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    Direct Tax Blog

    Uploaded by

    Arpit Gupta
    Direct Tax Vs. Indirect Tax: Direct taxes are paid in entirety by a taxpayer directly to the government. It is also defined as the tax where the liability as well as the burden to pay it resides on the same individual. Direct taxes are collected by the central government as well as state governments according to the type of tax levied. Major types of direct tax include: Income Tax: Levied on and paid by the same person according to tax brackets as defined by the income tax department. Corporate Tax:Paid by companies and corporations on their profits. Wealth Tax: Levied on the value of property that a person holds. Estate Duty: Paid by an individual in case of inheritance. Gift Tax: An individual receiving the taxable gift pays tax to the government. Fringe Benefit Tax: Paid by an employer that provides fringe benefits to employees, and is collected by the state government. Indirect tax, as mentioned above, include those taxes where the liability to pay the tax lies on a person who then shifts the tax burden to another individual. Some types of indirect taxes are: Excise Duty: Payable by the manufacturer who shifts the tax burden to retailers and wholesalers. Sales Tax: Paid by a shopkeeper or retailer, who then shifts the tax burden to customers by charging sales tax on goods and services? Custom Duty:Import duties levied on goods from outside the country, ultimately paid for by consumers and retailers. Entertainment Tax:Liability is on the cinema owners, who transfer the burden to cinemagoers. Service Tax:Charged on services rendered to consumers, such as food bill in a restaurant. Therefore, the prime difference between direct tax and indirect tax is the ability of the taxpayer to shift the burden of tax to others. Direct taxes include tax varieties such as income tax, corporate tax, wealth tax, gift tax, expenditure tax etc. Some examples of indirect taxes are sales tax, excise duty, VAT, service tax, entertainment tax, custom duty etc. However, this is not an exhaustive list of taxes and more types of taxes are levied by the government on specific cases. Difference between direct tax and indirect tax- There are many difference implicit of direct and indirect taxes on the country. However, both types of taxes are important for the government as taxes include the major part of revenue for the government. Key differences between Direct and Indirect Tax are: Direct tax is levied and paid for by individuals, Hindu undivided Families (HUF), firms, companies etc. whereas indirect tax is ultimately paid for by the end-consumer of goods and services. The burden of tax cannot be shifted in case of direct taxes while burden can be shifted for indirect taxes. Lack of administration in collection of direct taxes can make tax evasion possible, while indirect taxes cannot be evaded as the taxes are charged on goods and services. Direct tax can help in reducing inflation, whereas indirect tax may enhance inflation. Direct taxes have better allocative effects than indirect taxes as direct taxes put lesser burden over the collection of amount than indirect taxes, where collection is scattered across parties and consumers’ preferences of goods is distorted from the price variations due to indirect taxes. Direct taxes help in reducing inequalities and are considered to be progressive while indirect taxes enhance inequalities and are considered to be regressive. Indirect taxes involve lesser administrative costs due to convenient and stable collections, while direct taxes have many exemptions and involve higher administrative costs. Indirect taxes are oriented more towards growth as they discourage consumption and help enhance savings. Direct taxes, on the other hand, reduce savings and discourage investments. Indirect taxes have a wider coverage as all members of the society are taxed through the sale of goods and services, while direct taxes are collected only from people in respective tax brackets.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Direct Tax Blog

