A PROJECT REPORT

On
“Taxation Structure in India”

SUBMITTED TO

SAVITRIBAI PHULE PUNE UNIVERSITY

For the partial fulfillment of

BACHELOR OF BUSINESS ADMINISTRATION (B.B.A)

SUBMITTED BY
HARSHIT OSWAL,
S.Y B.B. A,
ROLL NO. 4248

UNDER THE GUIDANCE OF

Assistant Prof. Sayali Jagtap

Through
BRACT’s
VISHWAKARMA COLLEGE OF ARTS, COMMERCE &
SCIENCE
KONDHWA (BK), PUNE- 411048
(2023-2024)
 ACKNOWLEDGEMENT

We are very much grateful to Dr. Shital Mantri (HOD Commerce) and
Dr. Arun R. Patil (Principal) without their support this research could not
have been completed. We sincerely thank to Project Guide - Assistant
Prof. Sayali Jagtap. Her consent inspiration, motivation, guidance,
encouragement and sympathetic attitude.

We express our deep gratitude and thanks to the owner, manager and all
the employees for providing me all necessary detail about the topic and
helping me throughout my project.

Our special thanks to our teacher and friends for their support in all
possible ways and I really acknowledge them. Last but not least to all
those who helped us indirectly towards completion of this project.

Student Name: Harshit Oswal

Roll No: 4248

Class & Sem: S.Y. B.B.A., Sem 4

Seat No:
 DECLARATION

We the undersigned hereby declare that the project work entitled

“Taxation Structure in India’’ submitted to the Savitribai Phule Pune
University is the record on an original work done by us for the partial
fulfillment of:

Bachelor of Business Administration Academic Year 2023-24 under the

guidance of Assistant Prof. Sayali Jagtap.

Findings and Conclusions are based on the material collected by me.

This project has not been submitted or published on any other College or
Institutes before.

Student Name: Harshit Oswal

Roll No: 4248

Class & Sem: S.Y. B.B.A., Sem 4

Seat No:

Date: - 21st February 2024

Place:- PUNE
 INDEX

SR
NO. CONENTS PAGE NO.

1 INTRODUCTION 1

2 OBJECTIVE 16

3 FINDINGS 17

4 CONCLUSION 18

5 BIBLIOGRAPHY 19
 INTRODUCTION OF TOPIC

EVALUATION OF INDIAN TAXATION STRUCTRE

Since independence, India's tax structure has been changing on a regular basis.
We had a record number of Committees investigating the necessary adjustments
to the existing tax structure. Even today, one cannot declare that everything is
perfectly systematized and that the Indian tax structure and operations are
faultless. Taxation is an ancient notion, dating back to the dawn of humanity. The
ancient Indian books 'Manu Smriti' and 'Artha sastra' contain extensive
discussions on taxation. The king, according to Manu Smriti, should organize for
tax collection in such a way that the taxpayer does not feel the burden of paying
taxes. During the British reign in India, James Wilson developed the modern
taxation system in 1860. In the year 1922, more codification was adopted. The
system persisted, and in 1961, a new attempt was made when the Income Tax Act
of 1961 was passed and brought into effect, which is still in effect with some
minor changes by the government's authority. The right of the Indian government
to collect taxes is legitimized by the Constitution of India, which allocates tax-
levying powers to the Union Government and State governments according to the
scheme provided out under the VIIth Schedule. Article 265 limits the state's
taxation rights and states that no taxes may be collected without legal
authorization. Furthermore, all taxes levied within India must be accompanied by
a statute known as the Finance Bill, which is passed by the Parliament or the
State Legislature every year. The Central Board of Revenue Act of 1924
established the Board as a governmental entity charged with the administration of
income tax. There have been numerous amendments since then. With the
expansion of the tax net, expert committees such as the Indian Taxation Enquiry
Committee (1924-25) and the Taxation Enquiry Commission (1955-34) were
formed to make suggestions.

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The sole objectives of these committees are as follows:

• Simplification of tax laws.

• Widening tax base.

• Restructuring income tax department to increase effectiveness and productivity.

