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0:00 Hey guys, welcome to my series on law of taxation. This is Ganesh Pujari and this is our second video on law of taxation. In this class I am going to discuss types of taxation that is direct and indirect in detail and then we are discussing the difference between direct and indirect taxes and then the most interesting topic is principle of taxation and I am focusing Adam Smith there. With that little brief introduction I am getting into my first slide to know the types of taxation to know the types of taxation in a chart. There are two types of taxes that is direct taxes and indirect taxes and I'm not going to waste any time explaining these things here because these are very easy aspects and I brought them as bullet points. Direct taxes the important things that you need to remember is tax payable by
0:48 an assassee or person directly to the government. Second one this tax is paid after the income reached in the hand of the taxpayer. Third one in the hand of the taxpayer third one they are imposed on person's net income or assets available fourth one revenue collected under direct taxes are lesser than the indirect taxes that is the most important thing the revenue that government getting in the form of direct taxes is much much lesser than the indirect taxes and example for direct taxes are income tax gift tax and wealth tax now what are indirect taxes indirect taxes are those taxes which the tax taxes indirect taxes are those taxes which the taxpayer pay the tax indirectly where the taxes collected by dealer
1:38 middleman and remitted into the account of revenue of the government second one they are paid before the goods reach the buyer third one they are imposed mainly on goods commodities and services sorry i miss services there revenue collected under indirect taxes are higher than the direct taxes and the example for indirect taxes are sales tax customs duty service tax central exercise etc now if i say this is all that is not going to be good so i need to give some statistics which i'm going to explain in my next slide every brilliant student know that how to score more in the exam now while writing types of taxes if you just write the theory that i
2:24 have given in my previous slide that is not going to fetch you too many marks but if you write this way with few but if you write this way with few good example with the acts and the year and uh their characteristics then you are going to get more score for example under direct tax i have brought few important and first four points are coming from income tax act 1961 that is income tax based on the income second one capital gain tax whatever capital that you have gained corporate tax based on the investment or sale and dividend distribution tax based on the income received by the investment on the income received by the investment from uh one's investment so all of these are coming from income tax act
3:10 1961 which are example for direct tax then we are moving to gift tax which is based under the gift tax act 1958 then we have expenditure tax the expenditure tax act 1987 we got interest tax based on the interest act 1974 then we have securities transaction tax that is tax that is stt 2004 based on the purchase of securities in stock market these are all direct taxes to the government now what are the indirect taxes sale tax for the products service tax for the services central exercise duty for the goods manufactured in india customs duty for the foreign manufactured goods octory that is goods transaction
3:56 across the state borders and value added tax that is uh vat uh value added to the product during its manufacturing process and goods and service act this tax is one of the major reforms in the tax structure of india and it has absorbed about 17 taxes in its regime that is gst uh it covers exercise duty sales tax service tax doctorize central sales tax vat and others which i am going to make an independent video on gst uh wait for that with that i am moving on before getting into the principles of taxes i would like to touch upon the before getting into the principles of taxes i would like to touch upon the differences between direct and indirect taxes now i don't know whether you will get a question directly on the difference
4:44 between direct and indirect taxes but remember there are two independent units on direct and indirect taxes so you need to have strong base on both so in a way of giving these differences i am giving the characteristics of both types of taxes or objective of the both types of taxes or the purpose of the both types of taxes so this is a multiple level of answering both types of taxes so this is a multiple level of answering so you have to grasp it very carefully and craft it in your exam hall that is the skill you need to have now let us try see the difference one by one the first difference is the direct taxes are directly on individuals or hindu undivided families or firms or companies etc whereas indirect taxes are levied on the end consumer of goods and services
5:31 the second difference is direct taxes cannot be shifted whereas indirect taxes you can shift because by not buying goods and services you can shift it to others whereas direct tax the moment you have income or capital or the property you cannot escape you have to pay it third one the evasion of tax is possible under direct taxes because there is a lot of administration involved whereas in indirect taxes nothing like that the moment you buy goods or services it is already inbuilt so there is no evasion possible in indirect taxes fourth one the direct taxes help to
6:18 reduce the inflation whereas indirect taxes will enhance the inflation fifth one direct taxes are considered as progressive because they help to reduce the inequalities whereas the indirect taxes are considered as regressive because they don't enhance any inequality or rather they enhance inequality enhance any inequality or rather they enhance inequalities and are considered to be regressive now the sixth aspect is there are a lot of exemptions available in uh direct taxes that makes a lot of administrative hiccups while calculating the taxes whereas in indirect taxes there is nothing like that you buy your goods or service you will pay the tax now the seventh aspect is the direct taxes discourage
