SSC CHSL 2025 PYQ — Question 90

The correct answer is Option 1: Higher income corresponds to a higher tax rate.
Explanation:
Progressive Taxation is a tax system in which the tax rate increases as the income of an individual or entity rises. Its primary objective is to reduce economic inequality within society, as it places a greater financial burden on high-income earners and a lighter burden on low-income earners. Income Tax in India is a prime example of this system.
Additional Facts:
Other Major Types of Taxes:

• Regressive Tax: In this system, the tax burden on low-income earners is relatively higher than that on high-income earners (e.g., the impact of indirect taxes or GST on daily necessities).
• Proportional Tax: In this system, the tax rate remains constant for everyone, regardless of whether their income is low or high. It is also referred to as a 'Flat Tax'.
• Digressive Tax: This is a hybrid of progressive and proportional taxation. In this system, the tax rate increases up to a certain threshold and then stabilizes.

Potential Questions for Upcoming Exams:
Question: What type of tax is 'Income Tax' in India?
Answer: Direct, Progressive, and Digressive (initially).
Question: Which tax system is considered most effective in reducing income inequality?
Answer: Progressive Taxation.
Question: Which central board in India is responsible for the collection of direct taxes?
Answer: Central Board of Direct Taxes (CBDT).