UNIT – 1
GENERAL CONCEPTS
According to Adam Smith, “Every tax should be
designed to take as little money as possible out
of people’s pockets while yet contributing to
the public treasury of the state.”
UPDATES AS ON NOVEMBER 2023
How many ITRs are filed in 2023?
7.85 crore
What is the processing status of ITR in 2023?
The average ITR processing duration has been reduced to 10 days for returns
submitted in the AY 2023-24, as opposed to 82 days for returns submitted in
the AY 2019-20 and 16 days for returns submitted in AY 2022-23.
Which company pays highest tax in India?
The top 10 highest tax-paying entities in India. Reliance Industries Limited
(RIL) is a Fortune 500 company and India's largest private sector corporation.
RIL paid the highest tax with a sum of Rs 20713 crore in taxes during the
financial year 2022-23.
What is the largest source of tax revenue in India 2023?
Corporate Tax. Corporate tax is the single largest source of income to the
government of India.
Which state has highest tax collection in India?
Maharashtra is the state with the highest GST at₹23,598 crore.
Karnataka becomes second with a collection of ₹ 10,061 crore.
Gujarat placed third with a collection of ₹9,238 crore.
Tamil Nadu come in fourth with a collection of ₹8,324 crore.
What is the share of direct and indirect taxes in India 2023?
Direct Taxes contribute 54.4 per cent
Indirect Taxes contribute 45.6 per cent
Tax to GDP ratio is estimated at 11.1 per cent.
Which tax is more in India direct or indirect
tax?
Indirect taxes, which are paid by all citizens,
whether rich or poor, include GST, customs &
excise duties and the erstwhile service tax. In
India, indirect taxes constitute about half of
total taxes collected.
Who was the Highest Taxpayer in India in
2021?
Akshay Kumar was awarded "Samman Patra ''
for being the highest taxpayer in India for the
last five years by Income Tax Department.
1. CANON OF EQUITY OR EQUALITY
The burden of taxation must be distributed equally or evenly
among taxpayers.
This type of equality; however, deprives justice because not
all taxpayers have the same ability to pay taxes.
Rich individuals can afford to pay more taxes than
impoverished ones.
Justice requires that a person with greater financial ability pay
higher taxes.
If everyone is expected to pay taxes based on his or her
abilities, then all taxpayers’ sacrifices become equal.
This is the core of the equality canon (of sacrifice).
To ensure equity in sacrifice, taxes will be imposed based on
the principle of ability to pay.
The canons of equality and ability are two sides of the same
coin.
2. CANON OF CERTAINTY
The tax that an individual must pay should be certain and not
arbitrary.
The time of payment, the method of payment, and the amount to
be paid; i.e., tax liability, should all be apparent to the contributor
and everyone.
The canon of certainty encompasses a wide range of concepts.
It must be certain for both the taxpayer and the taxing authority.
Taxpayers should be aware of when, where, and how much taxes
are due.
The certainty of liability must be anticipated ahead of time.
There must be certainty about the amount of income that the
government wants to collect throughout the specified time period.
Any bit of uncertainty in these areas could lead to disaster.
3. CANON OF CONVENIENCE
Taxes should be imposed and collected in such a way that it is
most convenient for both the taxpayer and the government.
It should be as painless and trouble-free as possible.
“Every tax”, emphasizes, “should be levied at the time or in the
manner most likely to be convenient for the contributor to pay it.”
Agricultural income tax is collected after the harvest.
Salaried people are taxed at the point of receipt of their salaries.
4. CANON OF ECONOMY
This canon suggests that the cost of collecting a tax should be
kept to a minimum.
Any tax that has a large administrative cost, extraordinary delays
in assessment,
High collection rate should be avoided at all costs.
5. CANON OF ELASTICITY
The canon of elasticity is very important to modern economists.
This canon indicates that a tax’s yield should be flexible or
elastic. It should be levied in such a way that the tax rate can be
adjusted in response to changing circumstances. When the
government requires funds, it must be able to extract as much
revenue as possible without causing any negative repercussions
by raising tax rates. This canon is satisfied by income tax.
6. CANON OF PRODUCTIVITY
Taxes must be productive or cost-effective.
Revenue generated by any tax must be substantial.
Only taxes that do not impede the productive work of society
should be imposed.
Only when a tax functions as an incentive to produce, it is
considered productive.
7. CANON OF VARIETY
Taxation must be dynamic.
Rather than having single or two taxes, a
country’s tax structure should be dynamic or
diversified.
Diversification of a tax structure will
necessitate the participation of the majority of
the people.
If a single tax system is implemented, only a
certain sector will be required to pay to the
national exchequer, leaving a big number of
people out.
The impact of such a tax structure will be
greatest on particular taxpayers.
A dynamic or varied tax system will result in
the distribution of tax burdens throughout a
large population, resulting in a low degree of
8. CANON OF SIMPLICITY
Every tax must be straightforward and understandable to the
public so that the taxpayer can calculate it without the assistance
of tax professionals.
A complex and complicated tax is certain to have unfavourable
side effects.
If tax system is determined to be difficult, it may encourage
taxpayers to evade taxes.
A complicated tax system is costly in the sense that even the
most honest and informed taxpayers must seek the guidance of
tax professionals.
In the end, such a tax structure has the potential for breeding
corruption in society.
9. CANON OF EXPEDIENCY
A tax should be expedient or beneficial so that the
government may defend itself against public criticism by
arguing for its need.
Taxpayers will be outraged if there is no justification for the
levy.
Every new tax must have a reason to generate a feeling of
acceptability in the minds of the taxpayers.
An unfair tax will always confront acute refusal on the part of
the taxpayers to pay and they will try to avoid them.
10. CANON OF FLEXIBILITY
It states that the entire tax system should be flexible enough to
allow taxes to be readily increased or decreased in response to
government requirements.
This flexibility guarantees that anytime the government wants
more money, it can generate it quickly and easily.
Similarly, decreasing taxes should not be an issue when the
economy is not thriving.