7:07 investment or savings because you will not get anything to have in your pocket by paying the tax whereas in indirect taxes what happens by reducing the consumption you can save the money that way it forces the people to discourage consumption and save their money the direct taxes are applicable only for those who are coming into the bracket of such taxes declared by the government as of serial number eight that i am discussing and indirect taxes nothing like that the moment you buy goods and services you may be poor you may be middle class you may be rich whatsoever you will have to pay tax accordingly so
7:55 the ninth point is uh the allocative efforts is uh very good when it comes to direct taxes whereas in the indirect taxes allocation is quietly distributed among the state or the entire nation for that particular matter now the 10th point i have brought entire nation for that particular matter now the 10th point i have brought for indirect taxes there are in additional indirect taxes levied on harmful commodities like cigarette alcohol etc this one point you can mention whenever there is a requirement so these are the major differences between direct and indirect taxes with that i am going to the principles of taxes the last part of this presentation is principles of taxes now when we discuss about principle of taxes i repeat again discuss about
8:43 principle of taxes i repeat again you need to bring adam smith who is the father of economics and possibly mention his book wealth of nations the moment you bring these terms the evaluator will think that this guy knows the aspects so that is very important to convince your evaluator that you are exactly hitting into the concept now there are four aspects that adam smith touched upon first one equality he spoke that tax should be equal to all the citizens now there are different theories that is progressive be equal to all the citizens now there are different theories that is progressive theories or regressive theories which i am going to explain in one of my future videos now based on whatever theory that your country is following you need to ensure that finally it is equal to all the citizens which is based on your law
9:29 of land second one it should be very certain every person should know by having so much of income or by having so much of wealth or capital or property or by buying so much of goods and services how much tax i'm going to pay to the government that should be very clear clear press because it is a science it is not like uh you can pay this much now or after three months we'll use concession no nothing like that it should be very clearly passed through a legislation and people should know what exactly or how exactly or how much they are going to pay tax that is very certain that is the principle of taxation now the third principle of taxes is it should be convenient tax itself is a
10:15 burden of taxes it should be convenient tax itself is a burden or it is a sacrifice as i already explained in my features so if it is difficult to pay to the government your tax part then first of all you are not interested and maybe you are trying to escape or though you are patriotic you want to give for the welfare of the society even then if it is not convenient then you might become ignorable so tax should be aligned in such a way that nobody can escape it escape from it and it escape it escape from it and it should be very easy to pay now for example goods and service the moment you buy to pay it and how we are paying the income tax now the company will deduct from tds like active tax deductible sources so these are the mechanism the nations have brought to ensure that the theory or principles of convenience
11:04 is followed the fourth one this is for the development of economy that should be the focus of taxation not for the mere whims and fancies of the government so these are the four major principles spoken by adam smith i have four more it should be flexible taxation should be flexible it should change according to the needs of the people for example we had gift tax and then we reviewed it we thought this is not required and then we brought gift tax again in the year 2004 with some uh corrections we had property tax where uh the old antics and other toughs if you had you had to pay tax but then that also reviewed based on the timelines and requirement and the progressive society things are changing that should be there this is one
11:53 of the most important principle when it comes to taxation then it should be transparent everybody should know who is paying how much not the amount but by earning 10 lakh how much one will pay or by by buying a toothpaste box how much one is going to pay like everything should be defined in the law not how much A is paying how much B is paying how much C is paying it is based on like if how A is earning so much what will be the tax like if a is earning so much what will be the tax that is the transference it is not like if you want to know that income tax paid by someone individually that is not the aspect i'm talking transference means everybody should know how exactly it applies third one it should be simple the calculation if it is too difficult then people will be like confused and uh it is not okay the
12:39 government should have their tax policy as easy as possible so that the layman also try to understand the concept uh fourth one diversity uh tax should not uh fourth one diversity uh tax should not come from one source government should have multiple sources with justification from the sources so these are the eight principles four from adam smith and four from my other sources now if you write these eight principles uh i think that's good enough with that i'm concluding this second video on law of taxation now if you're a student of law then you might be thinking like where are the case laws don't worry my third video which is case laws don't worry my third video which is on tax and fines i'm going to bring some important
13:27 case laws including pit pro quo so wait for my third session on law of taxation with that i'm taking off from this session but before conclude please remember to subscribe my channel please like share and comment my videos all the very best for your exams or what's of purpose you are watching this video and thank you so much for watching me
