State Income Tax
Each state in US levies income tax on the people residing within the boundaries of the state. This tax can be levied only by the state or national authority of the rank of federal government. State tax is a direct tax which is levied on the earnings of individuals or organizations. State needs revenue for the developmental causes of the state and the state tax is the biggest source of collects this needed revenue for the state authorities.
Individuals pay personal income tax on their earnings and companies are required to pay corporate taxes on the profits of the company. State income tax can be levied by individual states as in USA or by any national authority like Central Board of Direct Taxes in India. The rate of income tax can be progressive or regressive or constant across the country. Constant rate of income tax is fixed by the central authority and it stays same across the nation, in all states. This is the case of uniform tax as in India. The main forms of state taxes as levied in India are the Sales tax and Octroi taxes. These are levied when goods are moved from one state to another.
On the other hand; state levies the progressive state income tax in USA. Progressive income tax means, it increase with income. There are no state taxes in seven states of USA which include Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. And in Tennessee and New Hampshire chose to levy state tax only on the dividend and interest incomes only. This kind of rules is the great relief for the poorest working residents. In May 2009, the maximum rate of state income tax is 11% in the state of Hawaii. And Illinois levies lowest income tax of flat rate of 3%. There are personal exemptions granted on the single to married to individuals to one having a child respectively. The highest rate of income tax is seen in California which range from 1% to 9.3% and 6 income brackets. Some states like Alabama impose income tax within reasonable range and have minimum slabs which make it easy to calculate the tax.
In India, there is a uniform tax for all the states within the country. There is no complexity or ambiguity while calculating the tax. There are slabs for personal income which ensure that people with low income pay the least taxes. These slabs are 0- Rs.1 lakh, Rs.1 lakh to Rs. 1.5 lakh, Rs. 1.5 lakh to Rs. 2.5 lakh and from Rs.2.5 lakh and above. And rates of corresponding income tax are 0%, 10%, 20% and 30%.
If we talk about UK, income tax is levied by Her Majesty Department of Revenue and Customs (HMRC). In this country, individuals are offered many allowances according to the income and the age of the person. There is also a uniform rate of income tax across the country.
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