Question

Distinguish between regressive tax and degressive tax.

Differentiate between degressive taxation and regressive taxation.

Answer 1

Sr. No.	Aspect	Regressive Tax	Degressive Tax
1.	Meaning	A tax where the rate of tax decreases as income or wealth increases.	A tax that is progressive up to a limit, after which it becomes proportional (fixed rate).
2.	Impact on Income Groups	There is a heavier burden on lower-income groups than on higher-income groups.	There is a fairer burden on higher-income groups pay more, but beyond a point, the rate becomes uniform.
3.	Rate of Tax	Falls as the taxpayer’s income rises.	Rises initially with income (progressive), but then stabilizes at a fixed rate.
4.	Example	Indirect taxes like sales tax, GST, or excise duties.	Income tax where the rate increases with income up to a certain slab, then becomes flat (same for all higher incomes).
5.	Tax Burden Distribution	Tax burden decreases after a certain income level, becoming less equitable.	Tax burden is inherently less equitable, falling more heavily on those with lower incomes.