Explain the basis of classifying taxes into direct and indirect tax. Give two examples of each.

Solution:

Taxes are classified into direct and indirect on the basis of  'final burden'.
Direct Tax: Where final burden of tax is borne by the person on whom it is imposed is classified as Direct Tax. Example: income tax and wealth tax.
Indirect Tax:
Where final burden of tax can be shifted to other persons on persons other than on whom imposed called Indirect Tax. Example: sales tax and goods and services tax.

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