Taxation System in India

India has a well-developed three tiered tax structure, controlled by the three major bodies of the country-Union government, the State Governments and the Urban and Rural Local Bodies. Only 1.46 crore people in India pay income tax. 

Indian taxation system has undergone extreme restructuring from the past 10-15 years. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of restructuring of tax administration is going on in India and is a continuous process.


The Indian economic policy of 1991 brought a revolutionary change in the Tax System in India by rationalization of the tax rates, simplification of the tax laws, easy tax payment, reduction in customs and excise duties, corporate tax, widening of the tax base and modulating the tax administration. 

From April 01, 2005, many states saw the introduction of a new tax- Value Added Tax (VAT) which was levied in place of sales tax. Indian government depends very much on the revenue generated by the Tax collection.  Indirect taxes shares two-thirds of the total tax intake of the Indian government.

The Tax System in India asks tax payers to file their returns in a given period of time. The financial tax year in India starts from the first day of April and ends with the last day of March. Every business personality should present an annual return by October 31 whereas salaried people need not submit any annual return.

Tax Slab in India

1.     For incomes up to 2,50,000 INR, the tax is nil.
2.     For income slabs between 2,50,000 to 5,00,000 INR, the income tax is 5%.
3.     For income slabs between 5,00,001 to 7,50,000 the income tax is 10%.
4.     For income slabs between 7,50,001 to 10,00,000 the income tax is 15%.
5.     For income slabs between 10,00,001 to 12,50,000 the income tax is 20%.
6.     For income slabs between 12,50,001 to 15,00,000 the income tax is 25%.
7.     For people with income above 15,00,000 per year, the income tax is 30%.

* For further details please visit the web site of Income Tax Department at

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