income except  agricultural income


Export duty including custom duty and excise duty and other manufacturing goods in India except alcoholic drink and other narcotic drugs.


The tax of Corporation


The Tax of Capital value asset, exclusively the agricultural land and the tax of capital amount of the company.


The tax of property and agricultural land.


The duty of succession of land or property


The tax of movable property like the tax of good of passenger carried by any railway, sea and air.


The tax other than the stamp duties in transaction of stock exchange.


The tax on news paper and advertisement through media


The tax of transaction of inter state goods


The tax for sold the news paper



Serial no.

State Legislature


Agricultural income tax


Mineral right tax


Tax on tolls


Tax of animal and boat


Land and building tax


Tax of sale and consumption of the electricity


Tax of vehicle suitable for road


Tax the good carried by passenger


Tax of any advertising or broadcasting


The tax of Stamp duty.


The Department of Income Tax

This Dept. functions under the revenue department in finance ministry. This department administrates this under mentioned Acts-

  • GIFT TAX ACT, 1958
This board is the part of the revenue department in the finance ministry, Govt Of India. This board is the statutory authority which acted upon the central board of revenue department in the initial stage this board was charged for direct and indirect charges and there after this administration became widely and impossible for handle and thereafter it splitted up into two boards.

Organization structure of the Central Board of Direct Taxes (CBDT)

The Chairman, who is also an ex-officio Special Secretary to Government of India, heads the CBDT. In addition, CBDT has six Members, who are ex-officio Additional Secretaries to Government of India.

  • Member (Income Tax)
  • Member (Legislation and Computerisation)
  • Member (Revenue)
  • Member (Personnel & Vigilance)
  • Member (Investigation)
  • Member (Audit & Judicial)

The Chairman and Members of CBDT are selected from Indian Revenue Service (IRS), a premier civil service of India, whose members constitute the top management of Income Tax Department.


This Act imposed a tax whose income individually and jointly and this act consists on five major bases- Income from

  1. House and property,

  2. Business and profession,

  3. Salaries

  4. Capital gains

  5. Other sources


A surcharge of 2.5 percent of total tax liability applicable to payee (exceeded where nonresident and foreign company Rs 1 crore)

Direct Taxes: - A tax that is paid directly by an individual or organization to the imposing entity. A taxpayer pays a direct tax to the government for different purposes, including real property tax, personal property tax, income tax or taxation on where the tax is levied on one entity, such as a seller, and paid by another, such a sales tax paid by the buyer in a retail setting.

    A direct tax can not be shifted to another individual or organization upon which the tax is levied and is solely responsible for the fulfillment of the tax payment.

    A direct tax is one that you have to pay and it cannot be shifted to others. State and federal income and property taxes are examples of direct taxes. The direct taxes are essentially the ones that are directly levied on individuals, corporations and organizations. These direct taxes are collected by the government, by the way of income tax return that is filed every annum.

    Direct taxation in India is taken care by the central board of direct Taxes. It is a division of Department of revenue under Ministry of Finance. The central board of direct is governed by the revenue act 1963. The central board of direct is given the authority to create and control direct taxes in India. The most important function of central board of direct is to manage direct tax law followed by Income Tax department. The tax structure in India is divided amongst the central government and state government.

    The central government levies taxes on income, custom duties, service tax and central excise. While the state government levies tax like state excise, Vat, Stamp duty, land revenue and professional tax.

Indirect Taxes: - Indirect taxes, on the other hand, are where the liability to pay can be shifted from one taxpayer to another.

  • Customs: - It's known as the Customs Act, 1962 (CA '62)- It is the basic Act for levy and collection of customs duty in India. The main purpose of this Act is for prevention of illegal import and export of goods and services and extends to whole India. The Custom Act is branched into (1) Indian Customs Act, (2) Sea Customs Act, (3) Land Customs Act, (4) Air Customs Act and (5) Customs Tariff Act. The main purposes for this act are:

