DIRECT TAXES:-

 Income tax, corporation tax, and wealth tax ar major direct taxes.
 Central government revenue is about 56% of total tax revenue.
 Direct taxes ar paid on to the govt by the person vulnerable to pay tax.
 Direct taxes square measure those that the payer pays directly from his
income/wealth/estate etc.
 Broadly speaking, direct taxes are those which are paid after the income reaches the
hands of the taxpayer.
 Important direct taxes are Income Tax, Gift tax, Wealth tax, Expenditure tax, etc

INDIRECT TAXES:-

 Central excise tax, Central Excise, Service Tax, and Customs Law are major indirect
taxes.Besides these, there square measure another indirect taxes, like duty, entry tax,
luxury tax, etc
 Central government revenue is about 44% of total tax revenue.
 Indirect taxes square measure paid to the govt by one person, however he recovers a
similar from another person. Thus, the person who bears the tax burden(the ultimate
‘consumer’) pays it indirectly to the government through some other person.
 .Indirect taxes square measure those that the payer pays indirectly i.e.while buying
merchandise and commodities, paying for services, etc.
 Indirect taxes area unit paid before the goods/services reach the remunerator.
 Important indirect taxes are Central Excise (Duty on manufacture), Customs (duty on
imports and exports); Sales tax; Octroi, Entry Tax, Service Tax, etc.

Advantages of Direct taxes:-

 Psychological resistance- it's psychologically terribly troublesome for someone to pay
some quantity once it's received in his hands. Hence, there is psychological resistance
[This is the reason why even the Income-tax act is widening the scope of ‘Tax
Deduction at Source(TDS) and TCS. Thus, an instantaneous tax is born-again to
associate degree taxation.]
 Tax evasion is comparatively more indirect taxes where it is on the unorganized sector
since control is difficult.
 Collection cost of direct taxes as a percentage of tax collected is higher in indirect
taxes compared to direct taxes.
 Direct taxes will management such wasteful expenditure solely indirectly by heavy
higher-income cluster folks.
 Government will judiciously use the direct taxes to support development in
fascinating areas, whereas discouraging it in others, e.g tax incentives for industries in
backward areas, infrastructure development, etc.
Advantages of Indirect taxes:-
 Psychological advantage- Since the worth of trade goods or service is already inclusive of
indirect taxes, the client i.e.the ultimate remunerator doesn't feel a right away pinch
whereas paying indirect taxes, and hence, resistance to indirect taxes is far less compared
to resistance to direct taxes.
 Tax evasion is comparatively less in indirect taxes in organized sectors due to the
convenience of control.
 Collection cost of indirect taxes as a percentage of tax collected is lower in indirect taxes
compared to direct taxes.
 Government can levy higher taxes on luxury goods, which reduces wasteful expenditure.
 Government will judiciously use the indirect taxes to support development in fascinating
areas, whereas discouraging it in others, e.g., e.g. reducing taxes on goods manufactured
in tiny scale units; lowering taxes in backward areas, etc.

A disadvantage of direct taxes:-

 Indirect taxes are ‘progressive’, as they depend on paying capacity. The rich person is
taxed more compared to a poor person.
 Direct taxes do not affect the prices of goods and services.
 High-income tax rates increase tax evasion and hawala transactions.
 Direct taxes do not have such an effect.
 Direct taxes are not inflationary.

Disadvantages of indirect taxes

 Indirect taxes increase the costs of product and therefore ar typically perceived as
inflationary.
 Higher customs duty and excise duty increase the cost of modern machinery and
technology.
 High customs /excise duty will increase importation, banking industry trade, and mafia
gangs, that is harmful in some ways. Similarly, high excise duty to evasion.
 Tax on goods and services increases its prices, which reduces demand for goods and
services. Lesser demand suggests that lower growth of industrial enterprise.
 Indirect taxes don't rely upon paying capability. Since the indirect tax is uniform, the tax
payable on the commodity is the same, whether it is purchased by a poor man or a rich
person. Hence, the indirect taxes square measure termed as ‘regressive’.