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Question
The following table indicates:
| Tax Base in ₹ | Rate of tax in % |
| 10,000 | 8 |
| 20,000 | 8 |
| 30,000 | 8 |
| 40,000 | 8 |
Options
Progressive taxation
Regressive taxation
Proportional taxation
Degressive taxation
MCQ
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Solution
Proportional taxation
Explanation:
- The table shows a proportional tax system. In this system, the tax rate stays at 8% regardless how large the tax base is (₹ 10,000, ₹ 20,000, ₹ 30,000, or ₹ 40,000).
- In a balanced tax system, everyone pays the same amount of their income, no matter how much they make. In other words, the tax rate stays the same regardless of how much cash is made or how much tax is collected.
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RELATED QUESTIONS
Match the following:
| Column I | Column II | ||
| A. | Direct tax | (i) | Tax rate increases with tax base |
| B. | Indirect tax | (ii) | Tax rate remains constant |
| C. | Proportional tax | (iii) | Imposed on goods and services |
| D. | Progressive tax | (iv) | Impact and incidence lie on the same person |
Differentiate between direct and indirect taxes.
Citing reason state the advantage of a progressive tax over proportional tax.
Citing reason state the advantage of a direct tax over an indirect tax.
Give one example of progressive tax.
Define a tax.
State two differences between income tax and commodity tax.
State the four merits of a direct tax.
State three demerits of an Indirect tax.
Explain the term Impact of a tax.
