A tax is any unpaid financial obligation or some sort of levy levied on a person by a government agency in order to finance various public expenses and government spending. A taxpayer may be asked to pay taxes if he fails to file his returns, pay the tax amount or make refundable contributions. evade tax, and there are a few serious crimes that attract stiff penalties and fines. Evasion of taxes, and support of illegal activities related to tax evasion, are strictly punished by law. Thus, it is very important to understand the concept of tax and how to avoid paying it.

There are two basic kinds of taxes: income taxes and sales taxes. Both these taxes are meant to finance the administration of the state. A certain kind of income tax known as income tax is directly proportional to the net salary a person earns. The more money that a person earns, the higher his tax rate will be. If a person is able to effectively minimize his income tax payment by any means, then he can save a lot of money in the long run.

In contrast, consumption tax is directly proportional to the value of the product purchased. The more the price of the product, the higher the consumption tax will be. If you find any item that is sold at a discounted price or with a combination of different coupons, the tax is zero. Consumption tax is levied only on luxury items like jewelry, automobiles, etc. Other types of taxes are Excise tax, which is imposed on persons who indulge in retailing business and Sales tax which is charged on all goods and services that are sold in retail shops.

The kind of tax a person pays is largely determined by the kind of income he makes. If he makes high income from various sources, then he may be liable for high income taxes. On the other hand, if he makes low income from a single source, then he may have low income taxes. Progressive taxes are regressive in nature and are based primarily on your net income from work, whereas proportional taxes are proportional to your net income from all sources.

Corporate tax and personal income tax differ in terms of the tax rate applicable on dividends paid by corporations and on its shareholders. Most corporate tax laws allow individuals to deduct a portion of their income from their annual income tax returns. Similarly, individuals are eligible to deduct a certain percentage of their corporate income taxes from their personal income tax returns. In addition to these deductions, individuals are also entitled to rebates on personal expenditure made during a year.

When an individual is earning sufficient money and has relatively high taxes as well, he may find it difficult to pay both his personal income taxes as well as his corporate income taxes. In such cases, he would be better off with proportional taxes rather than absolute ones. However, while having a higher percentage of earnings as profit, you may not be able to have the same amount of deductions as individuals who have lower incomes. Therefore, it is advisable to seek a professional’s help for calculating the correct income tax for you.