What is a direct tax?

1.	What is a direct tax?
Answer» Direct taxes refer to taxes that are imposed on property and income of individuals and companies and are paid directly by them to the government. • They are imposed on individuals and companies. • The ‘liability to pay’ the tax (i.e. impact) and ‘actual burden’ of the tax (i.e, incidence) lie on the same person, i.e. its burden cannot be shifted to others. • They directly affect the income level and purchasing power of people and help to change the level of aggregate demand in the economy. • Examples: Income tax, Corporate tax, Interest tax, Wealth tax, Death duty, Capital gains tax, etc.

Answer»

Direct taxes refer to taxes that are imposed on property and income of individuals and companies and are paid directly by them to the government.

• They are imposed on individuals and companies.

• The ‘liability to pay’ the tax (i.e. impact) and ‘actual burden’ of the tax (i.e, incidence) lie on the same person, i.e. its burden cannot be shifted to others.

• They directly affect the income level and purchasing power of people and help to change the level of aggregate demand in the economy.

• Examples: Income tax, Corporate tax, Interest tax, Wealth tax, Death duty, Capital gains tax, etc.

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