Difference between Direct Tax and Indirect TaxAll of us pay the taxes in one way or the other. The people who are earning pay such taxes. There are various kinds of taxes such as estate tax, house tax, excise tax, sales tax, etc. Now, what is a tax? Well, a tax can be defined as a charge imposed by the government on various services and products. The government imposes such taxes so that the government expenditures and funds are funded. A person who doesn't pay the tax is liable for punishment. Taxes are important as the government utilizes these funds to develop the nation in certain ways. Income tax, corporate tax, and capital tax are the most important forms of taxes. The main aim of these taxes is to provide funding to the government for their projects. Various projects of the government are started and completed because of the taxes paid by us. Now, there are two significant kinds of taxes, namely the indirect tax and the direct tax. So, let us discuss them separately. Direct TaxDirect tax is defined as the tax paid to the government directly. Direct tax is generally imposed on a property or a person. The usual example of direct tax is income tax. Income tax is imposed on the taxpayer and is directly paid to the government. These taxes cannot be forwarded to other people. Income tax, property tax, and taxes on assets are the major kinds of direct taxes. There are many pros and cons related to direct tax. The significant benefit of the direct tax is that it is very productive. The income tax given to the government changes the national wealth heavily. These taxes are imposed on the taxpayers based on their economic condition. This encourages social equality among people. Indirect TaxIndirect taxes are defined as taxes that can be transferred to other people. Indirect taxes are levied on the people who undertake certain expenses. Indirect taxes are paid by the customer buying a product. The supplier collects these taxes and pays them to the government. The most common kinds of indirect taxes are sales tax, entertainment tax, excise tax, etc. For instance, when the price of the product increases, taxes are included in it. The increased price means that the product is inclusive of taxes. There are certain advantages and disadvantages regarding indirect taxes. But before that, let us look at some of the significant contrasting points between direct and indirect taxes.
So, these are the significant contrasting points between indirect and direct taxes. Both direct and indirect taxes are an essential part of the government's revenue. It is necessary to pay these taxes because, directly or indirectly, it increases the national wealth. Now, there are certain pros and cons associated with these taxes. So, let us discuss them briefly. Advantages of Direct Taxes
Disadvantages of Direct Taxes
Advantages of Indirect Taxes
Disadvantages of Indirect Taxes
So, these are some of the pros and cons associated with direct and indirect taxes. It is essential to note that both direct and indirect taxes must be paid by the people as it increases the nation's wealth. Moreover, the government uses these taxes to develop the economy. Thus, both direct and indirect taxes are an essential part of the government revenues.
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