Types of Direct Tax

Types of Direct Tax

Types of direct tax include progressive tax, regressive tax, Digressive tax, proportional Tax.

1.    Progressive Tax

Tax which increases with the increase of income are regarded as progressive tax. It is based on the principal equality. Under progressive taxation system income is divided into different slabs and there is different tax rate for each slab.

2.    Regressive Taxation

Regressive taxation the tax rate falls with increase of income. It means this taxation system put more burdens on the poor and has more relief for the rich people.

3.    Digressive Taxation

Under digressive taxation system the tax rate does not increase proportional to the income increase , in this tax system , tax rate increase up to certain income level and then it become fixed .

4.    Proportional Taxation

Under proportional taxation everyone will pay tax proportional to its income. It means there is little relief for poor people and everyone in the society will pay the tax with same rate. It is kind of fixed rate of tax for all income group.