Direct Tax

Direct Tax is the tax directly paid to the Government by the taxpayers. 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

• Income Tax: It is charged by the central government on the income of individuals and organisations. Slabs of income tax have been formulated depending on the different income groups.

• Corporation Tax: It is a flat rate charged on the domestic corporates for the profits earned for a particular period.

Advantages of Direct Taxes

• The lower income group carries a lower burden of tax

• Self-payment of direct taxes makes one socially aware and responsible

• The distribution of wealth is equal under direct taxation

• Direct tax rates can be used as an anti-inflationary tool

Disadvantages of Direct Taxes

• Direct taxes might discourage savings and investments

• The biggest disadvantage being it leads to tax evasion

• It might be inconvenient to pay direct taxes as the procedure is complicated