What is Direct Tax and Indirect Tax

Tax is one of the primary sources of income for the government of any country. That is how the government funds infrastructure, education, and other social services. Paying taxes on time is every citizen’s duty. 

Direct and Indirect Taxes in India

Broadly, taxes can be divided into two types - direct and indirect. So if you want to know ‘what is direct and indirect tax’, read on. You will also find some examples of direct and indirect tax, which will help you understand them in greater detail.  

Direct Tax

As the name suggests, direct taxes are paid directly to the government by the public. 

Disadvantages of Direct Tax

There are certain disadvantages to direct tax. These are -

Indirect Tax

Indirect taxes are levied on goods and services availed by consumers. 

Disadvantages of Indirect Tax

Just like direct tax, indirect taxes too have some disadvantages. They are-

Examples of Direct and Indirect Taxes in India

Now that it is clear what each type of tax means, let’s take a look at some examples of direct and indirect tax. 

The following are the examples of direct taxes - 

On the contrary, the following are some indirect taxes in India-


It is the responsibility and duty of every citizen of the country to pay taxes. Taxes are immensely important for the economy and nation building. The government uses the tax money eventually to invest in defense, healthcare, and education to make the country prosperous. 

So, never forget to pay your taxes in full!

What is Direct Tax and Indirect Tax - Related FAQs

Both VAT and GST are indirect taxes. Nowadays, GST has completely eliminated VAT, and it is only levied on some products containing alcohol. 

TDS stands for Tax Deducted at Source and it is an indirect type of tax.

Both direct and indirect taxes need to be paid by everyone residing in a country. It is everyone’s responsibility and duty to pay their taxes on time.

The main difference between the direct and indirect tax is the way in which they are paid. Direct tax is paid once a year by the taxpayer, after calculating it, and submitting the paperwork. Whereas indirect tax is paid at the time of buying any product or services.

Indirect taxes are paid by every individual regardless of their income strata. But direct taxes are paid only by people whose income is above a specific slab, as mentioned by the IT department.


Was this information useful?

300 characters allowed (alphanumeric and special characters such as comma, full stop, @, ", &)

Thank you. Your feedback is important to us.


Apply for personal loan

Green Tick Success

Thank you for your interest!

We will reach out to you shortly