A study on direct taxation in India

Taxation is a major source of revenue for the Government. It is also a means of economic transformation and socio-economic cohesion. Taxation policy of a country has to play a vital role, particularly, by utilizing this weapon to the best advantage of the national economy. Specially, in a developing country like India, taxation has been used to promote multiple objectives such as to increase the rate of domestic savings, reduce inequalities of income and wealth and to maintain price stability. Revenue from taxes has provided a big support to the Government finances. Revenue from direct taxes is increasing day by day. Direct taxes are preferred to indirect taxes because they are more equitable, administratively effective and can be related to individual’s ability to pay. Income-tax is the oldest tax in the direct taxes and has an important place in the direct tax revenue. Besides, agricultural income-tax and professional tax are also very important in the matter of economic stabilization. So, these taxes also play an important role in Indian direct taxes. This paper is an attempt to analyze and interpret the importance of taxation, especially direct taxation in India.