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What is direct tax and Indirect Tax in India

23rd February 2026

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Direct taxes are taxes levied directly on individuals and entities and are based on their income, profits, or wealth. The burden of direct taxes cannot be shifted to someone else. Examples of direct taxes in India include:

Income Tax: Levied on the income earned by individuals, Hindu Undivided Families (HUFs), companies, firms, and other entities during a financial year.

Corporate Tax: A tax levied on the profits earned by companies operating in India.

Capital Gains Tax: Tax levied on the profit earned from the sale of capital assets such as property, stocks, bonds, etc.

Wealth Tax (Abolished): Previously, wealth tax was levied on the net wealth of individuals, including assets such as land, buildings, jewelry, cars, etc. However, it was abolished in the Finance Act, 2015.

Direct taxes are progressive in nature, meaning that the tax rate increases as the income or profit increases.

1.Direct Taxes:

Indirect taxes are taxes levied on goods and services, and the burden of these taxes can be shifted from one individual to another. In other words, the person who ultimately bears the burden of the tax may not be the one who initially pays it. Examples of indirect taxes in India include:

Goods and Services Tax (GST): Implemented in 2017, GST is a comprehensive indirect tax levied on the supply of goods and services at each stage of the supply chain. It has replaced various indirect taxes such as VAT, central excise duty, service tax, etc.

Customs Duty: A tax imposed on the import and export of goods into and from India. It is levied on the value of the goods along with other applicable duties and charges.

Excise Duty: A tax levied on the manufacture or production of goods within the country.

Service Tax (Replaced by GST): Previously, service tax was levied on certain specified services provided by service providers.

Indirect taxes can be regressive, meaning that they tend to have a greater impact on individuals with lower incomes as they consume a higher proportion of their income on taxable goods and services.

Both direct and indirect taxes play a crucial role in the Indian economy by providing revenue to the government for financing various developmental and welfare activities.

2.3. Indirect Taxes:

Owen Christ

Harry Ferguson is an author, blogger, and designer living in a suburb of Washington, DC. When he’s not designing, blogging, or writing, Ferguson can be found with his head in a book or pinning like a madman.

Edna Watson

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November 16, 2018 at 4:31 am
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Owen Christ

Thanks for always keeping your HTML Template up to date. Your level of support and dedication is second to none.

November 19, 2018 at 4:31 am
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James Scott

November 13, 2018 at 4:50 am

Thanks for always keeping your HTML Template up to date. Your level of support and dedication is second to none.

February 12, 2018 at 6:31 am
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1. Harry Ferguson
  
  February 13, 2019 at 4:51 am
  
  Thanks for always keeping your HTML Template up to date. Your level of support and dedication is second to none.
  
  November 13, 2018 at 4:31 am
  | Reply