Direct Tax

What is Direct Tax?

A direct tax is a tax levied on an individual or an organization without any intermediate agency. In other words, the taxpayer directly pays the tax to the government. The most common examples of direct taxes are income taxes, property taxes, and corporate taxes.

Types of direct tax

Direct taxes are taxes levied by the government on the taxable income of individuals and organizations. In India, the two predominant types of direct tax are Income Tax and Corporate Tax. Income Tax is charged on the taxable income generated from sources such as salary, business, house property, and capital gains, while Corporate Tax covers profits earned by a company.

Additionally, other common forms of direct taxation include Wealth Tax, Professional Tax, and Fringe Benefit Taxes. Direct taxes are an integral part of our nation's finance system enabling proper funding for essential public services that benefit the entire population.

Difference Between Direct Tax and Indirect Tax

The main difference between direct and indirect taxes is that direct taxes are levied on individuals or organizations based on their income or wealth, while indirect taxes are levied on the sale of goods and services.

Direct taxes are paid directly to the government by the taxpayer, while indirect taxes are collected by businesses from their customers and then paid to the government. Direct taxes include income tax, property tax, and inheritance tax, while indirect taxes include value-added tax (VAT), excise duty, and customs duty.