A direct tax is an equitable tax. Through it the rich can be made to pay more than the poor. In case of necessity, the poor people can be granted exemption from payment of such taxes. A direct tax is equitable in the sense that it is levied according to the taxable capacity of the people.

What are advantages of direct tax?

The cost of collection of direct taxes is low. They are mostly collected “at the source”. For instance,-the income tax is deducted from an officer’s pay every month. This saves expense.

What is the demerit of direct tax?

Demerits of direct taxation are: 1. Pinching 2. Inconvenient 3. Evasion and Corruption 4.

What are two merits of indirect tax?

(a) Convenience: Indirect taxes are less inconvenient and burdensome to the taxpayer than the direct taxes. Since taxes are included in the price of the taxed commodity the taxpayer does not feel the burden of the taxes. It is convenient also because these taxes are not paid in lump-sum amount unlike direct taxes.

What are the merits and demerits of excise duty?

Merits of Excise Duty or Importance of Excise Duty

• Major source of Government revenue.
• Psychological advantages to tax payer.
• Easier to collect.
• Balanced Industrial Growth.
• Less collection cost.
• Tax evasion difficult.
• Control over wasteful expenditure.

What are the merits and demerits of direct taxes?

Let us make an in-depth study of the merits and demerits of direct taxes. 1. Equity: A direct tax is an equitable tax. Through it the rich can be made to pay more than the poor. In case of necessity, the poor people can be granted exemption from payment of such taxes.

Why are direct taxes important to the government?

(iii) Direct taxes are easy to collect. Consider, for example, the PAYE system which is used to collect income tax from most wage and salary earners. (iv) Direct taxes are important to the government’s economic policy. If the government is fighting inflation it can impose, for example, high levels of income tax to restrict consumer demand.

How are direct taxes different from indirect taxes?

Broadly taxes are classified into two classes: 1. Direct Taxes 2. Indirect Taxes A direct tax can be defined as a tax that is paid directly by an individual or organization to the imposing entity (generally government). A direct tax cannot be shifted to another individual or entity.

What are the advantages of direct tax in India?

The main advantages of Direct Taxes in India are mentioned below: Economic and Social balance: The Government of India has launched well-balanced tax slabs depending on an individual’s earnings and age. The tax slabs are also determined based on the economic situation of the country.