Difference Between Direct And Indirect Taxes In Pakistan

Tax is categorized into two main categories or types such as direct Taxes and Indirect Taxes. It is the financial obligation of every citizen of a state. Taxes are also referred to the biggest source of revenue for the government. Direct taxes are levied directly on the income of someone who pays it whereas the indirect taxes are paid indirectly by the taxpayers. There is a huge difference between both direct and indirect taxes which we are going to describe below in detail. Keep reading this article until the end will surely help you. It is all about Difference between Direct and Indirect Taxes in Pakistan

Direct Tax:

Income tax is said to be the tax which is levied directly on the income or profits of the person who pays it, rather than on goods and services. Direct taxes are usually based on the ability to pay principle. We can say that the basic or main purpose of the direct tax is to redistribute the wealth of nation within the boundaries of the country. Direct taxes are not passed to the different person or entity as compared to indirect taxes. Direct taxes are progressive I nature because its purpose is to redistribute the wealth among the nation.

Indirect Tax:

Indirect tax is a type of tax which is paid indirectly by the taxpayer. These taxes are shifted from one taxpayer to another taxpayer. It is levied on goods and services which ultimately increase the price of goods and services. Indirect taxes are usually levied equally upon all taxpayers irrespective of their income as compared to direct taxes. Indirect taxes are considered regressive because all rich and poor taxpayer have to bear the burden of the same value of tax on goods and services. Indirect taxes are the major source of government revenue in Pakistan. For more detail must read the below-listed key differences between direct taxes and indirect taxes.