KIRANKUMAR BATTUR

TOPIC : DIRECT TAXATION

 DIRECT TAXSATION :

• Meaning :
Direct tax is a tax that a person or organization pays directly to the entity that imposed it.

• Direct taxes are imposed on people’s income or wealth, and the profit of firms.
• Some of the income is taxed directly by employers ,while some is charged based on the annual “
tax return” .
• In tax there are 2 types of taxes one is direct taxes and indirect taxes.
• Types of direct taxation :
1. Income tax :
it is based on one’s income. A certain percentage is taken from a worker’s salary, depending
on how much he or she earns. The good thing is that the government is also keen on listing credits
and deductions that help lower one’s tax liabilities.
2. Transfer taxes
The most common form of transfer taxes is the estate tax. Such a tax is levied on the
taxable portion of the property of a deceased individual, including trusts and financial accounts. A
gift tax is also another form wherein a certain amount is collected from people who are transferring
properties to another individual.
3. Entitlement tax
This type of direct tax is the reason why people enjoy social programs like medicare,
medicaid, and social security. The entitlement tax is collected through payroll deductions and is
collectively grouped as the federal insurance contributions act.
4. Property tax
Property tax is charged on properties such as land and buildings and is used for
maintaining public services such as the police and fire departments, schools and libraries, as well as
roads.

5. Capital gains tax

This tax is charged when an individual sells assets such as stocks, real estate, or a
business. The tax is computed by determining the difference between the acquisition amount and
the selling amount.
• Advantages of direct tax :
1. Promotes equality
Since direct taxes are based on the ability of a person to pay, it promotes equality among
payers and citizens. Every person is charged a different amount, depending on how much they
make.

2. Promotes certainty
The good thing about direct taxes is that they are determined and made final before they are
even paid. In the case of income tax, the annual tax is the same every year as long as the salary
does not change.
3. Promotes elasticity
Taxes are the earnings of the government, and when they fluctuate, the earnings also change.
They can go higher or lower.

4. Saves time and money

The government does not need to spend on the collection of taxes because they are
already taken right at the source of the income. Some companies use automtic payroll deduction
system payroll , which help save time and money.
• Objectives of direct taxation :

1. Economic development
2. Full employment
3. Price stability
4. Control of cyclical fluctuations
5. Reduction of BOP difficulties
6. Non-revenue objective
thank you