“There are two things certain in life, said Benjamin Franklin once, “death and taxes".
Taxation is an essential part of our lives, shaping how governments function and providing the resources needed for public services. In India, there are two main types of taxes: direct and indirect. But what exactly are these taxes, and how do they differ? In this blog, we"ll take a closer look at the difference between direct and indirect tax. We"ll break down the concepts in simple terms, exploring their roles, implications, and how they affect individuals and businesses nationwide.
Before we delve into the differences between direct and indirect taxes, you must familiarise yourself with the basic differences between the two:
The government levies These taxes directly on individuals or entities based on their income or profits.
They are paid directly by the taxpayer to the government.
The most common example of a direct tax in India is the income tax, where individuals and businesses are required to pay a percentage of their earnings to the government.
Indirect taxes, on the other hand, are not directly imposed on individuals or businesses but are instead levied on goods and services.
These taxes are passed on to the end consumer as part of the price of the goods or services purchased.
In India, the most talked-about indirect tax is the Goods and Services Tax (GST), which subsumes many indirect taxes like service tax, excise duty, and value-added tax (VAT).
First Published: Oct 16, 2024, 16:00
Subscribe Now