Question

Distinguish between Direct tax and Indirect tax.

Answer 1

Direct Tax	Indirect Tax
(a) A direct tax is paid by a person on whom it is legally imposed. It cannot be transferred.	(a) Indirect tax is imposed on one person, but paid by the other.
(b) e.g. Income Tax, Wealth Tax, etc.	(b) Sales tax, excise duty, service tax are examples of indirect tax.
(c) Impact and incidence are on the same person i.e., the tax payer is also tax bearer. Tax burden cannot be shifted.	(c) The impact and incidence may be on different persons i.e., there is a shifting of the tax burden.
(d) Direct tax is either on the person's income, wealth or property.	(d) Indirect tax is on commodities and services.
(e) This tax is paid at the time of earning income.	(e) This tax is paid at the time of spending income.