Revision: The State and Economic Development >> The State and Economic Development Economic Applications (English Medium) ICSE Class 10 CISCE

Fiscal deficit refers to the total amount of borrowing required by the government to finance its budget deficit, i.e., the excess of government expenditure over government revenue. 

1. Under this system, the rate of tax increases up upto a certain limit but after that, a uniform rate is charged.
2. Income tax in India is an example of a digressive tax.

Direct taxes refer to taxes that are imposed on the property and income of individuals and companies, and their burden cannot be shifted to another person/entity.

A direct tax is one that is paid by the person on whom it is legally imposed.

A tax is a compulsory payment imposed on persons and companies by the government to meet expenditure incurred for the common good.

Fiscal policy can be defined as the policy under which the government uses its expenditure and to revenue programmes to produce desirable effects.

According to G.K. Shaw, "We define fiscal policy as any decision to change in the level, composition or timing of government expenditure or change in burden, structure and frequency of the tax payments."

A tax is said to be progressive when the rate of tax increases as the taxpayer's income increases.

1. A progressive tax is one in which the tax rate rises in proportion to the taxpayer's income. In this tax system, the tax rate increases with each rise in income. In other words, lesser income is taxed less, and higher income is taxed more.
2. A progressive tax takes a bigger percentage of a person's income as their income increases. Individuals earning less than 5 lakh per year may be taxed at 10%, while those earning less than 10 lakh per year may be taxed at 30%, and so on.
3. In the case of progressive taxation, the tax burden increases as income rises, not just in absolute terms (total tax amount) but also as a percentage of income.

Indirect taxes are those taxes in which the burden of tax shifts from the payer to the bearer. For example, in the case of sales tax, the seller is liable to pay the tax; however, the burden of bearing the tax falls on the customer. The seller collects the tax from the customer and pays it to the government.

According to Prof. Dalton, An indirect tax is imposed on one person but paid partly or wholly by another