1.Meaning of direct and indirect tax
On the income and profits of the taxpayer, a tax known as direct tax is imposed. A tax that you pay directly to the government on your income is known as a direct tax.
Indirect Tax is an imposed on the goods and service, not on income and profits by the government. It is imposed on the Manufacturer of goods or services provider but is shifted to the final consumer of the goods or services by growing the cost of the goods and services.
2. Applicability of the Tax
Direct Taxes are relevant to the income and profits.
Indirect taxes are imposed on the goods and services.
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3. collected and paid taxes
Individuals, HUF, businesses, companies, etc. all levy and pay direct tax.
Although the final consumer of the goods or services is responsible for paying indirect tax, the manufacturer of the goods or services is still subject to it.
4. Investments and Savings
The government must get a percentage of income from direct taxes, which might cause savings and investments to decline.
Indirect taxes encourage saving and reduce consumption.
Direct taxes have the potential to lower inflation.
Indirect taxes could make inflation worse.
6. Office expenses
Direct taxes entail more administrative expenses and greater exclusions.
Because indirect taxes are easy to collect and are consistently collected, they have lower administrative costs.
Taxes are converted
The division of taxes is actually fairly ambiguous. Indirect taxes frequently overlap with direct taxes, and vice versa. I’ll give you a few examples:
Income tax is seen as a direct tax that must be paid by the person who receives the income. Salary workers in India do not, however, pay their taxes to the government directly. His taxes are withheld at source (TDS) and remitted to the government by his company. After TDS, the employee simply receives their salary.
Read more: why direct and indirect tax are necessary ?