Indian taxes have undergone numerous revisions, but it is still a long way from
being an ideal taxation system. Many issues, such as tax evasion, reliance on
indirect taxes, black money, and the development of a parallel economy, indicate
that the Indian tax system will require considerable adjustments in the future to
address all of these issues.

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 TAXATION STRUCTURE

The taxation structure in India is a complex framework comprising various taxes

levied by the central, state, and local governments. This system is crucial for
generating revenue to fund government operations, public services, infrastructure
development, and welfare programs. The Indian taxation system has evolved
significantly over the years, with frequent amendments and reforms aimed at
enhancing efficiency, transparency, and equity. Here's a comprehensive overview
of the taxation structure in India:

1. DIRECT TAXES:

Direct taxes are levied on individuals and entities based on their income, profits,
and assets. These taxes are directly paid to the government and cannot be
transferred to others. The major direct taxes in India include:

A. INCOME TAX:

Income tax is levied on the income earned by individuals, Hindu

Undivided Families (HUFs), companies, and other entities. It is governed
by the Income Tax Act, 1961, and is administered by the Central Board of
Direct Taxes (CBDT). Income tax rates vary based on income slabs, with
higher rates for higher incomes.

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B. CORPORATE TAX:

Corporate tax is imposed on the profits earned by companies operating in

India. The rates for corporate tax differ for domestic companies, foreign
companies, and certain categories of companies. The Finance Act governs
corporate tax laws, and the CBDT administers its implementation.

C. CAPITAL GAINS TAX:

Capital gains tax is applicable on the profits earned from the sale of capital
assets such as property, shares, mutual funds, and other investments. It is
categorized as short-term capital gains tax (STCG) or long-term capital gains
tax (LTCG), depending on the holding period of the asset.

D. WEALTH TAX:

Wealth tax was previously levied on individuals, HUFs, and companies

based on the value of specified assets owned. However, it was abolished in
the Finance Act, 2015.

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 2. INDIRECT TAXES:

Indirect taxes are imposed on the production, sale, or consumption of goods and
services. These taxes are collected by intermediaries such as manufacturers,
wholesalers, and retailers but are ultimately borne by consumers in the form of
higher prices. The major indirect taxes in India include:

A. GOODS AND SERVICE TAX (GST):

GST is a comprehensive indirect tax levied on the supply of goods and

services across India. It replaced multiple indirect taxes such as central
excise duty, service tax, value-added tax (VAT), and others. GST is
governed by the GST Act and administered jointly by the central and state
governments through the Goods and Services Tax Council.

B. CUSTOM DUTY:

Customs duty is imposed on the import and export of goods. It aims to

regulate the inflow and outflow of goods, protect domestic industries, and
generate revenue for the government. Customs duty rates vary based on the
classification of goods and applicable trade agreements.

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C. EXCISE DUTY:

Excise duty was previously levied on the production or manufacture of

goods within India. However, with the introduction of GST, excise duty was
subsumed into the GST regime.

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 3. OTHER TAXES:

Apart from direct and indirect taxes, there are various other taxes and duties
levied by the central, state, and local governments in India. These include:

A. PROPERTY TAX:

Property tax is imposed by local authorities on the ownership of land and

buildings. The rates are determined based on the property's value, size, and
location.

B. STAMP DUTY:

Stamp duty is charged on various legal documents such as property

transactions, agreements, and contracts. The rates vary across states and
depend on the type and value of the transaction.

C. PROFESSIONAL:

Professional tax is levied by state governments on the income earned by

professionals, such as salaried employees, lawyers, doctors, and chartered
accountants, within their jurisdiction.

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 D. ENTERTAINMENT TAX:

Entertainment tax is imposed on the exhibition, screening, or hosting of

entertainment events such as movies, concerts, and amusement parks.

In conclusion, the taxation structure in India encompasses a wide range of direct

and indirect taxes levied by different levels of government. The system is
designed to mobilize resources for public expenditure while ensuring fairness and
efficiency in tax collection and administration. Continuous reforms and policy
measures are undertaken to streamline the taxation system and promote economic
growth and development.

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DIFFERENCE BETWEEN DIRECT TAX AND INDIRECT TAX

1) The impact of direct taxation is felt immediately by the taxpayer. In the

beginning, indirect taxes were levied on traders or producers, but they were
eventually levied on buyers of goods or services.

