Tax Notices & Investors: Making The Connection

The bygone year witnessed remarkable market performance, with Nifty reaching unprecedented all-time highs. However, our focus today shifts to a topic entrenched in business and finance for centuries, one that plays a pivotal role in financial planning. Yes, you guessed it right: taxes. The question is what you, as an investor, do if the company you have invested in receives a tax notice,

- Vaishnavi Chauhan

Taxes, though often met with sighs and groans, have been a fundamental part of human civilisation for millennia. There are various types of taxes but first one must understand the two faces of taxation:

1. Direct Taxes: These are levied directly on individuals or businesses based on their income, wealth, or assets. Examples include Income Tax, Capital Gains Tax and Property Tax. The burden of direct taxes falls directly on the taxpayer.

2. Indirect Taxes: These are levied on goods and services at various stages of production and consumption. Examples include GST, Value-Added Tax (VAT), and excise duties. While the initial burden falls on businesses, the cost is often passed on to consumers through higher prices.

Crossing Borders: International Tax and Customs 

■ Double Taxation Avoidance Agreements (DTAAs): These treaties between countries aim to avoid double taxation, where the same income is taxed in both countries. DTAs often define residency rules and tax credits to prevent this burden.

■ Customs Duties: These are taxes levied on goods imported or exported across borders. Customs authorities regulate international trade flow and collect revenue for the government. Understanding customs regulations is crucial for businesses involved in international trade.