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What Are Taxes? What Are The Benefits Of Paying Taxes?

When we use the word “TAX”, we usually imagine a tax on income, whether that's a personal income tax, a corporate income tax, a property tax, or a consumption tax. However, taxes are not only a form of income tax. They are also used as payment for the government's services, and even in other areas of the economy.

“Tax is the money you pay the government for the public services they provide you. Taxes are based on your income, and they form the main source of revenue for the government.”

Tax is the most common and important government intervention to redistribute income among the population. It is an attempt to share the burden of economic growth through a progressive taxation system. The tax burden on the upper income groups is higher, and the burden is lower for lower income groups.

There are many benefits of paying taxes. They help in the development and maintenance of infrastructure, like roads, and they can even help to create or maintain the institutions needed for the rule of law and the functioning of the democratic process.

Taxes are the government's revenue for financing public spending, including building roads, school buildings, and hospitals, and for funding local government services, including police and fire departments, parks and playgrounds, and public libraries.

Some common taxes paid and collected in India are - Income Tax, GST, Road Tax, Property Tax, Professional Tax, Corporate Tax, Customs Duty, Excise Duty, Entertainment Tax, Swachh Bharat Cess, Krishi Kalyan Cess, and so on.

Each tax is collected for a specific purpose, and most are collected according to a schedule of rates. The Department of Revenue has overall supervision and authority over all Direct and Indirect Union Taxes through two statutory Boards, the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIT&C) (CBIC). Each Board is led by a Chairman who also serves as the Government of India's ex-officio Special Secretary. The CBDT is responsible for the levy and collection of all Direct Taxes, whereas the CBIC is responsible for the levy and collection of Customs and Central Excise charges, as well as other Indirect Taxes.

Benefits Of Paying Taxes

Why should I pay taxes? How does it benefit me? Many individuals have this question. So we thought of clarifying that for you -

"Tax is needed by your government to provide you with basic necessities like roads, electricity, water supply, schools, hospitals, public transport and other essential services"

The government uses the tax amount collected and provides its citizens with all basic facilities and services to lead a good life. Here are some of the benefits of paying taxes -

1. Taxes fund public infrastructure and services. For example, in India, the country spends the highest proportion of its GDP on public infrastructure and services, as compared to other emerging economies. With a year-on-year rise in capex of more than 35% and a targeted infrastructure investment of more than Rs 10 lakh crore in Budget 2022-23, the Union government has reaffirmed its commitment to utilize infrastructure as a force multiplier for long-term economic growth.

2. Taxes are also used for social development and welfare programs. For example, the government of India allocates a substantial amount of revenue, about 6% of GDP, for various social development and welfare programs, including public health and nutrition, education, and rural development programs.

3. Taxes fund education. For example, in India, where illiteracy is a major problem, the government needs a lot of money to provide quality education; not only in urban areas but up to the grass root levels. This includes public and private expenditure on education, including spending on school infrastructure, teachers' salaries, and research, development and innovation.

4. Taxes secure the country's borders. This includes expenditures on equipment and personnel, defense research and development, defense imports, international military cooperation, and international peace-keeping operations.

5. Taxes fund salaries and pensions of government employees. This includes wages and pensions of public sector employees such as central government employees, state government employees, and local government employees.

6. Taxes pay the principal and interest on government debt. The government of India has a large external debt and a sizable portion of its outstanding debt is denominated in foreign currency. As per the latest data from the finance ministry, external debt in India increased to USD 593,100 Million in the third quarter of 2021 from USD 571,300 Million in the second quarter of 2021. Therefore, the government has to borrow money from the international financial markets on which interest is also to be paid.

7. Taxes fund the government's public transport system, including rail and road transport. This includes the purchase of a wide variety of vehicles, including airplanes, ships, buses, trains, coaches, tractors, tractors and other vehicles for road and highway construction, and other infrastructure projects.

8. Taxes fund the government's law-enforcement agencies, including the police, the paramilitary forces, the air and sea, border patrol, customs and excise, and intelligence agencies. This includes expenditures on personnel, equipment, training, and infrastructure to provide for security and public safety.

9. Taxes fund basic economic stability and social security schemes that are meant to help people who are unemployed or have a low income, such as the National Rural Employment Guarantee Act (NREGA) and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

10. Healthcare & Medical Infrastructure is also funded through taxes. This includes expenditures on health and medical research and development, hospital infrastructure, health insurance, and other health services.

And during these Corona times, the nation realized the need for great improvement in the health & medicare sector in our country. Subsequently, the budget allocation for this segment has been increased.

To Summarize:

We need taxes to run a country. It is an integral part of governance. It is required for the progress and development of a country. It is not a privilege but a duty.

FAQs

1. What are some of the benefits that taxes provide to a country?

There are numerous advantages to paying taxes. They aid in the creation and maintenance of infrastructure, such as roads, and they can even assist in the establishment or maintenance of institutions necessary for the rule of law and the operation of the democratic process.

2. What are some of the most common taxes paid in India?

Income tax, GST, customs duty, excise duty, road tax, property tax, etc. are some of the most common taxes paid in India.

3. How much income tax should I pay if my income is Rs.10 lakhs per annum?

After available deductions and rebates, for incomes over Rs.10 lakhs, you will pay Rs. 1,12,500 + 30% above Rs. 10,00,000.

4. Is it necessary for every Indian to pay taxes?

Every Indian, directly or indirectly, pays taxes. Even if your income is not high enough to trigger an income tax, you will be subject to GST. Taxation is how the government generates revenue to run the country.

5. Are there consequences for not paying taxes?

There are stringent regulations for tax evasion. The punishment could range from monetary fines to jail imprisonment based on the evaded amount.

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