The amount of money charged by the government from your income is known as income tax. The amount charged depends on how much you earn in a year. The percentage charged varies with your location and income. Income tax can be individual or organizational. The amount paid by individuals and organizations is different.
The question that arises here is why income tax?
The government needs funds for public works. There are multiple sources for governments to collect revenue. Income taxes are the primary source of income for governments. The money collected is used to improve public infrastructure, emergency services, healthcare, research, etc. In this way, we help our government do better. Though the government has other income sources. Revenue generated by income tax is easy money.
How much do I have to pay?
The percentage charged varies from 5% to 20%. If you are earning a high amount of money, then you have to pay a high percentage of tax. Some countries charge high amounts of income taxes to provide free education and healthcare. The percentage charged can vary from 30% to 40%. Most European countries charge a high amount of income tax.
Though the high amount of income taxes might sound absurd. But most of the European countries that charge high-income taxes have the best habitable places. And as a result, their infrastructure is very good. And their happiness index is always high. Developed countries attract more tourists as well. Leading to generating more revenue.
Small businesses in European countries have been in business for generations. Because of the high number of tourists. An organization pays up to 10% to 30% income tax annually. Small businesses pay less percentage as compared to big businesses.
What if you don’t want to pay income tax?
Income taxes need to be paid. If you delay the income tax-paying process, eventually, you will pay more– the interest rate applied on the due amount of tax. In case of denial, you can face imprisonment or prosecution. The government can take hold of your business and assets.
There are a few ways to save on income tax. Though you have to pay income tax. You can certainly reduce the amount. In India, these are the ways that you can avail to save on income taxes. Life insurance, health insurance–for yourself and your family, home loan repayment, public provident funds, equity-linked saving scheme, etc.
You can also get tax returns. The tax returns work when you have paid more taxes than you should. You will get tax returns only if you file them. So, be aware and pay your taxes on time. And if something goes wrong. You’ll have time to file the returns.
Income taxes apply to your investments as well.
Again the amount charged varies in different countries. The amount gained in profit is taxable up to 20% to 40%. 20% is the common amount charged in most countries. You have to share all taxable income sources and investments with the IRS. As a good citizen, you should pay your income tax on time. Be responsible and attentive.
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