Why do we Pay Taxes?

What are Taxes?

The government must levy taxes on eligible citizens to run the country wisely; paying taxes to the local government is an essential component of life for all individuals, irrespective of their geographical location. At present, taxes can be charged in many different ways, including but not limited to state and federal taxes, direct and indirect levies, and more. For understanding, the forms of taxation in India shall be classified as either direct or indirect....

Types of Taxes in India

Whether it be an individual, a business, or an organisation, it is mandatory to pay taxes in different formats. In India, taxation is commonly categorised into two main classifications, Direct Tax and Indirect Tax. Let us examine these two categories of taxes to understand the difference between direct and indirect taxes....

Types of Taxes in US

1. Taxes on Individual Income: An individual or household’s earnings, including wages, salaries, investments, and other sources of income, are subject to an individual income tax (also known as personal income tax). Numerous individual income taxes are “progressive,” which means that as a taxpayer’s income rises, so do tax rates; as a consequence, those with higher incomes pay a greater proportion of income taxes....

Tax Delinquency in US

In the United States, tax delinquency relates to circumstances in which entities, including individuals and businesses, refuse to meet their tax responsibilities through the delayed payment of the mandatory tax amount. Delinquency regarding taxes may be found at different tiers of government, including the federal, state, and local sectors....

Why do we Pay Taxes?

In order to fund important public services and functions that contribute to the welfare and progress of society, individuals are required to pay taxes. Governments depend on tax revenues as their principal financial asset, which enables them to deliver essential services including but not limited to education, healthcare, infrastructure, and national defense. In addition to contributing to the redistribution of wealth, taxes boost social programs and safety nets in an effort to reduce economic inequality. Moreover, taxation plays an essential role in promoting economic stability by enabling governments to exert control over economic circumstances via fiscal policies. Tax payment is an important social obligation that contributes to the protection of the rule of law, the financing of public commodities, and the development of a community or nation as a whole....

Differences Between Direct Taxes and Indirect Taxes

Basis Direct Taxes Indirect Taxes Nature of Tax Levied on individuals and businesses Levied on goods and services Basis of Taxation Depends on the income or profits of the taxpayer Based on consumption or expenditure Example Income Tax, Corporate Tax, Property Tax Value Added Tax (VAT), Goods and Services Tax (GST), Excise Duty Impact on Behavior Direct taxes may influence individual behavior (e.g., work, investment choices) Indirect taxes may affect consumption patterns Collection Method Typically collected directly from the taxpayer by tax authorities Collected indirectly through intermediaries like manufacturers or retailers Progressivity Can be progressive, with higher-income individuals paying a higher percentage of their income May not be as inherently progressive, as everyone pays the same rate on the goods or services consumed Ease of Administration Can be complex to administer and enforce due to the need to assess individual incomes and assets Often considered easier to administer, especially with modern systems like VAT or GST Visibility to Taxpayer The taxpayer is acutely aware of the tax amount paid, as it’s a direct deduction The tax may be embedded in the price of goods or services, and the taxpayer might not be fully aware of the amount paid Economic Efficiency May impact economic efficiency due to potential disincentives for work or investment Generally considered more efficient as it doesn’t directly influence individual decisions as much....

How do Income Taxes Work in U.S.?

Taxes are imposed on corporations and individuals by the city, state, or nation in which they conduct business or reside. The tax that is attributed to the government of the United States is called a federal tax. Federal governments depend on the revenue generated from federal taxes to finance the development and maintenance of the nation. Federal tax is perceived by some as the “rent” or “fee” required to utilise the resources given by a nation. You are investing in the economy when you pay taxes to the United States government, as the funds are used for the following:...

How to Calculate Tax?

Depending on your location, the nature of your income, and the tax regulations of your jurisdiction, calculating taxes can be a complicated task. Listed below is an overview of how to compute income tax:...

How to File Taxes?

The process of filing taxes in India includes multiple stages and can differ depending on factors such as the source of one’s income, eligibility for exemptions, and employment status (salaried or self-employed). The following is an overview of the tax filing process in India,...

Frequently Asked Questions (FAQs)

1. What is Income Tax?...