    Uploaded by

    Arpit Gupta
    24 views3 pages
    Direct Tax Vs. Indirect Tax: Direct taxes are paid in entirety by a taxpayer directly to the government. It is also defined as the tax where the liability as well as the burden to pay it resides on the same individual. Direct taxes are collected by the central government as well as state governments according to the type of tax levied. Major types of direct tax include: Income Tax: Levied on and paid by the same person according to tax brackets as defined by the income tax department. Corporate Tax:Paid by companies and corporations on their profits. Wealth Tax: Levied on the value of property that a person holds. Estate Duty: Paid by an individual in case of inheritance. Gift Tax: An individual receiving the taxable gift pays tax to the government. Fringe Benefit Tax: Paid by an employer that provides fringe benefits to employees, and is collected by the state government. Indirect tax, as mentioned above, include those taxes where the liability to pay the tax lies on a person who then shifts the tax burden to another individual. Some types of indirect taxes are: Excise Duty: Payable by the manufacturer who shifts the tax burden to retailers and wholesalers. Sales Tax: Paid by a shopkeeper or retailer, who then shifts the tax burden to customers by charging sales tax on goods and services? Custom Duty:Import duties levied on goods from outside the country, ultimately paid for by consumers and retailers. Entertainment Tax:Liability is on the cinema owners, who transfer the burden to cinemagoers. Service Tax:Charged on services rendered to consumers, such as food bill in a restaurant. Therefore, the prime difference between direct tax and indirect tax is the ability of the taxpayer to shift the burden of tax to others. Direct taxes include tax varieties such as income tax, corporate tax, wealth tax, gift tax, expenditure tax etc. Some examples of indirect taxes are sales tax, excise duty, VAT, service tax, entertainment tax, custom duty etc. However, this is not an exhaustive list of taxes and more types of taxes are levied by the government on specific cases. Difference between direct tax and indirect tax- There are many difference implicit of direct and indirect taxes on the country. However, both types of taxes are important for the government as taxes include the major part of revenue for the government. Key differences between Direct and Indirect Tax are: Direct tax is levied and paid for by individuals, Hindu undivided Families (HUF), firms, companies etc. whereas indirect tax is ultimately paid for by the end-consumer of goods and services. The burden of tax cannot be shifted in case of direct taxes while burden can be shifted for indirect taxes. Lack of administration in collection of direct taxes can make tax evasion possible, while indirect taxes cannot be evaded as the taxes are charged on goods and services. Direct tax can help in reducing inflation, whereas indirect tax may enhance inflation. Direct taxes have better allocative effects than indirect taxes as direct taxes put lesser burden over the collection of amount than indirect taxes, where collection is scattered across parties and consumers’ preferences of goods is distorted from the price variations due to indirect taxes. Direct taxes help in reducing inequalities and are considered to be progressive while indirect taxes enhance inequalities and are considered to be regressive. Indirect taxes involve lesser administrative costs due to convenient and stable collections, while direct taxes have many exemptions and involve higher administrative costs. Indirect taxes are oriented more towards growth as they discourage consumption and help enhance savings. Direct taxes, on the other hand, reduce savings and discourage investments. Indirect taxes have a wider coverage as all members of the society are taxed through the sale of goods and services, while direct taxes are collected only from people in respective tax brackets.

