Fiscal Policy & Revenue (Part – Iv)

The pool of taxes that are shared with states is called the divisible pool. Taxes like surcharges and cesses (levied for specific purposes) are not included in the divisible pool and are retained by the central government. The Finance Commission plays a crucial role in determining the share of taxes that each state receives, based on factors like population, income, and other relevant criteria. Central GST (CGST) is part of the GST collected by the central government is also shared with the states. The GST collected by the state governments themselves (SGST) is entirely retained by them. A portion of the Integrated GST (IGST) collected on inter-state transactions is also shared between the center and the states. Other taxes like income tax and corporation tax are also part of the divisible pool.

The New Income Tax Bill 2025 aims to simplify and modernise the Indian Income tax system through proposed legislation. The bill focuses on important reforms that would enhance tax compliance, reduce litigation and give better clarity in tax laws. At the end of the day, the goal is to optimize and simplify the tax process for authorities as well as tax taxpayers. This would help in creating a better and efficient tax system.
New Income Tax Bill 2025 Objectives
The New Income Tax Bill 2025 has been designed to make tax compliance simpler and more user-friendly. Here's how:

• Simpler Legal Language: The bill replaces complex jargon with clear, straightforward language, making it easier for taxpayers to understand and comply without needing legal expertise.
• Shorter, More Efficient Laws: The new legislation will be about half the length of the current tax laws, removing redundant sections and reducing legal disputes. This will streamline processing for both taxpayers and officials.
• No New Taxes: This reform isn't about adding more taxes-it's about simplifying existing laws. By cutting down on complexity, taxpayers can navigate the system with ease and minimal bureaucratic hurdles.
• Budget Announcements Included: Key tax updates from the national budget, like income tax rate changes and TDS revisions, will be seamlessly integrated, ensuring clarity and smoother implementation.

This reform is all about making taxation simpler, more transparent, and easier to follow for everyone.

Direct Taxes
A direct tax can be defined as a tax that is paid directly by an individual or organization to the imposing entity (generally government). A direct tax cannot be shifted to another individual or entity. The individual or organization upon which the tax is levied is responsible for the fulfilment of the tax payment.
The Central Board of Direct Taxes deals with matters related to levying and collecting Direct Taxes and formulation of various policies related to direct taxes. A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets, FBT, Gift Tax, Capital Gains Tax, etc.
Indirect Taxes
The term indirect tax has more than one meaning. In the colloquial sense, an indirect tax such as sales tax, a specific tax, a value-added tax (VAT), or goods and services tax (GST) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer).
The intermediary later files a tax return and forwards the tax proceeds to the government with the return. In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by the government from the persons (legal or natural) on which it is imposed.

Central Excise Duty: Central Excise duty is a form of indirect tax that is levied by the Central Government for the Production, sale, or license of certain goods.

Customs Duty: Customs duty refers to the tax imposed on goods when they are transported across international borders. In simple terms, it is the tax that is levied on import and exports of goods. It is an indirect tax.

Corporation Tax: Corporation tax is a tax imposed on the net income or profit that enterprises (companies) make from their businesses. It is a direct tax like income tax. Companies, both private and public registered in India under the Companies Act 1956, are liable to pay corporation tax.

Central Excise Duty: Central Excise duty is a form of indirect tax that is levied by the Central Government for the Production, sale, or license of certain goods.

Customs Duty: Customs duty refers to the tax imposed on goods when they are transported across international borders. In simple terms, it is the tax that is levied on import and exports of goods. It is an indirect tax.

Corporation Tax: Corporation tax is a tax imposed on the net income or profit that enterprises (companies) make from their businesses. It is a direct tax like income tax. Companies, both private and public registered in India under the Companies Act 1956, are liable to pay corporation tax.

A corporate tax is a tax on a corporation's profits. Taxes are paid on a company's taxable income, which is revenue less general and administrative (G&A), selling and marketing, R&D, depreciation, and other operating expenditures.
A corporate entity's net income or profit from its operations, whether domestic or international, is subject to the direct tax which is the corporation tax or corporate tax.
The Corporate Tax Rate is the amount of tax levied by the terms of the Income Tax Act of 1961.
Depending on the kind of business entity and the various revenues generated by each corporate entity, the corporate tax rate is based on a slab rate structure.
Corporate tax rates vary greatly amongst nations, with some having meager rates and being labeled as tax havens.

• The effective corporate tax rate, or the rate a corporation pays, is typically lower than the statutory rate, which is the declared amount before any deductions because corporate taxes can be reduced by a variety of deductions, government subsidies, and tax loopholes.