Direct taxes are progressive in nature. Briefly explain. - Vidyadip

Question

Direct taxes are progressive in nature. Briefly explain.

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Answer

A tax, the rate of which increases with increase in income and decreases with fall in income is called progressive tax. Direct taxes are progressive in nature. Rich people are subjected to higher rates of taxes while the poor are exempted from taxes. Example : In India, there is no tax up to annual income of ₹ $2,50,000$ but the rate of income tax increases with increase in incomes. It is $10 \%$ on incomes between ₹ $2,50,001$ and $5,00,000 ; 20 \%$ on incomes between ₹ $5,00,001$ and 10,00,000 and 30% on incomes above ₹ $10,00,000$.

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