Following are the chief advantages of direct taxes- (1) Equitable. Thus, with the imposition of income tax, rate of return on investment is reduced which induces the individuals to substitute present consumption for saving and investment. They Cause Less Squabbles They are not collected with force and therefore, cause no or less friction. What is a Mentor and How Can You Benefit From Having One? A high level of taxation discourages investment and enterprise in the country. This is arbitrary. In the case of a direct tax, a person knows that he is paying a tax, he feels conscious of his rights. One of the biggest disadvantages of direct taxes – especially high direct taxes is the fact that it has the tendency to discourage people from working hard. They include: 1. This makes the taxing agency more accountable to the people whom it taxes, since the … Direct taxes are progressive taxes. The rate of taxes depends upon the whim of the Finance Minister. Equity. But this isn’t the case in the indirect tax where the tax payer is not even aware that he or she is paying it and therefore doesn’t have any grudges when making the payment. Following is a list of the top ten benefits of owning and operating a direct sales business. I he tax-payers do not feel the burden much partly because an indirect tax is paid in small amounts and partly because it is paid only when making purchases. One of the biggest disadvantages of direct tax is that it encourages people not to work hard since direct taxes are normally progressive in nature, meaning the more income you make, the … The direct tax is paid directly by the organization or a person to the entity that has obligatory the payment. An applicant must establish a business purpose for seeking a direct pay permit and must demonstrate how the direct payment will benefit tax … Direct taxes are paid directly to the government by the individual taxpayer – usually through “pay as you earn”. The yield from income tax or death duties can be easily increased by raising their rate. An applicant for a direct pay permit must apply in writing to the tax commissioner. It also states the advantages of direct taxes as well as the disadvantages of indirect taxes. There is social justice in the allocation of tax burden in case of direct taxes as they are based on the principle of ability to pay. Advantages of Direct Tax. This is possible simply because he knows in advance how much he is going to pay as tax and when he will pay the tax. He ‘squeaks’ when a lump sum is taken out of his pocket. As an Amazon Associate I earn from qualifying purchases. Another virtue of direct taxes is that they are very productive. The Complete Guide on Using Kratom For Sleep, 7 Indispensable Pieces of Advice for New Parents, This Is How to Clean a Boat the Right Way, 5 Reasons Why Custom T-Shirts Are Great for Marketing, What to Do If Your Home Has Basement Water Damage. Direct Taxation Advantages Direct taxes tend to be more predictable than indirect taxes. Direct taxes have some merits and so have the indirect taxes. (vi) A means of developing civic sense. Here, the Direct Tax code is explained in this section by delving into its key features. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. 5 MERITS OF DIRECT TAX Following are the important advantages or merits of Direct Taxes:-  Equity There is social justice in the allocation of tax burden in case of direct taxes as they are based on the principle of ability to pay. The employer acts as an honorary tax collector. This has come up on the back of … For example, direct taxes collected through the. This means great economy. (3) Possibility. I participate in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com. A progressive tax sees the tax burden falling heavily more on the rich than on the poor. Advantages of Direct Tax. ), Becoming Your Own Boss: 5 Unique Online Business Ideas, How to Create Luxury Brands in Your Area of Expertise, Every Office Safety Tip You May Not Know During COVID-19, state owned enterprises advantages disadvantages, advantages and disadvantages of corporal punishment in schools. the greater is the burden of direct tax on him. How does direct tax cause a disincentive to work hard? If the taxes are too heavy, they discourage saving-sand investment. Progressive taxes have so many advantages. Direct tax gives mental pinch to the taxpayers as they have to curtail their income to pay to the government. 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