The citizens of India cannot shy away from paying taxes. The Government of India imposes two types of taxes on its citizens – direct and indirect taxes. Before we delve into the details of differences between the two taxes, let’s quickly recap the two types of taxes:
Direct taxes : These taxes have to be paid directly to the government and cannot be transferred to anyone else. Different acts govern these taxes.
Indirect taxes : These taxes are imposed on all the goods and services, and not on income and profits. It is collected by a retail store or an intermediary from the consumer or one bearing the ultimate burden of the tax.
| Context | Direct Tax | Indirect Tax |
|---|---|---|
| Imposition | Imposed on income or profits | Imposed on goods and services |
| Taxpayer | Individuals, HUFs, firms and companies | End-consumer of the goods and services |
| Applicability | Applicable to the taxpayer alone | Applicable to every stage of the production-distribution chain |
| Tax burden | The burden falls directly on the individual | The burden is shifted to the consumer by the manufacturer or service provider |
| Transferability | Cannot be transferred to anyone else | Can be transferred from one taxpayer to the other |
| Coverage | Confined to an entity or individual taxpayer | Wide coverage because all the members of the society are taxed |
| Administrative cost | Higher administrative costs and many exemptions | Lesser administrative costs because of stable, convenient collections |
| Tax evasion | Possible | Not possible |
| Allocative effects | Have good allocative effects since they put less burden on the collection | Allocative effects not as good as those of direct taxes |
| Inflation | Helps in reducing inflation | Might help in increasing inflation |
| Orientation | Discourage investments, lessen savings | Growth-oriented, encourage savings |
| Mode of progress | Progressive, reduce inequalities | Regressive, enhance inequalities |
| Most common types (in India) | Income, Wealth, Corporate Tax | GST or Goods and Services Tax |
Income Tax
Income Tax
Income Declaration Scheme
Income from House Property
Income from Other Sources
Income Tax Calculator
Income Tax Department
Income Tax Features
Income Tax for Pensioners
Income Tax for Senior Citizens
Income Tax Refund
Income Tax Return
Income Tax Slab
How to pay Income Tax online
Payment of Tax through Credit Cards
E-Filing of Income Tax Returns
E-payment
Property Tax
Professional Tax
