• India's taxation system is complex, but is getting simpler.india flag icon. (with clipping path) image by Andrey Zyk from Fotolia.com
  
  India's taxation system is similar to those of most developing countries. India has a three-tier government system (the Union Government, the State Governments and the Urban/Rural Local Bodies), and every tier of government has the right to collect certain taxes, which makes Indian taxation system somewhat complex. Since the 1990s, the Indian government has taken significant steps toward simplifying the country's tax regime.
  
  

Direct Taxes

• India's primary direct taxes include personal income tax and corporate income tax. Individual income tax is progressive, meaning that the higher your income is, the more taxes you pay. Personal income slabs are 0, 10, 20, and 30 percent for annual incomes up to Rs (rupees) 50,000, 50,000 to 60,000, 60,000 to 150,000 and above 150,000, respectively. (See Reference 1.)
  
  Indian companies pay income tax of 35 percent. For foreign companies, the corporate income tax equals 40 percent. Subsidiaries of foreign companies properly registered in India are treated as local companies.
  
  

Sales Tax

• Indian sales tax is levied by the federal government as well as by individual states. The Central Sales Tax (CST), a federal sales tax, is 4 percent and is charged on all manufactured goods sold in the country. Local Sales Taxes (LST) are levied by the states and are typically under 15 percent. (See Reference 1.)
  
  

Custom Duties

• Customs duties in India vary from 0 to 30 percent of the total value of imported products, following the 1990s and 2000s reforms that reduced custom duties from levels as high as 220 percent (1991). India's customs duties are similar to those of other countries. (See Reference 2.)