Direct Tax
Direct taxes are levied directly on individuals and entities by the government. These taxes are imposed based on the income or profits earned, and they are not shifted to others.
Nature of Direct Taxes
Direct taxes are imposed directly on individuals and entities
based on their income, profits, or assets. They include:
Income Tax: Tax levied on the income earned by
individuals, corporations, and other entities.
Corporate Tax: Tax imposed on the profits
earned by corporations.
Capital Gains Tax: Tax levied on the profit
from the sale of assets like stocks, bonds, real estate, etc.
Wealth Tax: Tax levied on the net wealth or
assets owned by individuals or entities.
Benefits of Direct Taxes
- Tax rates are structured to be higher for higher-income individuals, promoting equity and redistribution of wealth.
- Unlike indirect taxes (e.g., sales tax), direct taxes provide a stable and predictable source of revenue for the government.
- Direct taxes can influence economic behavior, encouraging savings, investment, and responsible financial decision-making.
- Taxpayers directly contribute to government revenue, promoting transparency in public finances and accountability in governance.