With suitable examples Distinguish between Direct tax and Indirect tax.

• Direct taxes are levied directly on individuals or entities and are based on their income, profits, or wealth.

• These taxes are paid directly by the taxpayer to the government.

• Examples include income tax, corporate tax, wealth tax, property tax, and capital gains tax.

• Direct taxes are progressive, meaning the tax rate increases as income or wealth increases.

Example: Income Tax – Individuals pay a percentage of their income to the government based on tax brackets.

Indirect Tax:

• Indirect taxes are imposed on goods and services at the point of sale or consumption, but the burden can be shifted to consumers.

• These taxes are collected by intermediaries, such as businesses, and passed on to consumers as part of the purchase price.

• Examples include Value Added Tax (VAT), Goods and Services Tax (GST), excise duty, customs duty, and sales tax.

• Indirect taxes are regressive, meaning they impose a higher burden on low-income individuals.

Example: Value Added Tax (VAT) – Consumers pay VAT as a percentage of the value of goods purchased, and sellers collect and remit it to the government.