Question

Differentiate between progressive taxation and proportional taxation.

Distinguish between proportional and progressive taxation

Distinguish between proportional and progressive taxation. Give examples.

Distinguish between proportionate and progressive tax systems.

Answer 1

	Progressive Taxation	Proportional Taxation
1.	When the rate of tax rises as the taxpayer’s income rises, the tax is said to be progressive.	A proportionate tax is one in which the tax rate remains constant regardless of income fluctuations.
2.	High-income groups are taxed more heavily under this system, and vice versa.	This method of taxation applies the same percentage of tax to all income classes.
3.	More equitable, as it helps in reducing income inequality.	Less equitable, as it does not reduce income inequality.
4.	Examples: A flat income tax of 10% across all income levels.	Examples: Income tax where 10% is charged on income up to ₹5 lakhs, 20% on ₹5 – 10 lakhs, and 30% above ₹10 lakhs.