Question

Income Tax is a type of ________.

• A. Indirect Tax
• B. Direct Tax
• C. Excise Tax
• D. None of the above

Hint:

Direct Tax: Burden cannot be shifted (Income Tax, Wealth Tax).
Indirect Tax: Burden is shifted (GST, Customs Duty).

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Taxes are classified as direct or indirect based on whether the "impact" (legal liability) and "incidence" (monetary burden) fall on the same person.
Step 2: Detailed Explanation:
1. Direct Tax: The burden of the tax cannot be shifted. The person who is legally responsible for the tax pays it directly from their pocket to the government. Income tax is levied on the earnings of an individual; the individual cannot ask someone else to pay their income tax.
2. Indirect Tax: The burden can be shifted. For example, a shopkeeper pays GST to the government but recovers it from the customer.
Step 3: Final Answer:
Since the burden of income tax stays with the person earning the income, it is a Direct Tax.