Question

Classify the following as direct and indirect taxes : (i) Income tax `" " ` (ii) Entertainment tax `" "` (iii) Profit tax `" " ` (iv) Wealth tax .

Answer 1

Direct taxes : (i) , (iii) , (iv) . They are direct taxes as their burden cannot be shifted .i.e., their impact and incidence are on the same person or firm.
Indirect taxes : (ii) This is an indirect tax as its burden can be shifted , i.e., impact and incidence are on different persons.