Direct Tax refers to a type of tax that is levied directly on an individual or an organizationís income or wealth and is paid straight to the government. The burden of a direct tax cannot be shifted to another person, meaning the taxpayer who earns the income is responsible for paying the tax.

The most common examples of direct taxes in India include Income Tax, Corporate Tax, Capital Gains Tax, and Wealth Tax (though wealth tax was abolished in 2015). These taxes are governed and collected by the Central Board of Direct Taxes (CBDT), which operates under the Ministry of Finance.

Types of Direct Tax:

• Income Tax: Imposed on the income earned by individuals, Hindu Undivided Families (HUFs), and other entities during a financial year. Tax rates vary according to income slabs announced in the Union Budget.
• Corporate Tax: Charged on the profits earned by domestic and foreign companies operating in India. Different rates apply depending on the size and nature of the company.
• Capital Gains Tax: Levied on profits arising from the sale of capital assets such as property, shares, or mutual funds. It can be short-term or long-term based on the holding period.

Key Characteristics of Direct Taxes:

• They are progressive in nature ó higher income leads to higher tax liability.
• They promote equity and fairness since individuals pay taxes based on their ability to pay.
• They help the government maintain a stable source of revenue for public services and development projects.

Example: If an individual earns ?10 lakh in a financial year, the income tax payable will be calculated based on the applicable slab rates after considering exemptions and deductions under sections like 80C and 80D.

In conclusion, Direct Tax is a crucial component of Indiaís taxation system. It not only serves as a major source of government revenue but also promotes social and economic balance by ensuring that taxpayers contribute fairly based on their income levels.