Tax | Meaning and Definition

The government collects taxes from the eligible citizens of a country to run a country efficiently and judiciously. No matter where we reside, paying taxes is a crucial responsibility for every one of us. Taxes can be collected in different forms, such as central government taxes, state taxes, indirect taxes, direct taxes, and so on.

Tax refers to a compulsory fee levied on an organization or an individual by the government to amass revenue for furnishing the country with advanced infrastructure, providing facilities, and other public works. The fund that is gathered is then utilized to invest in several public expenses. A person who defers the filing and payment of taxes due on him/ her gets to bear serious consequences under defined regulations.

Types of taxes

Taxes are paid in various forms and can be classified further into direct and indirect taxes relying on the manner in which they are reimbursed to the tax authorities. Let’s ys hash out these in detail:

•   Direct tax: Direct tax is paid directly by the taxpayer to the government. The typical examples of this type are Wealth Tax and Income Tax. Since direct taxes are directly correlated to the wealth or income of taxpayers who are registered, it is comparably easy to estimate tax earning from direct taxes from the perspective of the government.
•   Indirect tax: The collection method and the indirect taxes themselves are slightly different from direct taxes. These taxes rest on consumption and are applied to services or goods when they are sold or bought. This tax is paid by the seller of services or goods to the government.