Distinguish between Direct tax and indirect tax.
Answers
Key differences between Direct and Indirect Tax are: Direct tax is levied and paid for by individuals, Hindu undivided Families (HUF), firms, companies etc. whereas indirect tax is ultimately paid for by the end-consumer of goods and services. ... Direct taxes, on the other hand, reduce savings and discourage investments.
Explanation:
Direct and indirect taxes include all the different tax forms that the state has levied. Direct taxes are taxes that can not be delegated or passed to another entity, such as income tax owed directly to the government by a citizen. In this situation, the tax burden falls flatly on the person who earns a taxable income and is unable to pass the tax to others.
Whereas, Indirect taxes are taxes that can be transferred to someone else. An example would be the VAT included in the bill of goods and services you buy from others. The original tax is levied on the supplier or service provider, who then transfers the tax burden to customers by charging higher commodity prices by including the final price of taxes