CDS , AFCAT : Important Notes (3)

Dear Friends ,

Today i am providing study material for TAX STRUCTURE IN INDIA . Every Indian must be aware of this topic. So enjoy reading.

If you have some doubt than plz ask..

LINK -

https://drive.google.com/folderview?id=0B2LNpIBU6wLQaURNdzFPVmpjMmc&usp=sharing

JAI HIND.

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Some of you facing problem in understanding proportional taxation so a short explanation -

Progressive taxation  -  The more you earn ,The more you pay income tax. Consider 4 people A, B, C, D.

There yearly incomes are - ( These data's are taken for example only)

A = 1..9 lakh  , B = 4 lakh ,C = 8 lakh , D = 12 lakh

Now according to progressive taxation , which India also follows , I will show you the income tax they will pay -

I.T.R. = Income Tax Rate

Where the total income does not exceed Rs. 2,00,000/-. .(ITR is NIL ) 

So A will pay NIL

Where the total income exceeds Rs. 2,00,000/- but does not exceed Rs. 5,00,000/-.(ITR -10%)

B will pay 40,000

Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-. ( ITR - 20%)

C will pay 1,60000

Where the total income exceeds Rs. 10,00,000/- ( ITR - 30%).

D will pay 3,60000.

As you can see this type of taxation is not encouraging any one to earn high. If you will earn low then it's better because of low Income tax. That is the reason it is said that " Being poor is rewarded , while richness is punished " ... Those who earn high , start showing Income Tax department that they earn less  so that they can save money by evading income tax.

But this method is pro -poor / helpful for the poor. And this method taxes people according to their affordability.


As you can see with the increasing salary the rate of taxation is also increasing, So we need to convert this progressive taxation into proportional taxation at certain level( 10 lakh).

Proportional Tax means same rate of tax for everyone irrespective of their earning. This proportional taxation is complemented with progressive / regressive .

In our example we converted progressive tax in to proportional tax at the level of 10,0000 , If anyone who earns more than 10 lakh like 15 lakh , 20lakh or more they all will pay income tax by same rate and procedure in a proportional manner , if we will not convert progressive into proportional  then you can imagine the percentage of tax rate who earns more than 10 Crore per annum and in India earning 10 crore/ annum is getting common.

Note - This is only a example to give a better understanding. There are some more features of progressive taxation and proportional tax.