Meaning of Direct Taxes and Indirect Taxes
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Meaning of Direct Taxes and Indirect Taxes

Meaning of direct taxes and indirect taxes Meaning of direct taxes A tax is believed to be a direct tax when it is not anticipated to be transferred to any other individual. The individual who compensates it in the first case is also anticipated to bear it. Therefore, the effect and the prevalence are on the same individual. An instance of a direct tax is income-tax. The man who shells out income-tax has also to bear it.

Meaning of direct taxes and indirect taxes

Meaning of direct taxes

A tax is believed to be a direct tax when it is not anticipated to be transferred to any other individual. The individual who compensates it in the first case is also anticipated to bear it. Therefore, the effect and the prevalence are on the same individual. An instance of a direct tax is income-tax. The man who shells out income-tax has also to bear it. He can’t bypass it on to someone else. The additional illustrations of direct taxes at the Centre are estate duty, wealth tax, capital gains tax, gift tax and in the States professions tax, land revenue and property tax.

 Meaning of  indirect taxes

Indirect taxes are those kinds of taxes which are remunerated in the first place by one individual and are then transferred on to various other individual. The effect is on one individual but the prevalence is on a different person. Taxes on goods are instances of indirect taxes. The sellers pay these taxes in the first place and then, when they trade the goods, they take in them in the value that they charge from the consumers. Sack taxes, are enveloped up, as it were, in price, and they are paid eventually by customers. The administration wants actually to tax the customers of these goods. They are levied circuitously via the trader of those goods. Customs duties and union excise duties are the main indirect taxes levied by the Central Government in India and State excise duties, sales tax, entertainment tax and electricity duty are examples of indirect taxes levied by the State Governments in India.

In answer to the question whether direct or indirect taxes are better, much can be said on both sides. But it is safe to conclude that no country can do with one type only. Both types have to be mixed in a good system of taxation. The rich can be taxed best directly, but pockets of the poor have also to be tapped through indirect taxes. Now-a-days, when State intervention is assuming greater importance, substantial amounts are required for the discharge of its multifar­ious activities. Neither the direct nor the indirect taxes alone can raise this much revenue. Both are necessary. Their relative importance depends on a number of factors, such as distribution of income, nature of the economic system, the stage of economic development, etc. Thus, the discussion of the relative merits and demerits of direct and indirect taxes is only academic. It has no practical importance.

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Comments (1)

Clearly explained, thanks!

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