Question

With suitable examples, distinguish between Direct taxes and Indirect taxes.

Answer 1

S. No.	Basis of Difference	Direct Tax	Indirect Tax
1.	Meaning	The tax burden falls on the same person on whom the tax is lawfully imposed and who pays it.	This kind of tax is the responsibility of one individual, but he transfers all or part of the tax liability to another.
2.	Nature	It has a progressive aspect, meaning that the real burden falls more heavily on the rich than the poor.	Since the real burden falls more on the poor and less on the rich, it is regressive.
3.	Imposition	It is imposed on income, wealth, and profits.	It is imposed on goods and services.
4.	Liability	The individual on whom the tax is imposed is responsible for its payment.	The benefit recipient is responsible for the payment, not the person it is imposed on.
5.	Evasion	Tax evasion is possible.	Taxes are incorporated in the price of products and services, making evasion unlikely.
6.	Inflation	Direct taxes help to reduce inflation.	Indirect taxes boost inflation.
7.	Burden	It cannot be transferred to another person.	It can be transferred to another person.
8.	Examples	Income tax, Wealth Tax, Gift Tax, Corporate Profit Tax.	Goods and Services Tax (GST).