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What are Direct Taxes & Indirect Taxes in India?

Updated on: 27 May, 2024 02:52 PM

Before discussing the Direct Taxes & Indirect Taxes in India, let us first understand what is the meaning of tax.

What is a Tax?

A tax may be defined as a “pecuniary burden laid upon individuals or property owners to support the government, a payment exacted by legislative authority. In simple words, the tax is nothing but money that people have to pay to the government, which is used to provide public services.

Taxes are broadly classified into 2 Types-

  1. Direct Taxes
  2. Indirect taxes

What is Direct Taxes?

A direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to the government by the persons( juristic or natural) on whom it is imposed. A direct tax is a tax that cannot be shifted by the taxpayer to someone else. A significant direct Tax imposed in India is income tax.

What is Indirect Taxes?

They are Transferable tax from one person to another. The entire burden of the tax is on the ultimate consumer, but the immediate liability to pay tax is on supplier of goods or services.
They are also called consumption based tax and regressive in nature because they are not burdened principle of ability to pay. All consumer including Bagger bear the burden of the tax.
Indirect taxes are levied on goods or services but not on income or property. From 1st of July 2017 all indirect taxes on goods or services or merge into one unified code called as goods and services tax.

What is the difference between Direct Taxes & Indirect Taxes?

difference between Direct Taxes & Indirect Taxes

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.