Question

Progressive taxation is suitable for the Indian economy. Give reasons to support your answer.

Answer 1

A tax is said to be progressive when the rate of tax increases with the increase in the tax payer’s income. Under this system, the tax liability increases not only in absolute terms but the proportion of income tax also increases. Rich people pay a higher average income tax than poor people. Hence, it reduces the income inequalities among the rich and poor groups of people.

Answer 2

Progressive taxation is suitable for the Indian economy because the tax rate increases with the taxpayer's income. As a result, lower-income groups pay fewer taxes, while higher-income groups pay higher rates.