The
term Direct Tax refers to the tax paid directly to the government by the person
on whom it is imposed. It cannot be
shifted to another individual or entity. The individual or organization upon
which the tax is levied is responsible for the fulfillment of the tax payment. Alternatively, it can be said that it
is a kind of tax that is taken away from one's salary or wages. Some of the
examples of direct taxes include capital gains tax, personal income tax, tax on
corporate income, and tax incentives.
It can be defined from two different prospective:
a) From colloquial point of view
b) From U.S Constitutional law point of view
Ø In the
former case, Direct tax is defined as a charge levied directly to the taxpayer
by the government. Examples include corporate taxes, income taxes and transfer
taxes. The transfer taxes include estate tax and gift tax.
Ø While
the latter defines it as the charge on property by reason of its ownership.
In other words we can say a direct tax is a tax
that is levied upon an individual person or on property. Certain
taxes may fall under indirect tax categories in the constitutional sense, but
fall under direct tax category in the colloquial sense
In India, all the direct tax related matters are taken care
by the Central Board of Direct Taxes (CBDT), which is a significant division of
the Department of Revenue, Ministry of Finance, Government of India.
Any person who is an Indian resident or a non resident but
has an Indian source of income is taxable. However if a person has a foreign
source of income but is an ordinary resident of India, the person is taxable (Income
tax) too.
Advantages
and Disadvantages of Direct Taxes:
·
Advantages:
1.
Control of inflation,
2.
Social equality (as it is based on the ability
to pay) and certainty
·
Disadvantages:
1.
Tax evasion and less coverage but these
disadvantages are due to administrative inefficiencies and difficulties.
2.
Direct taxation is important aspect of modern
financial system.
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