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60. DIRECT TAX
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INDIRECT
TAX
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1.
Meaning
It
is directly paid by tax payers. Or it is deducted form the income of the tax
payers.
2.
Examples
The
direct taxes include personal income tax, corporate tax, capital gain tax,
wealth tax, etc.
3.
Principles of equity
Direct
taxes follow the principle of equity (social justice). Higher income people
are taxed at a higher rate, and middle income people are taxed at lower rate.
The lower income people are normally exempted form direct tax.
4.
Share of Taxes
In
India, the share of direct taxes is on the rise. In 2008-09, the share of
direct taxes was estimated at 55% of the total tax revenue of Central
Government.
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It is indirectly paid by tax payers. It
is include in the price of goods and services.
The indirect taxes include customs duty,
excise duty, VAT, service Tax, etc.
Indirect taxes
lack the principle of equity. For instance, in the case of mass consumption
goods, all consumers (whether rich or poor) have to pay the same rate of
indirect taxes like excise duty.
In India, the
share of indirect taxes is on the decline. In 2008-09, the share of indirect
taxes was estimated at 45% of the total tax revenue of Central Government.
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DIRECT TAX INDIRECT TAX
