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
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 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.
Difference Between Direct And Indirect Taxes In Pakistan
Key Difference between Direct and Indirect Taxes:
Following are the main point which probably clears you a Difference Between Direct And Indirect Taxes In Pakistan
|Direct Taxes||Indirect Taxes|
|The main difference between a direct tax and indirect tax is that the burden of the direct tax is transferable||Burden of the indirect tax is not transferable|
|The nature of the direct tax is progressive||Nature of the indirect tax is regressive|
|All direct taxes are imposed on or collected from assesses||All indirect taxes are imposed o or collected from consumer by the dealer of goods and services|
|It is very easy to avoid the direct tax by hiding the exact income||Indirect taxes are not avoided because they are they are hidden in the sales price of product or services rendered|
|Direct taxes are not levied equally; it imposed on the basis of low and high income||Indirect taxes are levied equally upon all taxpayer irrespective of its low or high income.|