What is direct taxation?

Direct taxation refers to Taxes levied on the income or wealth of an individual or company. While direct taxes are imposed on income and profits, indirect taxes are levied on goods and services. A major difference between direct and indirect tax is the fact that while direct tax is directly paid to the government, there is generally an intermediary for collecting indirect taxes from the end-consumer.

  • The simplest definition of direct tax can be derived from its name which implies that this tax is paid directly by the taxpayer to the government.
  • The most common examples of this type of tax in India are Income Tax and Wealth Tax.
  • From the government’s perspective, estimating tax earnings from direct taxes is relatively easy as it bears a direct correlation to the income or wealth of the registered taxpayers.