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Direct Tax is More Important than Indirect Tax – Discover Reasons

Most of us find the tax system as a gullible one and we feel that avoiding tax-related matters is more comfortable always. But, it is not the right thing. When you think of yourself as a responsible citizen of India, there are a few things that you cannot ignore and the tax system is one of those things. Today, we will discuss why the direct tax system is more important compared to the indirect tax system. You can consult with a tax advisor in Kolkata to widen your knowledge regarding this matter. CA Chandan Agarwal & Co. is the best place to get to know more about direct and indirect taxes and how they impact our economy. 

Why Direct Tax Is Progressive?

Moving forward to the topic of why direct tax is considered more important than indirect tax. Direct tax is the tax that is levied on the income of the people of India. Be it business income, corporate income, capital gain, and/or personal income; it does change the fact of paying your tax. On the contrary, indirect tax is collected by Goods and Services tax. 

  • According to the basic principles of economics, it is said a person who can earn more and can pay tax should pay tax for the betterment of the nation. 

  • The reason why rich people and/or higher-income group people pay more tax revenues compared to lower-income group people. Because rich people earn more and make more profit. So, indirect tax is considered progressive. 

  • While rich and poor pay the same tax when they buy goods and/or take any service. However, it is said that indirect taxes are regressive because the poor cannot afford to pay it and they find heavier on their income as they earn less. 

So, it is clear that direct tax contributes more to the government’s tax revenue. Since 2007, the Indian tax system has become progressive due to the direct tax system and it is a good sign for our nation. To know how much tax you need to pay on your income you can certainly consider contacting CA Chandan Agarwal & Co..

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