Question

Which of the following is an example for direct tax?

• A. Inciome tax
• B. Goods and service tax
• C. Excise duty
• D. Customs duty

Answer 1

Answer:

A. Inciome tax

Understanding Direct Tax: Income Tax as an Example

What is a Direct Tax?

• A direct tax is a type of tax where the burden of the tax cannot be shifted from the person or entity on whom it is levied to another. This means the person who pays the tax to the government is also the one on whom the tax is originally imposed.

• It is usually levied on the income, wealth, or profit of an individual or an organization.

Income Tax: A Prime Example of Direct Tax

• Income Tax is a tax levied by the government on the income and profits of individuals and corporations.

• The liability to pay income tax rests directly with the income earner (individual or company), and they cannot legally transfer this liability to someone else.

• It is a progressive tax in nature, meaning that individuals with higher incomes pay a higher percentage of their income as tax. This is based on the principle of ability to pay.

Other Important Examples of Direct Taxes for Competitive Exams:

• Corporate Tax: Tax levied on the net income or profit of corporations.

• Wealth Tax: A tax on the total value of personal assets, including cash, bank deposits, real estate, and other properties. (Note: Wealth tax in India was abolished in 2015-16.)

• Property Tax: Tax levied on real estate by local governments.

• Gift Tax: Tax on the transfer of property or money from one person to another without full consideration.

• Inheritance Tax (Estate Duty): A tax on the assets of a deceased person's estate before it is distributed to their heirs. (Note: Estate Duty was abolished in India in 1985.)