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    Direct Tax Vs. Indirect Tax: Direct taxes are paid in entirety by a taxpayer directly to the government. It is also defined as the tax where the liability as well as the burden to pay it resides on the same individual. Direct taxes are collected by the central government as well as state governments according to the type of tax levied. Major types of direct tax include: Income Tax: Levied on and paid by the same person according to tax brackets as defined by the income tax department. Corporate Tax:Paid by companies and corporations on their profits. Wealth Tax: Levied on the value of property that a person holds. Estate Duty: Paid by an individual in case of inheritance. Gift Tax: An individual receiving the taxable gift pays tax to the government. Fringe Benefit Tax: Paid by an employer that provides fringe benefits to employees, and is collected by the state government. Indirect tax, as mentioned above, include those taxes where the liability to pay the tax lies on a person who then shifts the tax burden to another individual. Some types of indirect taxes are: Excise Duty: Payable by the manufacturer who shifts the tax burden to retailers and wholesalers. Sales Tax: Paid by a shopkeeper or retailer, who then shifts the tax burden to customers by charging sales tax on goods and services? Custom Duty:Import duties levied on goods from outside the country, ultimately paid for by consumers and retailers. Entertainment Tax:Liability is on the cinema owners, who transfer the burden to cinemagoers. Service Tax:Charged on services rendered to consumers, such as food bill in a restaurant. Therefore, the prime difference between direct tax and indirect tax is the ability of the taxpayer to shift the burden of tax to others. Direct taxes include tax varieties such as income tax, corporate tax, wealth tax, gift tax, expenditure tax etc. Some examples of indirect taxes are sales tax, excise duty, VAT, service tax, entertainment tax, custom duty etc. However, this is not an exhaustive list of taxes and more types of taxes are levied by the government on specific cases. Difference between direct tax and indirect tax- There are many difference implicit of direct and indirect taxes on the country. However, both types of taxes are important for the government as taxes include the major part of revenue for the government. Key differences between Direct and Indirect Tax are: Direct tax is levied and paid for by individuals, Hindu undivided Families (HUF), firms, companies etc. whereas indirect tax is ultimately paid for by the end-consumer of goods and services. The burden of tax cannot be shifted in case of direct taxes while burden can be shifted for indirect taxes. Lack of administration in collection of direct taxes can make tax evasion possible, while indirect taxes cannot be evaded as the taxes are charged on goods and services. Direct tax can help in reducing inflation, whereas indirect tax may enhance inflation. Direct taxes have better allocative effects than indirect taxes as direct taxes put lesser burden over the collection of amount than indirect taxes, where collection is scattered across parties and consumers’ preferences of goods is distorted from the price variations due to indirect taxes. Direct taxes help in reducing inequalities and are considered to be progressive while indirect taxes enhance inequalities and are considered to be regressive. Indirect taxes involve lesser administrative costs due to convenient and stable collections, while direct taxes have many exemptions and involve higher administrative costs. Indirect taxes are oriented more towards growth as they discourage consumption and help enhance savings. Direct taxes, on the other hand, reduce savings and discourage investments. Indirect taxes have a wider coverage as all members of the society are taxed through the sale of goods and services, while direct taxes are collected only from people in respective tax brackets.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    24 views3 pages

    Direct Tax Blog

    Uploaded by

    Arpit Gupta
    Direct Tax Vs. Indirect Tax: Direct taxes are paid in entirety by a taxpayer directly to the government. It is also defined as the tax where the liability as well as the burden to pay it resides on the same individual. Direct taxes are collected by the central government as well as state governments according to the type of tax levied. Major types of direct tax include: Income Tax: Levied on and paid by the same person according to tax brackets as defined by the income tax department. Corporate Tax:Paid by companies and corporations on their profits. Wealth Tax: Levied on the value of property that a person holds. Estate Duty: Paid by an individual in case of inheritance. Gift Tax: An individual receiving the taxable gift pays tax to the government. Fringe Benefit Tax: Paid by an employer that provides fringe benefits to employees, and is collected by the state government. Indirect tax, as mentioned above, include those taxes where the liability to pay the tax lies on a person who then shifts the tax burden to another individual. Some types of indirect taxes are: Excise Duty: Payable by the manufacturer who shifts the tax burden to retailers and wholesalers. Sales Tax: Paid by a shopkeeper or retailer, who then shifts the tax burden to customers by charging sales tax on goods and services? Custom Duty:Import duties levied on goods from outside the country, ultimately paid for by consumers and retailers. Entertainment Tax:Liability is on the cinema owners, who transfer the burden to cinemagoers. Service Tax:Charged on services rendered to consumers, such as food bill in a restaurant. Therefore, the prime difference between direct tax and indirect tax is the ability of the taxpayer to shift the burden of tax to others. Direct taxes include tax varieties such as income tax, corporate tax, wealth tax, gift tax, expenditure tax etc. Some examples of indirect taxes are sales tax, excise duty, VAT, service tax, entertainment tax, custom duty etc. However, this is not an exhaustive list of taxes and more types of taxes are levied by the government on specific cases. Difference between direct tax and indirect tax- There are many difference implicit of direct and indirect taxes on the country. However, both types of taxes are important for the government as taxes include the major part of revenue for the government. Key differences between Direct and Indirect Tax are: Direct tax is levied and paid for by individuals, Hindu undivided Families (HUF), firms, companies etc. whereas indirect tax is ultimately paid for by the end-consumer of goods and services. The burden of tax cannot be shifted in case of direct taxes while burden can be shifted for indirect taxes. Lack of administration in collection of direct taxes can make tax evasion possible, while indirect taxes cannot be evaded as the taxes are charged on goods and services. Direct tax can help in reducing inflation, whereas indirect tax may enhance inflation. Direct taxes have better allocative effects than indirect taxes as direct taxes put lesser burden over the collection of amount than indirect taxes, where collection is scattered across parties and consumers’ preferences of goods is distorted from the price variations due to indirect taxes. Direct taxes help in reducing inequalities and are considered to be progressive while indirect taxes enhance inequalities and are considered to be regressive. Indirect taxes involve lesser administrative costs due to convenient and stable collections, while direct taxes have many exemptions and involve higher administrative costs. Indirect taxes are oriented more towards growth as they discourage consumption and help enhance savings. Direct taxes, on the other hand, reduce savings and discourage investments. Indirect taxes have a wider coverage as all members of the society are taxed through the sale of goods and services, while direct taxes are collected only from people in respective tax brackets.

