Question : What is the difference between a direct tax and an indirect tax?
Option 1: A direct tax is a tax on goods and services, while an indirect tax is a tax on income
Option 2: A direct tax is a tax on income, while an indirect tax is a tax on goods and services
Option 3: A direct tax is a progressive tax, while an indirect tax is a regressive tax
Option 4: A direct tax is a regressive tax, while an indirect tax is a progressive tax
Correct Answer: A direct tax is a tax on income, while an indirect tax is a tax on goods and services
Solution : The correct answer is (b). A direct tax is a tax on income, while an indirect tax is a tax on goods and services.
A direct tax is a tax that is imposed directly on individuals or entities based on their income, profits, or wealth. Examples of direct taxes include income tax, corporate tax, and property tax. Direct taxes are typically calculated and paid directly by the taxpayer to the government.
On the other hand, an indirect tax is a tax imposed on goods and services at the point of consumption. It is not directly levied on individuals or entities based on their income or wealth. Instead, the tax is included in the price of the goods or services, and the burden of the tax is ultimately passed on to the consumer. Examples of indirect taxes include sales tax, value-added tax (VAT), excise tax, and customs duties.
