Quick Answer: What Is Taxation And Example?

What is the purpose of tax?

The main purpose of taxation is to raise revenue for the services and income supports the community needs.

Public revenues should be adequate for that purpose..

What are the 3 stages of taxation?

The three stages or aspects of taxation are: 1. Levy – This refers to the enactment of a law by Congress imposing a tax 2. Assessment and collection – This is the act of administration and implementation of the tax law by the executive department through the administrative agencies 3.

What are the 3 principles of taxation?

These are: (1) the belief that taxes should be based on the individual’s ability to pay, known as the ability-to-pay principle, and (2) the benefit principle, the idea that there should be some equivalence between what the individual pays and the benefits he subsequently receives from governmental activities.

What are the classification of taxation?

The taxes have been variously classified. Taxes can be direct or indirect, they can be progressive, proportional or regressive, and indirect taxes can be specific or ad-valorem.

Why do we need to pay tax?

When you work at a job to make money, you pay income taxes. … Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools!

Why do I have to pay income tax?

This is likely because income taxes are the federal government’s primary source of revenue “Income”, as defined by the IRS, can take on many forms such as salaries, rents, royalties, interest dividends, business earnings, unemployment compensation and even lottery winnings.

What is an example of taxable income?

Taxable Income Meaning Reported in several forms, examples of taxable income include wages, salaries, and any bonuses you receive from your work that are documented on Form W-2. … Realized gains from selling stocks – or unearned income from bank account interest or alimony payments – can also count.

How do I know my taxable income?

Simply stated, it’s three steps. You’ll need to know your filing status, add up all of your sources of income and then subtract any deductions to find your taxable income amount.

What is income tax and how it is calculated?

Income tax is calculated on the basis of tax slab. Your taxable income is worked out after making relevant deductions, other taxes that you may have already paid (Advance Tax) and tax deducted at source (TDS), the resultant taxable income will be taxed at the slab rate that is applicable.

What are the basic principle of taxation?

In The Wealth of Nations (1776), Adam Smith argued that taxation should follow the four principles of fairness, certainty, convenience and efficiency. Fairness, in that taxation should be compatible with taxpayers’ conditions, including their ability to pay in line with personal and family needs.

What is the characteristics of taxation?

A good tax system should meet five basic conditions: fairness, adequacy, simplicity, transparency, and administrative ease. Although opinions about what makes a good tax system will vary, there is general consensus that these five basic conditions should be maximized to the greatest extent possible.

What are the two main principles of taxation?

The two central principles of taxation relate to the impact of tax on efficiency concerned with the allocation of resources) and equity (concerned with the distribution of income). As the major principles of taxation in any system, it is worth taking an in-depth look at “efficiency” and “equity (fairness)”.

What does taxation mean?

Taxation is a term for when a taxing authority, usually a government, levies or imposes a tax. The term “taxation” applies to all types of involuntary levies, from income to capital gains to estate taxes.

What is taxation in simple words?

Taxation refers to the practice of a government collecting money from its citizens to pay for public services. Without taxation, there would be no public libraries or parks. … Taxation is the practice of collecting taxes (money) from citizens based on their earnings and property.

What is your net income?

Gross income is the amount you earn before taxes and other payroll deductions. Net income is your take-home pay after taxes and other payroll deductions. Your net income, the amount on your paycheck, is what’s used to make your budget.