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    Direct tax-

    Direct Tax is that type of tax which is directly paid to the Government by the tax payers. It is
    imposed directly by the Government and cannot be transferred to any other entity for
    payment.

    Examples of Direct Taxes in India:


     Income Tax
     Wealth Tax
     Corporation Tax

    The Central Board of Direct Taxes in India:


    The direct taxation is overseen by CBDT or Central Board of Direct Taxes in India. It was
    formed as a result of Central Board of Revenue Act, 1924.

    It is the hub and nexus of all the Direct Tax related news and enforcement. The body is headed
    by the Chairman and comprises of 6 members who are also Special Secretary to
    the Government of India.

    Description: In the case of direct tax, the burden can’t be shifted by the taxpayer to someone else.
    These are largely taxes on income or wealth. Income tax, corporation tax, property tax, inheritance
    tax and gift tax are examples of direct tax.

    Tax Rates for Different Types Of Direct Taxes:


    1. Income Tax
    In India, Income Tax is charged according to slabs which outline the details for different tax rates
    for different levels of income.
    For individual residents under 60 years of age:

    Income Slabs Tax Rates

    Taxable income under Rs.2,50,000. NIL.

    10% of the amount by which the taxable income exceeds


    Taxable income between Rs.2,50,000 and Rs.2,50,000.
    Rs.5,00,000. Less: Tax Credit u/s 87A – 10% of taxable income (up to a
    maximum of Rs.2,000).

    Taxable income above Rs.5,00,000 and Rs.25,000 plus 20% of the amount by which the taxable income
    Rs.10,00,000. exceeds
    Rs.1,25,000 plus 30% of the amount by which the taxable income
    Taxable income above Rs.10,00,000.
    exceeds Rs.10,00,000.

    For individual residents between 60 and 80 years of age:

    Income Slabs Tax Rates

    Taxable income under Rs.3,00,000. NIL.

    10% of the amount by which the taxable income exceeds Rs.3,00,000.


    Taxable income between Rs.3,00,000 and
    Less: Tax Credit u/s 87A – 10% of taxable income (up to a maximum
    Rs.5,00,000.
    of Rs.2,000).

    Taxable income between Rs.5,00,000 and Rs.20,000 plus 20% of the amount by which the taxable income
    Rs.10,00,000. exceeds Rs.5,00,000.

    Rs.1,20,000 plus 30% of the amount by which the taxable income


    Taxable income above Rs.10,00,000.
    exceeds Rs.10,00,000.

    For Individual residents above 80 years of age:

    Income Slabs Tax Rates

    Taxable income under Rs.5,00,000. NIL.

    Taxable income between Rs.5,00,000 and


    20% of the amount by which taxable income exceeds Rs.5,00,000.
    Rs.10,00,000.

    Rs.1,00,000 + 30% of the amount by which taxable income exceeds


    Taxable income above Rs.10,00,000.
    Rs.10,00,000.

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