Q.Write answer in one sentence: Name the tax burden of which lies on the person who pays it.
🔒You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
🔒 Start your 14-day free trial to unlock the full solution →Concept understanding — Direct and Indirect Taxes
Who Really Pays the Tax?
When the government needs money, it taxes — but how it taxes decides who ultimately feels the pinch. The single most useful way to classify taxes is by asking: can the person who pays it to the government pass that burden on to someone else? That question splits every tax into two families: direct and indirect.
Direct tax = a tax whose impact and incidence fall on the same person, so the burden of payment cannot be shifted to another.
Indirect tax = a tax levied on goods and services whose burden can be shifted from the person who pays it to the government onto the final consumer.
Direct Taxes — The Burden Stays Put
Direct taxes are imposed on the income, profits or wealth of individuals and companies. The taxpayer both hands over the money and bears the real cost — there is no one to shift it to. Examples:
- Personal income tax
- Corporate tax on company profits
- Wealth-type taxes on assets
Because they rise with income, direct taxes are usually progressive — higher earners pay a larger share — which makes them a tool for reducing inequality.
Indirect Taxes — The Burden Travels
Indirect taxes are levied on the production or sale of goods and services. A shopkeeper deposits the tax with the government but adds it to the price, so the consumer ultimately pays. Examples:
- GST (Goods and Services Tax)
- Customs duty on imports
The classic Assertion–Reason framing is: direct taxes are imposed on income/profits, and their burden cannot be shifted — both statements are true, and the second correctly explains the first, because non-shiftability is the defining feature of a direct tax. …
A tax whose money burden and real burden fall on the same person who pays it — it cannot be shifted — is a direct tax. …
A tax whose burden falls on the payer himself is a direct tax.
A direct tax is one whose impact (liability to pay) and incidence (final burden) are on the same person — it cannot be shifted to others. Income tax, corporate tax and wealth tax are examples. In contrast, an indirect tax (e.g., GST, excise) can be shifted to the fina …
- CBSE 2026Set ANNUAL1 markMCQQ.Which of the following is the strategy to promote globalisation of the Indian economy? (A) Partially convertability (B) Reduction of tarrifs (C) Increase in equity limit of foreign investment (D) All of the above
›Reveal solutionSolution
Partial convertibility of the rupee, reduction of tariffs, and higher FDI equity limits were ALL part of India's globalisation strategy.
India's post-1991 globalisation strategy involved several interlinked reforms, all of which the question's options correctly describe: (i) partial (and later fuller) convertibility of the rupee on the current account, making it easier to exchange rupees for foreign currency for trade purposes; (ii) a steady reduction of import tariffs and customs duties to integrate Indian industry with world markets and expose it to foreign competition; and (iii) raising the permissible limit of equi …
- CBSE 2026Set ANNUAL1 markQ.What is quantitative restrictions on imports?
›Reveal solutionSolution
Quantitative restrictions fix a physical quota/ceiling on how much of a good may be imported, as opposed to tariffs, which restrict imports through price/duty.
Quantitative restrictions on imports refer to government-imposed limits that cap the actual physical QUANTITY (or value) of a particular good that can be legally imported into the country during a given period, often administered through import licences or quotas. They are a non-tariff trade barrier -- unlike tariffs (import duties/taxes), which restrict imports indirectly by raising their price, quantitative restrictions directly cap the volume of imports allowed, regardless of price. Prior to the 1991 reforms, India relied heavi …
- CBSE 2026Set ANNUAL1 markQ.Suggest one long-term structural reform policy measure undertaken by the Government of India with the introduction of New Economic Policy.
›Reveal solutionSolution
One major long-term structural reform under the New Economic Policy (1991) was industrial delicensing -- scrapping licence requirements for most industries.
With the introduction of the New Economic Policy in 1991, the Government of India undertook several long-term structural reforms. One of the most significant was industrial policy reform through delicensing -- the government abolished the requirement to obtain an industrial licence before setting up, expanding or diversifying most industries (barring a small list reserved for strategic/security or environmental reasons). This freed private firms from the earlier 'Licence Raj' and allowed market forces to guide investment decisions. (Other equall …
- CBSE 2025Set 58/4/11 markMCQQ.Read the following statements – Assertion (A) and Reason (R). Choose the correct alternative from the options given below : Assertion (A) : Direct taxes are imposed on income/profits of individuals/companies. Reason (R) : The burden of payment of direct taxes cannot be shifted to any other entity. Options : (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A). (C) Assertion (A) is true, but Reason (R) is false. (D) Assertion (A) is false, but Reason (R) is true.
