{"id":269118,"date":"2025-06-16T10:05:39","date_gmt":"2025-06-16T10:05:39","guid":{"rendered":"https:\/\/imarticus.org\/blog\/?p=269118"},"modified":"2025-06-30T10:05:53","modified_gmt":"2025-06-30T10:05:53","slug":"modern-tax-systems-key-aspects-and-their-evolution","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/modern-tax-systems-key-aspects-and-their-evolution\/","title":{"rendered":"Modern Tax Systems: Key Aspects and Their Evolution"},"content":{"rendered":"

As a working individual, you must have seen the deductions on your payslips and have wondered why it must have happened. You may have a vague idea that this is because of taxes but you may not know where this tax money goes, or what might be the purpose of it – and also, why every working citizen has to pay tax not only on their salary, but also again as income tax.<\/span><\/p>\n

For many, the <\/span>tax system<\/span> is just too complicated but they see their earned money being taken, with almost no idea on how it is used. This article is meant to give a straight-up view of how the tax system has changed over time, what types of taxes are out there, especially in India, and how these systems affect us on a daily basis.<\/span><\/p>\n

Now, if all this tax talk makes you think you need to level up your finance knowledge, the <\/span>ACCA course<\/span><\/a> is a brilliant option. It\u2019s a professional course recognised around the world.\u00a0<\/span><\/p>\n

What is a <\/span>Tax System<\/span>?<\/span><\/h2>\n

Before going into where taxes go, first let\u2019s understand what a <\/span>tax system<\/span> actually is. The government as a body needs to fund public services like infrastructure, subsidies and more. Now, the government needs a source of revenue for these funds. For the government, one of the major sources of revenue is taxes, which is how they collect money from individuals and businesses and then use that money to pay for public services, like roads, schools, hospitals, and the military.<\/span><\/p>\n

Every country has their own rules with regards to taxation – their own tax systems. Some are quite simple. Others can make your head spin. But no matter the complexity, the goal is usually the same: raise enough money without being unfair.<\/span><\/p>\n

Types of Taxes in India<\/span><\/h2>\n

Let\u2019s look at how it works in India specifically. The <\/span>tax system<\/span> here is divided broadly into two types; <\/span>direct and indirect taxes. <\/span>Here\u2019s a quick table that breaks it down:<\/span><\/p>\n\n\n\n\n\n
Type<\/b><\/td>\nExamples<\/b><\/td>\nWho Pays It<\/b><\/td>\n<\/tr>\n
Direct Tax<\/b><\/td>\nIncome Tax, Capital Gains Tax<\/span><\/td>\nIndividuals & Companies<\/span><\/td>\n<\/tr>\n
Indirect Tax<\/b><\/td>\nGST, Excise Duty, Customs Duty<\/span><\/td>\nConsumers (indirectly)<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Direct Taxes<\/b><\/h3>\n

Direct taxes are paid straight to the government and are based on what you earn or profit. The most common one is income tax, where higher earners pay more under a slab system. Companies also pay corporate tax on their net profits.\u00a0<\/span><\/p>\n

India used to have a wealth tax too, but it was scrapped in 2015 since it didn\u2019t bring in much and was hard to manage. These taxes are seen as fairer since they\u2019re linked to how much you can afford to pay.<\/span><\/p>\n

Indirect Taxes<\/b><\/h3>\n

Indirect taxes are added to the price of goods and services and collected by sellers, so consumers pay them without even realising it. In 2017, India rolled out GST, which replaced older taxes like VAT and service tax with one system. It\u2019s charged at different rates, 5% for basics, up to 28% for luxury items, and it\u2019s built into almost everything you buy, from groceries to movie tickets.<\/span><\/p>\n