difference between direct and indirect taxes

Basis for comparison Direct taxes Indirect taxes
Meaning Direct tax is referred to as the tax, levied on person’s income and wealth and is paid directly to the government. Indirect Tax is referred to as the tax, levied on a person who consumes the goods and services and is paid indirectly to the government.
Burden Cannot be shifted. Can be shifted.
Nature Progressive as high income earner pays higher taxes. Regressive as indirect tax is tax on consumption, they affect inversely to lower income group.
Imposition Imposed on income of person. Imposed on goods and services.
Evasion Tax evasion is possible. Hardly possible.
Scope Number of tax payers are limited. Number of tax payers are large.
Assessee The assessee is tax payer. Assessee and taxpayers may or may not be different.
inflation Do not have impact on cost, price and demand of goods. Any increase in indirect tax increase cost and price but reduces demand of goods.
Types Income tax, corporate tax, wealth tax etc. Service tax, value added tax, custom duty, excise duty etc.

 

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