Question

differentiate between direct tax and indirect tax give 4 points

Answer 1

Key Differences Between Direct and Indirect Taxes1.The tax, which is paid by the person on whom it is levied is known as the Direct tax while the tax, which is paid by the taxpayer indirectly is known as the Indirect tax. The direct tax is levied on person’s income and wealth whereas the indirect tax is levied on a person who consumes the goods and services.2.The burden of the direct tax is transferable while that of indirect tax is non-transferable.3.the incidence and impact of directtax falls on the same person, but in the case of indirect tax, the incidence and impact falls on different [persons.4.The evasion of tax is possible in case of a direct tax if the proper administration of the collection is not done, but in the case of indirect tax, the evasion of tax is not possible since the amount of tax is charged on the goods and services.5.The direct tax is levied on Persons,i.e. Individual, HUF (Hindu Undivided Family), Company, Firm,etc. On the other hand, the indirect tax is levied on the consumer of goods and services.6.The nature of a direct tax is progressive, but the nature of theindirect tax is regressive.7.Direct tax helps in reducing the inflation, but the indirect tax sometimes helps in promoting the inflation.8.Direct tax is collected when the income for the financial year is earned or the assets are valued atthe date of valuation. As against this, the indirect taxes are collected, when the purchase or sale of goods or services are rendered.9.Direct tax is imposed on and collected from the assessee. Unlike indirect tax is imposed on and collected from consumer but deposited to the exchequer by thedealer of goods or provider of services.