2) In the case of direct taxes, shifting the burden is difficult because the tax payer
must suffer the tax. The indirect tax might be passed on to other people.

3) In the case of direct taxes, the potential for evasion is substantial due to
account falsification and other means.

4) Income suppression in the case of indirect taxes, the opportunity for tax fraud
is limited because the tax is included in the purchase of a product or service.

5) Inflation can be reduced through direct taxation, but it can also be increased
through indirect taxation.

6) Direct taxes have a negative impact on taxpayers' ability to save and invest. In
the case of indirect taxes, savings and investment may grow when non-essential
items and services are reduced.

7) Direct taxes are progressive, reducing inequalities, but indirect taxes are
regressive, increasing inequalities.

8) In the case of indirect taxes, by heavily taxing hazardous items such as

cigarettes, liquors, and so on, the government can channel people's purchasing
power toward useful items, so creating a beneficial consumption pattern.

9) Direct taxes are typically complex, with numerous exemptions, procedures,

and provisions that may necessitate the assistance of professional accountants and
auditors, resulting in higher administrative costs, whereas indirect taxes have
lower administrative costs due to convenient and consistent collections.

10) Indirect taxes have a broader reach because they are levied on all members of
society through the sale of goods and services, whereas direct taxes are levied
solely on those who fall into specific tax brackets.

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 IMPORTANCE OF TAXATION STRUCTURE IN INDIA

The taxation structure of India is of paramount importance for several reasons:

 REVENUE GENERATION:

Taxation is the primary source of revenue for the Indian government. It

funds various public expenditure programs such as infrastructure
development, healthcare, education, defense, and social welfare schemes.
A well-structured tax system ensures an adequate flow of funds to meet
these expenses.

 REDISTRIBUTION OF WEALTH:

Progressive taxation helps in redistributing wealth by imposing higher tax

rates on individuals with higher incomes. This helps in reducing income
inequality by transferring resources from the affluent sections of society to
the economically disadvantaged ones.

 FISCAL POLICY TOOL:

Taxation serves as a crucial tool for implementing fiscal policy objectives.

Through tax rates and incentives, the government can influence
consumption, savings, investment, and overall economic activity to
achieve desired macroeconomic goals such as price stability, economic
growth, and employment generation.

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 PROMOTION OF ECONOMIC GROWTH

A well-designed tax structure can incentivize investment,

entrepreneurship, and innovation, thereby fostering economic growth. Tax
incentives for certain sectors or activities can encourage their
development, leading to overall economic expansion.

 FOREIN INVESTMENT ATRACTION:

The taxation regime also plays a crucial role in attracting foreign

investment. Favorable tax policies, such as lower corporate tax rates or tax
holidays for specific industries, can make India more competitive in the
global market and encourage multinational corporations to invest in the
country.

 RESOURCE ALLOCATION:

Taxation influences resource allocation by affecting the prices of goods

and services. By imposing taxes on certain products or activities (e.g., sin
taxes on tobacco or carbon taxes on polluting industries), the government
can discourage their consumption or production, thereby promoting more
socially desirable outcomes.

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  COMPLIANCE AND GOVERNANCE:

An efficient and transparent tax system promotes compliance among

taxpayers and fosters good governance. Simplification of tax laws, better
enforcement mechanisms, and reduction of tax evasion and avoidance
contribute to a more equitable and efficient tax regime.

 SOCIAL WELFARE:

Taxation can be used to fund social welfare programs targeted at

vulnerable sections of society such as the poor, elderly, and disabled.
These programs provide essential services and financial assistance to
improve the well-being of the population.

In summary, the taxation structure of India is crucial for revenue generation,

wealth redistribution, economic growth, resource allocation, attracting
investment, promoting social welfare, and ensuring good governance. A well-
designed and effectively implemented tax system is essential for sustainable
development and prosperity.

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 EFFECTS OF TAXATION STRUCTURE OF INDIA ON SMALL
BUSINESS AND INDIVIDUALS

The taxation structure in India has a significant impact on both small businesses
and individuals. Here's a short note outlining its effects:

FOR SMALL BUSINESSESS:

1. COMPLIANCE BURDEN:

Small businesses often struggle with the complexity and compliance

requirements of the tax system, including filing returns, maintaining
records, and adhering to various tax laws.

