From the moment you wake up, you use or consume various items, including soap and tea. When you purchase these products, you pay something called the Goods and Services Tax (or GST). In terms of paying indirect taxes, every Indian consumer is technically a taxpayer.
However, when you define a taxpayer, you go beyond the items you purchase (thus indirectly contributing to the tax revenue). Let us look at the meaning of a taxpayer and the process of filing taxes.
Who is a taxpayer
How do you define a taxpayer? Any person or entity, such as a company or partnership, that pays income tax according to the provisions of the Income Tax Act, 1961, is known as a taxpayer. In India, taxpayers assess and calculate their previous financial year’s income and pay their taxes using applicable ITR forms. Additionally, they pay taxes at the source and, if eligible, can also claim refunds.
Thus, in essence, there are two types of taxpayers: individuals and corporations. Moreover, you may owe these taxes to the State or Central Government. In our country, the Central Government levies and collects income tax and GST, while taxes imposed on other goods like petrol are collected by the state governments.
The Central and State governments rely heavily on tax revenue to maintain infrastructure, cover defence expenses, and pay salaries and pensions to government officials, among others. Besides income tax, taxpayers pay cess like the ‘Secondary and Higher Education’ cess to the Central Government, which is calculated on the basis of the tax due from the individual.
Another important point to note is that income tax is levied on the annual taxable income of the taxpayer. On the other hand, the Goods and Service Tax is levied on the taxpayer’s transactions. The government levies the GST on intra-state and inter-state sales or purchases made by the taxpayer.
Who is eligible to pay taxes
As previously mentioned, all individuals and corporations must pay taxes in the country. They should first register themselves as per the applicable laws and pay their taxes in full. Taxpayers in the country are required to pay their dues to avoid penalties and interest as per the applicable laws. In the event of late filing of tax returns, taxpayers must bear late filing fees for the delayed period.
Rights and responsibilities of a taxpayer
As a taxpayer, you have certain rights and responsibilities. Let us first take a look at your rights:
- You are entitled to receive information about tax laws and transactions from the income tax department.
- You can question the tax authorities in the event of a breach of duties and get answers.
- You reserve the right to submit tax returns.
- You can appoint an authorised representative to take care of tax-related work or duties.
- You can make up for defaults as directed by the tax authorities.
Your responsibilities include:
- You should cooperate and remain fair and honest during the tax assessment period.
- You must help and facilitate audit officers while performing their duties.
- You must respond honestly to tax queries.
- You should not declare false income or seek undeserved relief in tax returns.
- You must keep your tax records safe for the period under consideration.
A detailed breakdown of the procedure for filing taxes
As a taxpayer, you must file your annual tax returns, along with monthly returns (if applicable). Individual taxpayers must pay their income tax as per the tax slabs. While filing ITRs (or income tax returns), you must calculate and analyse the tax payable, claim credit for the taxes you have already paid during the financial year, and pay the remaining tax (if any).
While individual taxpayers must file their annual tax returns, certain other entities are required to undergo audits and provide audit reports in addition to the tax returns. Under the Goods and Services Tax, taxpayers must file monthly returns and pay monthly taxes. In certain situations, they must also file annual returns and furnish audit reports.
Conclusion
A taxpayer is any individual or entity that pays direct or indirect tax to the government. As a taxpayer, you are entitled to your rights, while you must also perform your responsibilities. Regarding the latter, your responsibilities extend beyond calculating income and tax liabilities. Additionally, you must also know whether the income you earn, and type of income are liable for tax and the best-suited tax regime.
It is also important that you understand what income of yours falls outside the scope of taxation. By being well-informed and careful, you can ensure that you pay your taxes in a diligent and timely manner.
