DIRECT TAXES :- "wepro.co.in"
We : wealth taxPro : property tax
Co : corporate tax
In : income tax
INDIRECT TAXES :- "excuse me"
Ex : excise tax
Cu : custom tax
Se : service tax
M : market tax/vat
E : entertainment tax
Below are some simple mnemonics to help remember the two broad categories of taxes: Direct Taxes and Indirect Taxes.
1. Mnemonics for DIRECT TAXES:
Direct taxes are those that are paid directly to the government by individuals or organizations. These taxes are non-transferable and are imposed on income or assets. A useful mnemonic for remembering the key types of direct taxes is:
"WePro.Co.In"
We = Wealth Tax: This is a tax on the net wealth owned by an individual or organization. Although currently abolished in India, it’s important to know as it can be part of historical questions in exams.
Pro = Property Tax: Levied on the ownership of property, this tax is usually collected by local authorities like municipal corporations.
Co = Corporate Tax: This is the tax paid by businesses and companies on their profits. It is a significant source of revenue for the government.
In = Income Tax: One of the most common taxes, income tax is levied on an individual’s earnings. The tax rate varies depending on income levels.
By breaking it down into "WePro.Co.In," you can easily recall the most important direct taxes that affect both individuals and corporations alike.
2. Mnemonics for INDIRECT TAXES:
Indirect taxes are taxes that are levied on goods and services rather than on income or profits. These taxes are generally passed on to consumers. To remember the various types of indirect taxes, use the mnemonic:
"Excuse Me"
Ex = Excise Tax: This is a tax levied on the manufacture of goods within a country. It typically applies to specific products like alcohol, fuel, and tobacco.
Cu = Customs Duty: This tax is imposed on goods when they are imported or exported across international borders. It helps regulate trade between countries.
Se = Service Tax: A tax levied on certain services provided within the country, such as telecom, banking, and hospitality services. Although it has been subsumed under GST, it’s still important for historical context in exams.
M = Market Tax (VAT/GST): Market tax, which used to be VAT (Value Added Tax), has now been replaced by the Goods and Services Tax (GST). It’s applied at every stage of production and distribution of goods and services.
E = Entertainment Tax: This tax is charged on entertainment-related activities, like movie tickets, sporting events, and performances. While many states have incorporated this into GST, it’s still relevant in certain contexts.
"Excuse Me" is a light and easy-to-remember phrase, helping you recall key indirect taxes with ease.
Understanding the Difference:
Direct Taxes are paid directly by individuals or entities to the government. They cannot be transferred to others. For example, when you pay income tax on your salary, you are directly bearing the tax burden.
Indirect Taxes are paid indirectly, as they are typically added to the price of goods or services. Consumers ultimately bear the cost when they purchase the product. For example, when you buy a movie ticket, the entertainment tax is included in the ticket price.
Conclusion:
Mnemonics are a simple yet effective way to remember complex information, especially for exam preparation. With "WePro.Co.In" and "Excuse Me," you can now confidently recall the major types of direct and indirect taxes. These memory aids will not only help in exams but also in understanding the broader economic landscape of taxation.