Direct tax can be interpreted taking into account its colloquial as well as constitutional meaning. Certain taxes may be classified as direct taxes in the colloquial sense, though in the constitutional sense, they are indirect in nature. Colloquially, a direct tax is a tax which is directly paid to the government by the person (juristic or natural) on whom it is levied. Thus, direct taxes in India include various taxes that are imposed on individuals and organizations and are directly collected from them, without the interference of a third party.
Taxes like income tax, corporate tax, inheritance tax and gift tax fall under the category of direct taxation system in India. By contrast, indirect taxes are indirectly collected from someone, other than the individuals on whom they are imposed. Though this demarcation of direct and indirect taxes holds true in the perspective of economics, interpretations of both these terms may vary according to the difference in the contexts.
If we analyze the taxation syatem in India today, we will witness a healthy rise in the direct tax collections of the country. As recorded on 31st January, overall direct taxes amounted to Rs. 1,56,429 crore, which is an increase by 41.2% over the collection of Rs. 1.10,780 crore, last year. Corporate tax collections ascended by 48.6% at Rs.97, 787 crore, while personal income tax (including FBT) increased by 27.5% at Rs.54, 185 crore.
Likewise, the Securities Transaction Tax (STT) and Banking Cash Transaction Tax (BCTT) were recorded at Rs.3,812 crore and Rs.404 crore, growing by 90.2% and 72% respectively. Fringe Benefit Tax (FBT) also escalated by 41.6% and was recorded at Rs.3, 984 crore. Moreover, Net Direct Tax collections have exceeded the predetermined targeted growth of 27.5%, as per the Budget Estimates for the fiscal 2006-07 and have been recorded at 41.2%.
