Question

Differentiate between direct and indirect taxes.

With reference to the taxation policy.

Mention three differences between direct taxes and Indirect taxes.

How are direct taxes different from indirect taxes? 

Answer 1

S. No.	Direct Taxes	Indirect Taxes
1.	Direct taxes are imposed on income, and property of people.	Indirect taxes are posed on goods and services.
2.	They are directly paid government by the person on whom imposed.	They are paid to the government by one person but their burden is borne by another person.
3.	They cannot be shifted on others.	They can be shifted on others.
4.	These taxes are linked to people and hence cannot be escaped.	These taxes are linked to particular transactions and hence can be avoided by escaping from entering into the particular transaction.
5.	They cause a lot of inconvenience to the tax payers as they are painful to the tax payer.	Indirect taxes are more convenient to pay than direct taxes.
6.	Direct taxes have limited coverage as they are paid only by those whose income is taxable.	Indirect taxes have wide coverage as everyone has to pay tax who buys goods and services.
7.	Income tax and corporation tax are examples of direct taxes.	GST, excise duty, custom duty, etc., are examples of indirect taxes.