Income tax is a type of tax that the central government charges on the income earned during a financial year by individuals and businesses. Taxes are sources of revenue for the government. The government utilizes this revenue for developing infrastructure, providing healthcare, education, subsidy to the farmer/ agriculture sector and in other government welfare schemes. Taxes are mainly of two types, direct taxes and indirect form of taxes. Tax levied directly on the income earned is called a direct tax, for example, Income tax is a direct tax. The tax calculation is based on the income slab rates applicable during that financial year.
Indirect taxes are basically taxes that can be passed on to another entity or individual. They are usually imposed on a manufacturer or supplier who then passes on the tax to the consumer. The most common example of Indirect taxes is the excise tax on cigarettes and alcohol. Value Added tax (VAT)