"Understanding Taxes: Direct vs. Indirect Explained Clearly"

TAX: It refers to compulsory monetary charges paid by citizens for rendering services. It collected for people by the people and its features:

1. It is compulsory monetary payment.
2. Direct benefits in return are not expected at time of tax payment.
3. The fund collected from taxes is spent for welfare of people.

TYPES OF TAXES:

1.Direct tax: When the impact and incidence of tax falls on the same person on whom it is imposed legally it is called direct tax. For eg: property tax, income tax etc.

ITS FEATURES:

1. Certainty: There is no uncertainty how much and when the tax is to be paid. The tax authorities are also certain about the amount of revenue.
2. Elastic: Direct tax is elastic. The government can increase or decrease the amount of revenue by changing the rate of direct tax.
3. Productivity: Direct tax is productive. At the time of prosperity, the income of the people rises and they are paying higher tax to the government.
4. Educative: In direct tax, the taxpayer bearstax. The actual taxpayer is conscious about his/ her rights to know about utilization of tax.

2.Indirect tax: When the impact of tax falls on one person and incidence of tax is shifted to another, it is called indirect tax. For eg: exercises, custom duty etc.

ITS FEATURES:

1. Shifting of tax burden: The burden of indirect tax can be shifted partly or wholly to another person. The producers or traders pay the tax imposed on commodities.
2. Broad based: The area of indirect tax is broad. It covers most people, rich or poor because they have to purchase the commodities in which tax is imposed.
3. Difficulty of evasion: Indirect tax is paid with the price of goods. It is difficult to avoid such tax.
4. Convenient: Indirect tax is convenient to pay. The final taxpayers pay this tax in small amounts at time of purchasing goods.

              DIFFERENCE BETWEEN DIRECT AND INDIRECT TAX: