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Which of the following statement(s) is/are correct about Direct Taxes? I. Direct taxes consist of taxes on incomes of individuals. II. Income tax is one of the direct taxes.

Which of the following statement(s) is/are correct about Direct Taxes? I. Direct taxes consist of taxes on incomes of individuals. II. Income tax is one of the direct taxes. Correct Answer Both I and II

The correct answer is Both I and II.

Key Points

  • A direct tax is paid by an individual or organization to the entity that levied the tax.
    • The Central Board of Direct Taxes deals with matters related to levying and collecting Direct Taxes and formulation of various policies related to direct taxes.
    • A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets, FBT, Gift Tax, Capital Gains Tax, etc. 

Additional Information

  • An indirect tax is a tax that is levied upon goods and services before they reach the customer who ultimately pays the indirect tax as a part of the market price of the good or service purchased.
  • Indirect tax such as sales tax, a specific tax, value-added tax (VAT), or goods and services tax (GST) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax.
  • ​Goods and Services Tax -
    • The GST is an indirect tax that replaced many indirect taxes such as excise duty, Value added tax, and service taxes in India.
    • In India, GST Bill was first introduced in 2014 as The Constitution (122nd Amendment) Bill.
    • The Goods and Services Act was passed in parliament on 29th March 2017 and came into effect from 1st July 2017

Related Questions

Which of the following components are true about tax planning?
1. Tax planning is the process of analyzing a financial plan or a situation from a tax perspective.
2. The objective of tax planning is to make sure there is tax efficiency. With the help of tax planning, one can ensure that all elements of a financial plan can function together with maximum tax-efficiency.
3. Reducing tax liability and increasing the ability to make contributions towards retirement plans are critical for success.
4. Tax planning comprises various considerations such as size, the timing of income, timing of purchases, and planning are concerned with other kinds of expenditures.
5. The chosen investments and the various retirement plans should go hand-in-hand with the tax filing status as well as the deductions in order to create the best possible outcome.
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