Difference between Direct Tax and Indirect Tax
Basis |
Direct Tax |
Indirect Tax |
---|---|---|
Meaning |
These are those taxes whose final burden falls on the person who makes the payment to the government. | These are those taxes that are paid to the government by one person, but their burden is borne by another person. |
Incidence and Impact of Tax |
When the incidence and impact of the tax lie on the same person, it is called direct tax. | When the incidence and impact of the tax lie on a different person, it is called an indirect tax. |
Shift of Taxation |
The impact of direct taxation can not be shifted. | The impact of indirect taxation can be shifted. |
Nature |
These are generally progressive in nature. | These are generally regressive in nature. |
Effect on the market price |
These taxes do not affect the market price of the product. | These taxes have a direct and positive effect on the market price of the product. |
Example |
Income Tax, Wealth Tax, Corporation Tax, etc. | Goods and Services Tax (GST). |
Difference between Direct and Indirect Tax
Direct and Indirect Tax are two types of taxes imposed on the property and income of individuals and companies, which is paid by them directly and indirectly to the government respectively.
Table of Content
- What is Direct Tax?
- What is Indirect Tax?
- Difference between Direct Tax and Indirect Tax
- How to Determine Whether a Tax is Direct or Indirect?
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