Every day, each of us in India pay various kinds of taxes. Income tax and sales tax are two of the most prevalent. Though many people mix them, they are really rather different. Let us dissect it using straightforward language.
Income taxation is what?
The tax you pay on your income—that is, on your earnings—is income tax. This covers pay, company profit, rent, or savings’ interest. Roads, schools, and hospitals among other public services the government funds come from this money.
Your income determines your income tax level. Every income slab has a unique tax rate; they are not all the same.
Income tax payers: who are they?
- Salared staff members
- Independent Contractors
- Employers
- Individuals getting income from investments or rent
Describes sales tax.
The sales tax is the tax you pay upon purchase of anything. Goods and services have it included in their cost. Every state in India had separate sales tax rates not too long ago. Most of it is now, however, replaced by GST (Goods and Services Tax).
Though GST is now in use, many people still know the term sales tax.
You pay sales tax where?
- While looking for tools or clothes
- In eateries
- Regarding internet buying
- Even now, when paying for services
Sales Tax vs Income Tax
Let’s examine some salient features between income tax sales tax:
| Feature | Income Tax | Sales Tax |
| Based on | Your Income | Your transactions |
| Paid by | both people and companies | Customers |
| Gathered under | Central Government | State Governments (previously) |
| Still under use today is the system | Generally superseded by GST |
Why Should You Concern Yourself?
Knowing income tax sales tax lets you better see your money. Knowing your taxes paid and the reasons behind them helps you better plan your budget.
- File returns accuracy.
- Steers clear of penalties
- Make wiser financial judgments.
Eventually
The economy of India depends much on income tax sales tax. One is predicated on your income; the other on your spending. Understanding differences keeps you responsible and financially informed.