What are the differences between direct tax and indirect tax?

Banking & FinanceManagementCompanies/Organisations

The major differences between direct tax and indirect tax are as follows −

Direct TaxIndirect Tax
  • It is the tax on income/profits.

  • Individuals, firms, companies pay direct taxes.

  • It is applicable to taxpayer.

  • It is burden on individual.

  • It can’t be transferred to others.

  • It covers an entity/individual.

  • It has high administrative cost.

  • Tax evasion is possible.

  • It includes good allocative effects (less burden).

  • It may reduce inflation.

  • It results in lesser savings, investments demoralising.

  • The mode of progress is progressive.

  • It is difficult to collect taxes.

  • It includes income tax, wealth tax and corporate tax.

  • It is the tax on goods and services.

  • End consumer of service/goods are taxpayers.

  • It is applicable at each stage of production/distribution chain.

  • It is burden on consumer.

  • It can be transferred to others.

  • It has wide coverage.

  • It has less administrative cost.

  • Tax evasion is not possible.

  • It may cause increase in inflation.

  • It is growth oriented.

  • The mode of progress is regressive.

  • It is easy to collect taxes.

  • It includes GST and service Tax.

raja
Published on 25-Jul-2020 10:54:37
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