Question

Explain the taxation types. 

Answer 1

Taxation Types:
There are four types of Taxation:

1. Proportional Tax
2. Progressive Tax
3. Regressive Tax and
4. Degressive Tax

1. Proportional Taxation: is a method, where the rate of tax is same regardless size of the income. The tax amount realized will vary in the same proportion as that of income. If tax rate is 5% on income, Mr. X getting an income of Rs. 1000 will pay. Rs. 50, Mr. B will be getting an income of Rs. 5,000 and will pay tax of Rs. 50. In short, proportional tax leaves the relative financial status of taxed persons unchanged. 
2. Progressive Taxation: is a method by which the rate of tax will also increase with the increase of income of the person a case of progressive taxation if a person with Rs. 1000 income per annum pay a tax of 10% (i.e., Rs. 100), a person with an income of Rs. 10,000 per annum pays a tax of 25% (i.e., Rs. 2,500), and a person with income of 1 lakh per annum pay the tax of 50% that is Rs. 50,000.
3.  Regressive taxation: it implies that higher the rate of tax furrow income groups than in the case of higher-income groups it is the very opposite to progressive taxation.
4. Digressive Taxes: which are to mildly progressive, hence not very steep, so that high-income earners do not make a due sacrifice on the basis of equity, are called digressive. In digressive taxation, a tax may be progressive up to a certain limit; after that it may be charged at a flat rate.