Tax System in India (2025)
The tax system in India is a key component of the government’s revenue generation, comprising direct and indirect taxes regulated by the Income Tax Department and GST Council.
Overview
India's tax system includes various taxes imposed by the central and state governments to finance public expenditure and promote economic growth.
Types of Taxes
- Direct Taxes: Taxes levied directly on individuals and organizations, such as Income Tax, Corporate Tax, Wealth Tax, and Capital Gains Tax.
- Indirect Taxes: Taxes imposed on goods and services, including Goods and Services Tax (GST), Customs Duty, Excise Duty, and Stamp Duty.
Goods and Services Tax (GST)
GST is a comprehensive indirect tax implemented in 2017 to unify various central and state taxes into a single tax structure. It has three components:
- CGST: Central GST collected by the central government on intra-state sales.
- SGST: State GST collected by the respective state government on intra-state sales.
- IGST: Integrated GST collected by the central government on inter-state sales and imports.
Recent Reforms and Highlights (2023-2025)
- Introduction of new GST slabs for better compliance and simplification.
- Increased focus on digital filing and e-invoicing for transparency.
- Amendments in Income Tax laws for startup incentives and tax benefits.
- Rationalization of customs duties to promote Make in India initiative.
- Steps to widen the tax base through improved PAN and Aadhaar linkages.
Previous Year Questions
- SSC CGL 2021: What is GST?
- Goods and Services Tax, a unified indirect tax on the supply of goods and services.
- HSSC 2020: What are the components of GST?
- CGST, SGST, and IGST.
- RRB JE 2019: Which authority administers GST in India?
- GST Council.
- SSC GD 2020: What is the basic exemption limit for individual income tax for FY 2024-25?
- ₹2,50,000.
- HSSC 2021: What is the current highest GST rate slab?
- 28%.
- SSC MTS 2019: What is the purpose of e-invoicing under GST?
- To improve compliance and reduce tax evasion.
- RRB NTPC 2020: What is the difference between direct and indirect taxes?
- Direct taxes are paid directly by taxpayers to the government; indirect taxes are collected on goods/services and passed on to consumers.
- SSC CHSL 2021: What tax benefits are available for startups under Income Tax?
- 100% tax exemption on profits for 3 consecutive years in the first 10 years.
- HSSC 2019: Define 'Customs Duty.'
- A tax levied on goods imported into or exported from India.
- SSC GD 2021: What is the GST rate for essential commodities?
- 0% (Exempted).
- RRB JE 2021: What is the role of the GST Council?
- To decide GST rates, exemptions, and related policies.
- SSC CGL 2019: What is the maximum surcharge on income tax for individuals?
- 37% for income above ₹5 crore.
- HSSC 2020: What are slabs of personal income tax in India?
- Slabs include 0%, 5%, 10%, 15%, 20%, 25%, and 30% depending on income range.
- SSC MTS 2020: What is the significance of PAN card in tax system?
- Permanent Account Number, used for tracking tax payments and preventing tax evasion.
- RRB NTPC 2019: What is 'Tax Deducted at Source' (TDS)?
- Tax collected by deducting a certain percentage from payments like salary, rent, commission, etc.
- SSC GD 2019: Name any two goods exempted from GST.
- Fresh fruits and vegetables, milk and milk products.
- HSSC 2021: What is the deadline for filing Income Tax Returns in India?
- Typically July 31 for individuals, extended in some cases.
- SSC CGL 2020: What is the purpose of the Income Tax Department?
- To administer direct taxes and ensure compliance with tax laws.