Direct and Indirect Taxes Explained
Taxes in India are broadly classified as direct taxes and indirect taxes, based on who bears the burden.
Taxes in India are broadly classified as direct taxes and indirect taxes, based on who bears the burden.
Direct taxes
Direct taxes are levied directly on income or wealth and cannot be shifted to another person — for example, income tax and corporation tax. They are generally progressive.
Indirect taxes
Indirect taxes are levied on goods and services and can be passed on to the consumer — for example, GST and customs duty. They tend to be regressive as they fall equally on all consumers.
Why it matters for UPSC
The direct/indirect classification and progressive vs regressive nature are standard Economy Prelims facts.
Practise related UPSC PYQs
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Practise PYQs →Frequently asked questions
What is a direct tax?
A tax levied directly on income or wealth whose burden cannot be shifted, such as income tax.
Are indirect taxes progressive or regressive?
They tend to be regressive, as they apply equally to all consumers regardless of income.