Union Budget 2023: Before listening to the budget speech, understand the difference between direct and indirect tax, read the report
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New Delhi : Finance Minister Nirmala Sitharaman will present the Union Budget 2023 in the Lok Sabha, the lower house of the Indian Parliament, on 1 February. The people of the country have a lot of expectations from the full budget before the election year. Some are expecting an increase in the benefit of tax exemption, while some are expecting a reduction in inflation. Many people may also be thinking that after the presentation of the budget, changes can be made in the income tax laws of the country. Discussions are going on in the media and on various forums. The topic that is discussed the most in these discussions is tax.
The two words that are mentioned the most in discussions are ‘direct tax’ i.e. direct tax and ‘indirect tax’ i.e. indirect tax. It is important that both these words are used a lot, but do the general public of India really know about the meaning and differences of these two words? Does she know which of these two terms affect individuals and which businesses or businessmen in India? The answer to both these questions will be no, so let’s understand the difference between direct and indirect tax for information…
what is direct tax
Understand from the point of view of economics, the taxes which are paid by the person or institution responsible for paying directly to the government are called direct taxes. These taxes include income tax, wealth tax and corporate tax. Direct taxes are based on the income and assets of the individual or entity and the amount of tax paid is directly proportional to the income or wealth earned. As such, a person with a higher income will pay more income tax than a person with a lower income.
what is indirect tax
The tax which is paid indirectly by the consumer or the ultimate end user is called indirect tax. Such taxes include Value Added Tax (VAT), Goods and Services Tax (GST) and Excise Duty. Indirect taxes are generally added to the price of goods and services and consumers pay these types of indirect taxes at the time of purchase. For example, while purchasing a product, a consumer pays GST on top of its base price.
Standards of Direct Taxes and Indirect Taxes
One of the major differences between direct and indirect taxes is that direct taxes are considered progressive. This is because they take a larger percentage of the income from those who can afford to pay more. On the other hand, indirect taxes are considered regressive because they take a larger percentage of income from those who can afford to pay less.
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