Question

Differentiate between direct and indirect taxes.

With reference to the taxation policy.

Mention three differences between direct taxes and Indirect taxes.

How are direct taxes different from indirect taxes? 

Answer 1

Sr. No.	Direct Taxes	Indirect Taxes
1.	Direct taxes are imposed on the income and property of people.	Indirect taxes are imposed on goods and services.
2.	They are directly paid by the government to the person on whom it is imposed.	They are paid by the government, but their burden is borne by another person.
3.	They cannot be shifted onto others.	They can be shifted to others.
4.	These taxes are linked to people and hence cannot be escaped.	These taxes are linked to particular transactions and hence can be avoided by avoiding entering into the particular transaction.
5.	They cause a lot of inconvenience to the taxpayers, as they are painful to the taxpayer.	Indirect taxes are more convenient to pay than direct taxes.
6.	Direct taxes have limited coverage, as they are paid only by those whose income is taxable.	Indirect taxes have wide coverage, as everyone who buys goods and services.
7.	Income tax and corporation tax are examples of direct taxes.	GST, excise duty, customs duty, etc., are examples of indirect taxes.