SSC Selection Post 2025 PYQ — Question 5

Correct Answer

Corporate Income Tax

Explanation

A direct tax is a tax that an individual or organization pays directly to the government. In the case of Corporate Income Tax, the tax is levied directly on the profits earned by a corporation. Unlike indirect taxes, the burden of a direct tax cannot be shifted to another person or entity. The taxpayer is directly responsible for filing returns and paying the tax amount to the tax authorities.

Key Points

Direct Tax: The burden of the tax falls directly on the person or entity on whom it is imposed. Examples include Personal Income Tax, Corporate Tax, and Wealth Tax.

Indirect Tax: These taxes are levied on goods and services rather than income or profit. The tax burden is passed on to the final consumer. Examples include GST, Customs Duty, and Excise Duty.

Economic Impact: Direct taxes are often progressive, meaning the rate increases as the income or profit of the taxpayer increases, helping to reduce wealth disparity.

Important Questions and Answers

Question: Why is GST classified as an indirect tax?

Answer: GST is considered an indirect tax because it is collected by intermediaries, such as manufacturers or sellers, from the consumer, who ultimately bears the cost of the tax.

Question: Can direct taxes be passed on to others?

Answer: No, the defining characteristic of a direct tax is that the liability and the burden of the tax fall on the same individual or entity.