›Reveal solutionSolution
The Assertion is true — direct taxes such as income tax and corporate tax are levied on the income and profits of individuals and companies. The Reason is also true — the burden of a direct tax cannot be shifted to anyone else. But the Reason describes a different characteristic (non-shiftability of incidence) and does not explain what the tax is levied on, so it is not the correct explanation of the Assertion. The answer is (B).
Let us first understand what direct taxes are, because the Assertion and the Reason describe two distinct features of the same category of tax. In the Indian tax system, taxes are broadly classified into direct and indirect taxes. Direct taxes are those imposed directly on the income, wealth or profits of a person or entity. Income tax paid by an individual on their salary, or corporate tax paid by a company on its profits, are classic examples. The government collects these taxes from the very person who earns that income or profit. So the Assertion is true.
Now consider the Reason — that the burden of a direct tax cannot be shifted. This too is true, and it is in fact the defining property of a direct tax. When you pay income tax you cannot legally transfer that liability to someone else; both the impact (who is legally liable) and the incidence (who ultimately bears the burden) fall on the same person. This is what distinguishes direct taxes from indirect taxes like GST or excise duty, where the seller deposits the tax but recovers it from the buyer through a higher price — there, the burden is shifted. So the Reason is true.
The crucial step in any Assertion–Reason question is the explanation test. The Assertion tells us what direct taxes are levied on — income and profits. The Reason tells us about the incidence of direct taxes — that the burden cannot be shifted. These are two separate, parallel characteristics of a direct tax. Non-shiftability does not explain why the tax is imposed on income and profits; the reason a direct tax is levied on income is a matter of how it is defined and classified, not a consequence of its non-shiftability. Therefore, although both statements are true, the Reason is not the correct explanation of the Assertion. …
- CBSE 2024Set ANNUAL1 markQ.Write answer in one sentence: Name the tax burden of which lies on the person who pays it.
›Reveal solutionSolution
A tax whose burden falls on the payer himself is a direct tax.
A direct tax is one whose impact (liability to pay) and incidence (final burden) are on the same person — it cannot be shifted to others. Income tax, corporate tax and wealth tax are examples. In contrast, an indirect tax (e.g., GST, excise) can be shifted to the fina …
- CBSE 2023Set ANNUAL1 markQ.Give any two examples of direct taxes.
›Reveal solutionSolution
Direct taxes are levied on and paid by the same person — income tax and corporate tax are the two most common examples.
Taxes are classified as direct or indirect depending on whether the burden (incidence) of the tax can be shifted to someone else. A direct tax is imposed on a person's income or wealth, and that same person bears its final burden — it cannot legally be passed on to another party. Income tax, charged on the income earned by individuals, is the most familiar example; corporate tax, charged on the profits earned by companies, works the same way. Other examples include wealth tax and estate duty. These contrast with indirect taxes (like GST), which are levied on goods and …
- CBSE 2022Set ANNUAL1 markQ.Answer in one sentence: Which are included in direct taxes?
›Reveal solutionSolution
Direct taxes include income tax, corporate tax and wealth tax.
A direct tax is one whose impact and incidence fall on the same person — it cannot be shifted to others. The main direct taxes are:
- Income tax (on individuals' incomes),
- Corporation/corporate tax (on company profits),
- Wealth tax / capital gains tax (on wealth and gains). …
- CBSE 2020Set ANNUAL1 markQ.Fill in the blank: Income tax is an example of ______ tax.
›Reveal solutionSolution
Income tax is a direct tax.
A direct tax is one whose impact and incidence are on the same person — it cannot be shifted to others. Income tax is levied on and paid directly by the income earner, so it is a direct tax (unlike indirect taxes such as GST, whose bu …
🎓Unlock everything free for 14 days
- ✓Full step-by-step solutions
- ✓Concept-first explanations
- ✓Methods, shortcuts & mistakes
- ✓PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.