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Income Tax Overview and Rates

An income tax is a tax imposed on individuals and entities based on their taxable income. The tax rate may increase as taxable income increases in a progressive or graduated manner. Companies pay corporate tax at a flat rate while individuals are taxed at various rates depending on their income band. Most jurisdictions exempt charitable organizations from income tax and allow credits to reduce tax owed. Income tax is generally calculated on total income minus expenses and deductions, with only net gains from property sales included. Jurisdictions either do not tax foreign income or allow credits for taxes paid elsewhere. Nonresidents are only taxed on certain domestic income sources. Taxpayers must self-assess and pay taxes, with penalties for late or unpaid taxes.

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50 views1 page

Income Tax Overview and Rates

An income tax is a tax imposed on individuals and entities based on their taxable income. The tax rate may increase as taxable income increases in a progressive or graduated manner. Companies pay corporate tax at a flat rate while individuals are taxed at various rates depending on their income band. Most jurisdictions exempt charitable organizations from income tax and allow credits to reduce tax owed. Income tax is generally calculated on total income minus expenses and deductions, with only net gains from property sales included. Jurisdictions either do not tax foreign income or allow credits for taxes paid elsewhere. Nonresidents are only taxed on certain domestic income sources. Taxpayers must self-assess and pay taxes, with penalties for late or unpaid taxes.

Uploaded by

Maningas John Paul
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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An income tax is a tax imposed on individuals or entities (taxpayers) that varies with respective

income or profits (taxable income). Income tax generally is computed as the product of a tax
ratetimes taxable income. Taxation rates may vary by type or characteristics of the taxpayer.
The tax rate may increase as taxable income increases (referred to as graduated or progressive
rates). The tax imposed on companies is usually known as corporate tax and is levied at a flat
rate. However, individuals are taxed at various rates according to the band in which they fall.
Further, the partnership firms are also taxed at flat rate. Most jurisdictions exempt locally
organized charitable organizations from tax. Capital gains may be taxed at different rates than
other income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose
the higher of an income tax or a tax on an alternative base or measure of income.
Taxable income of taxpayers resident in the jurisdiction is generally total income less income
producing expenses and other deductions. Generally, only net gain from sale of property,
including goods held for sale, is included in income. Income of a corporation's shareholders
usually includes distributions of profits from the corporation. Deductions typically include all
income producing or business expenses including an allowance for recovery of costs of business
assets. Many jurisdictions allow notional deductions for individuals, and may allow deduction of
some personal expenses. Most jurisdictions either do not tax income earned outside the
jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents
are taxed only on certain types of income from sources within the jurisdictions, with few
exceptions.
Most jurisdictions require self-assessment of the tax and require payers of some types of income
to withhold tax from those payments. Advance payments of tax by taxpayers may be required.
Taxpayers not timely paying tax owed are generally subject to significant penalties, which may
include jail for individuals or revocation of an entity's legal existence.

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