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Question

Give the differences between direct tax and indirect tax.

OR

Difference between capital receipts and revenue receipts.

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Solution

Direct Tax: When the liability to pay the tax and the burden of the tax falls on some person, it is called a direct tax.
e.g., Income tax, wealth tax, corporate tax, gift tax, interest tax. These are also known as progressive taxes.

Indirect Tax: When liability to pay a tax is on one person and the burden of the tax falls on another e.g., goods and services tax and customs duty etc. These are also known as regressive in nature because the burden is more on the poor as compared to rich.

OR

Difference between Revenue and Capital Receipts

Revenue Receipts Capital Receipts1.It does not lead to creation of liability1.It leads to creation of liability or reduction of assets. or reduction of assets. 2. Government is under no obligation to2.Government is under obligation to return the return the amount. amount along with interest.3.It is recurring in nature.3.It is non-recurring in nature.4.Example : Tax4.Example : Receipt from disinvestment.


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