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Direct Tax |
Indirect Tax |
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The burden of Tax Payer is borne by the person himself.
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The burden of Tax is shifted to another person.
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Tax on Income Wealth, Property. Examples – Income Tax, Wealth Tax, Property Tax.
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Tax on Goods and Services Examples – GST tax on goods like Mobile Phones TV’s etc. services like Telephone services by MTNL. |
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Progressive in nature, the Person pays more when income is more. Examples – Rate of Income Tax on Income between 3 lakhs to 5Lakhs Regressive is 5%, 5 lakhs to 10 lakhs is 20% and above 10 lakhs is 30%.
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Regressive in nature. All the consumers equally bear the burden irrespective of their ability to pay. For Example, If Rate of a Tax is 5 % every person will have to pay 5 % whether he earns in thousands lakhs or crores. |
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Tax Base – tax base is smaller. Only a small section of the population pays tax. In India barely 5 crores people pay Income tax.
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Tax Base-Winder tax base Tax is borne by crores of the consumer. |
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Not Inflationary – Direct tax is not Inflationary.
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Inflationary – Indirect taxes are imposed on commodity and services and causes all-round prices to spiral. For example, the rate of tax on tea is increased from 5 % to 10%. Tea of Rs 20+5% tax means the total cost is Rs.21 At the rate of 10%, the total cost is 20+2 it becomes Rs.22. Increase in cost. |