    (a) the maintenance of the security of India; (b) the maintenance of public order and standards of decency or morality; (c) the prevention of smuggling; (d) the prevention of shortage of goods of any description; (e) the conservation of foreign exchange and the safeguarding of balance of payments; (f) the prevention of injury to the economy of the country by the uncontrolled import or export of gold or silver; (g) the prevention of surplus of any agricultural product or the product of fisheries; (h) the maintenance of standards for the classification, grading or marketing of goods in international trade; (i) the establishment of any industry; (j) the prevention of serious injury to domestic production of goods of any description; (k) the protection of human, animal or plant life or health; (l) the protection of national treasures of artistic, historic or archaeological value; (m) the conservation of exhaustible natural resources; (n) the protection of patents, trademarks and copyrights; (o) the prevention of deceptive practices; (p) the carrying on of foreign trade in any goods by the State or by a corporation owned or controlled by the State to the exclusion, complete or partial, of citizens of India; (q) the fulfillment of obligations under the Charter of the United Nations for the maintenance of international peace and security; (r) the implementation of any treaty, agreement or convention with any country; (s) the compliance of imported goods with any laws which are applicable to similar goods produced or manufactured in India; (t) the prevention of dissemination of documents containing any matter which is likely to prejudicially affect friendly relations with any foreign State or is derogatory to national prestige; (u) the prevention of the contravention of any law for the time being in force and (v) any other purpose conducive to the interests of the general public.

  • Excise: - This type of act is the combination of Central Excise Act 1944, Tariff Act 1985, Central Excise Rules 2002. That kind of Act for levy of collection of Immovable and Marketable property. An excise tax can be defined as a kind of indirect taxation that is applicable for goods that are produced and sold within the territorial limits of a country. It is basically different from customs duties, which are levied on goods that have been produced outside a country.

    Excise Tax Rules in India: -

    The Central Excise Act 1944 mentions the rules for levying and collecting the central excise duties and gives the Union Government the authority necessary to make rules for implementing the same. The rules are classified under the following heads:

    • The Central Excise Rules, 2002 (Section 143 of the Finance Act, 2002)
    • Consumer Welfare Fund Rules, 1992
    • The Central Excise (Settlement of Cases) Rules, 2001
    • The Central Excise (Advance Rulings) rules, 2002
    • The Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001
    • Central Excise (Compounding of Offences) Rules, 2005
    • Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000

    Excise tax is also known as excise duty. The initial purpose of this tax was to help the government generate the maximum possible revenue but in time it has become an important part of fiscal policies and has been playing a critical role in economic growth. There are seven types of excise taxes that are presently in operation in India.

    • Basic Excise Duty: The basic excise taxes are levied as per the First Schedule of the Central Excise Tariff Act, 1985.
    • National Calamity Contingent Duty: It is also referred to as NCCD and is applied as per the Section 136 of the Finance Act, 2001. It is taken as an additional tax on certain specified goods.
    • Special Excise Duty: The special excise taxes are taken as per the Second Schedule of the Central Excise Tariff Act, 1985.
    • Excise Duties and Cess Leviable under Miscellaneous Act: These duties are addition nature.
    • Additional Duties of Excise (Textiles and Textile Articles): This tax is imposed as per the Section 3 of the Additional Duties of Excise (Textiles and Textiles Articles) Act, 1978. This tax has been determined at 15% of the basic excise duty that is being paid on previously mentioned textile articles.

  1. Service Tax: - Service tax is a tax levied by Central Government of India on services provided or to be provided excluding services covered under negative list and considering the Place of Provision of Services Rules, 2012 and collected as per Point of Taxation Rules, 2011 from the person liable to pay service tax. Person liable to pay service tax is governed by Service Tax Rules, 1994 he may be service provider or service receiver or any other person made so liable. It is an indirect tax wherein the service provider collects the tax on services from service receiver and pays the same to government of India. Few services are presently exempt in public interest via Mega Exemption Notification 25/2012-ST as amended up to date and few services are charged service tax at abated rate as per Notification No. 26/2012-ST as amended up to date.
    Service tax is a tax on provision of services. It is collected by the provider of services from the consumer and deposit with the government. It is levied on the total value of services provided. Service Tax Rate is specified under section 66B ( Chapter V of the Finance Act 1994 ).
    The current Service Tax rate in India is15%.
    The Break up of New Current service tax rates in India is as follows:


    Service Tax Rate


    Swachh Bharat Cess


    Krishi Kalyan Cess


    Total service tax rates


From 1st June 2016 onward the new rate of service tax is 15% due to the introduction of Krishi kalyan Cess @0.5%.