The Basics of Income Tax

21.12.2008 | Author: Deepak Shrivastava | Posted in Finance

Moving forward, the percentage of income tax we pay depends on the type of income we get, and basically on what the governing body in your area charges. There are some instances where there’ll be no tax at all, emphasis on the instances, because it’s definitely not that common.

Anyways, going deeper into the subject matter, it comes in two types, the first one being: progressive tax. How does this method or system work? Simple – the amount deducted from your income varies. The more you earn, the more you pay, and continues to increase as the your “flow of cash” gets bigger.

It does have a systematic computation table to follow, but nevertheless, deductions do get bigger as you earn more. The 2nd type is known as flat tax, which generally treats all the types of income as one. Here exists something known as an income tax system, which maintains balance in a sort of “yin yang” way.

If the system recognizes losses sustained by one type of income, it maintains the balance by putting more deductions on another type. Many people feel that they’re getting cheated out of their money, in the sense that the government isn’t utilizing ever single dollar collected as income tax for improvement.

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