Question

Distinguish between the following.

Direct tax and Indirect tax. 

Answer 1

Direct tax and Indirect tax.

Sr. No.	Aspects	Direct Tax	Indirect Tax
1.	Meaning	It is directly paid by tax payers. Or it is deducted from the income of the taxpayers.	It is indirectly paid by tax payers. It is included in the price of goods and services.
2.	Examples	The direct taxes include personal income tax, corporate tax, capital gain tax, wealth tax, etc.	The indirect taxes include customs duty, excise duty, VAT, service Tax, etc.
3.	Principles of equity	Direct taxes follow the principle of equity (social justice). Higher-income people are taxed at a higher rate, and middle-income people are taxed at a lower rate. The lower-income people are normally exempt from direct tax.	Indirect taxes lack the principle of equity. For instance, in the case of mass consumption goods, all consumers (whether rich or poor) have to pay the same rate of indirect taxes like excise duty.
4.	Share of Taxes	In India, the share of direct taxes is on the rise. In 2008-09, the share of direct taxes was estimated at 55% of the total tax revenue of Central Government.	In India, the share of indirect taxes is in decline. In 2008-09, the share of indirect taxes was estimated at 45% of the total tax revenue of Central Government.