2. TAX RATES:

The tax rates applicable to small businesses can directly affect their
profitability. High tax rates may reduce investable funds for growth and
expansion, impacting their ability to compete effectively.

3. INPUT TAX CREDIT:

Goods and Services Tax (GST) implemented in India allows for input tax
credit, benefiting small businesses by reducing the tax burden on inputs
used in production or services.

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 4. THRESHOLD LIMITS:

Threshold limits for turnover determine the eligibility for certain tax
schemes and exemptions. Small businesses often operate close to these
thresholds, making it crucial to monitor turnover to avoid unintended tax
consequences.

FOR INDIVISUALS:

1. INCOME TAX:

The income tax structure directly impacts individuals' disposable income.

Tax rates, deductions, and exemptions influence their savings, spending,
and investment decisions.

2. DEDUCTIONS AND EXEMPTIONS:

Various deductions and exemptions provided under the Income Tax Act
help individuals reduce their taxable income, thereby lowering the overall
tax liability.

3. CAPITAL GAIN TAX:

Taxation of capital gains affects individuals' investment decisions in

financial assets such as stocks, mutual funds, and real estate. The tax rate
on capital gains and holding periods influence investment strategies.

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 4. TAX INCENTIVES:

The government provides tax incentives for investments in specified

sectors like infrastructure, healthcare, and education. Individuals can
benefit from these incentives by channeling their investments accordingly.

In summary, the taxation structure in India significantly impacts small businesses

and individuals alike, affecting their compliance burden, profitability, investment
decisions, and disposable income. It is essential for policymakers to balance
revenue generation with promoting economic growth and fairness in the tax
system.

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 OBJECTIVES

 Understanding taxation structure by the government of India.

 To study the impact of taxes on business and individuals

 Understanding the benefits of Indian taxation structure, and comparing

with other countries.

 To Identify problems in the existing taxation structure

 To Identify the different taxes Collected

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 FINDINGS

 From this study I received a summary of India’s taxation frame work.

 While studying the taxation structure I understood the impact of the

taxation structure on small businesses and individuals.

 While studying I understood the benefits and draw backs of Indian

taxation structure.

 I also studied the problems occurring in the taxation structure.

 The study gives us a brief about the taxes which are collected by the
Indian government.

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 CONCLUSION

While the tax department is technologically advanced, improvements to

the administrative and procedural components may be required. The
information and data on which the tax authorities have relied must be
made public. The statute should ban departmental authorities and
assessing officers from using information obtained from unsubstantiated,
private sources in international tax transactions. Because India is a high-
tax nation, foreign corporate companies must proceed with prudence
before establishing a presence there. Choosing an appropriate mode of
sale, determining the type of entity and nature of operations, and
appointing distributors. The government could also strive to provide
certain tax benefits to taxpayers in order to stimulate them to earn more by
committing more hours to work and working to their full potential. This
will not only help to develop the economy, but it will also help to improve
the quality of life. The financial situation of taxpayers, but it also has a
significant impact on the nation's economy. However, the government
should make an effort to increase employment opportunities for people
from all walks of life. Due to the fact that there is only a small
percentage of the majority of the population pays taxes, although a small
percentage of the population evades their tax obligations by making
fictitious income statements. To address the issue of black money and tax
evasion, all receipts, including agricultural income, should be digitized. A
proper mechanism for determining actual agricultural income for the
purposes of exemption should be devised.

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 BIBLIOGRAPHY

1. Jyoti Choudhry, Indian Tax Structure, Academia letters.

2.
2. Jitendra Kumar, An analysis of Tax Structure in India,

3. Dr. S.M. Alagappan, Indian Tax Structure- An analytical perspective

4. M. Govinda Rao, Tax reforms in India- Achievements and challenges, 7

Asia Pacific Development,

5. Dr. Shant Kumar A.B, An overview of Indian Tax Structure before and
after GST, IOSR,
6. Gaurav Sharma, A comprehensive study of Income Tax Law in the
Taxation system of INDIA

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