Personal Saving can be obtained even without taking into account the Indirect Tax. Explain How.

Ans: Personal Saving Remittance to Foreign.

Personal Disposable Income Consumption Interest paid

Personal Saving means saving done by an individual or the families. Consumption Tax in the above equation or function is a kind of indirect tax. Indirect tax is the tax in which the burden of the tax falling on a person and the taxpaying person are not the same, ex- consumption tax, excise tax, sales tax, entertainment tax etc. Consumption tax in the above equation is an indirect tax. If the Consumption done by the people is taxed, and not the income, it would encourage both work and capital formation, but will discourage the consumption among the masses. Taxing consumption will encourage work and capital formation because people generally do not invest the whole amount in consumption of something and they generally save. The Consumption Tax is deducted while calculating the Personal saving because once its already included and including it for the second time will increase the price of the goods and services. The benefit of the consumption tax is that, it would almost raise the saving rate. The objection to a consumption tax based on some economics is that it would require a higher tax rate in order to raise the same revenue as an income tax that includes capital income. For this reason, a consumption tax would be less neutral between work and leisure than the current income tax. This would cause people to work less, and would increase the deadweight loss from the tax wedge on labour income. So this could be summed up as Personal saving can be obtained even without taking into account the indirect tax (Consumption Tax).

Chirag M Ambani Sec A 11BSP1353