Differences
between Direct Taxes and Indirect Taxes
The main differences between direct
taxes and indirect taxes are given in table.
1.
Meaning
Direct
Taxes: If a tax levied on the income or wealth of a person
is paid by that person (or his office) directly to the Government, it is called
direct tax.
Indirect
Taxes: If tax is levied on the goods or services of a
person is collected from the buyers by another person (seller) and paid by him
to the Government it is called indirect tax.
2.
Incidence and Impact
Direct
Taxes: Falls on the same person. Imposed on the income of a
person and paid by the same person.
Indirect
Taxes: Falls on different persons. Imposed on the sellers
but collected from the consumers and paid by sellers.
3.
Burden
Direct
Taxes: More income attracts more income tax. Tax burden is
progressive on people.
Indirect
Taxes: Rate of tax is flat on all individuals. Therefore
more income individuals pay less and lesser portion of their income as tax. Tax
burden is regressive.
4.
Evasion
Direct
Taxes: Tax evasion is possible.
Indirect
Taxes: Tax evasion is more difficult
5.
Inflation
Direct
Taxes: Direct tax helps in reducing the inflation.
Indirect
Taxes: Indirect tax contributes to inflation.
6.
Shiftability
Direct
Taxes: Cannot be shifted to others
Indirect
Taxes: Can be shifted to others
7.
Examples
Direct
Taxes: Income Tax, Wealth Tax, Capital Gains Tax,
Securities Transaction Tax, Perquisites Tax.
Indirect
Taxes: GST. Excise Duty.
Related Topics
Privacy Policy, Terms and Conditions, DMCA Policy and Compliant
Copyright © 2018-2023 BrainKart.com; All Rights Reserved. Developed by Therithal info, Chennai.