The Different Types and Advantages Of Direct Taxation

Have you ever thought why your income tax rates may vary from someone else’s whom you may know? So, that’s because it is a form of direct tax. What’s a direct tax? Well, direct taxation in India or any other country is the taxes that you pay directly to the government. The amount of direct tax varies from person to person. It depends on your total income and also your ability to pay taxes. So what are the advantages of direct taxes? What are the features of direct taxes? We’ll see that later on in the 7_How to become a smart investor in the retail trading profession.

There are two different types of taxes that you have to pay- Direct taxes and Indirect taxes. Indirect taxes are always included in the MRP(maximum retail price) of any product or service. These taxes are hidden, and you don’t need to pay them separately. But, on the other hand, direct taxes, as stated above, depending on your income.

So, let us see what are the different forms of direct taxation in India:

Capital Gains Tax

Capital gains tax is imposed on the positive difference between the sale price of the asset and its original purchase price. Long-term capital gains tax is imposed on the profits from the sale of assets held for more than a year.

Corporate Tax

A corporate tax, also called corporation tax or company tax is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities.

Security Transaction Tax

Securities Transaction Tax is a tax payable in India on the value of securities transacted through a recognized stock exchange.

Income Tax

An income tax is a tax imposed on individuals or entities that varies with respective income or profits. Income tax generally is computed as the product of a tax rate times taxable income. Taxation rates may vary by type or characteristics of the taxpayer.

These are some of the main sources of income for the government. Without these taxes, the economy of any country would come crashing down to earth. These taxes allow the government maintains a smooth economic growth of our country every single year. There are quite a few features of direct taxes. So, let’s see a few of the advantages of direct taxes:

Equality among the citizens

Direct taxes like income taxes are calculated based on your income. This means that the rich have to pay a bigger amount of tax than the poor. This promotes equality among citizens.

Protects the economy

The government can increase the direct tax rates on certain items during inflation. This brings down the demand for those products. Thus it acts like an anti-inflation measure.

Easy to collect

Direct taxes such as income taxes and many more are directly collected from your salary. This makes the process of tax collection extremely hassle-free.

Creates more responsible citizens

You are consciously paying direct taxes. This makes you question and criticizes whatever the government does with your money. Thus, making you a more responsible citizen.

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