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Direct Tax Definition
Direct Tax Definition
Tags: Gig Economy Economy WTO WTO Public Stockholding MSP Economic Growth Masala Bond Environmental Performance Index Forecast of Economic Growth Functions of the Finance Commission
The concept of Indirect Tax, therefore different from a direct tax as the intermediary files a tax return at a later stage while depositing the tax proceeds to the government along with the return. Thus, an indirect tax is charged by the taxpayer to someone else while it is not so in the case of a direct tax. Hence, this type of tax makes up for a sizeable proportion of the total tax revenue that is generated by the government.
Direct tax collection in India is both at the central and federal levels as different taxes are imposed by the central as well as state governments. Taxes like income tax, property tax, capital gains tax, etc. are examples of central taxes while value-added tax (VAT), motor vehicle tax, etc. are collected by individual states. The taxes collected by the government are spent by it on welfare measures and in building infrastructural capabilities for the economy. This type of tax features a progressive regime which can be exemplified by the income tax slab rates. Thus, people with more income have to pay at a higher rate compared to lower-income individuals.
The direct tax growth in India has been robust in recent years due to the economy performing well in many sectors and incomes increasing substantially for the middle class. Thus, the tax inflows have been steadily rising and have been meeting the budgeted targets year after year. The healthy growth in direct tax also highlights the stable economic policies of the government, focusing on streamlining and simplification of processes and plugging gaps in tax leakage through effective technological interventions.
There are many advantages of direct tax but the first and foremost is equity. As it is a type of progressive taxation, the rich can be taxed more than the poor which can lead to economic equilibrium or equity. Secondly, it is an important revenue source for the government and the collection charges are also fairly low. Thus, it is productive. And finally, this type of tax has enough elasticity and can be varied according to the requirements of the governments and changes in the income of the citizens.