While living and working in India, you will find yourself paying taxes at various levels. If you are resident in India, and earn an income in India, you will need to pay an annual income tax, for which there are several levels, depending on how much you earn in a year. For more details, see the “Income tax” section.
Regardless of whether you earn an income in India or not, any purchases you make, or services you avail, will fall under one or the other of the following taxes:
VAT: This has very recently been introduced, and replaces the earlier sales tax. Most products in India will have to bear VAT. There are two slabs for VAT – most essential goods and commodities come under a lower rate of 5% and luxury (or non-essential) goods are taxed at 12.5%.
Service tax: This is a tax on a broad range of services, and applies to any service obtained by a customer that is not a product. Service tax is set at 10.3%
Luxury Tax: This is a tax levied by the state government, on food and accommodation in hotels and establishments above a certain price level. Luxury tax is set at 12.5%