Rate structure taxes

Rate structure taxes:

On the basis of rate structure, taxes are classified as follows:

a) Proportional tax:

In the situation of a proportional tax, tax rate stays constant in spite of of whether the tax base is big or small. This means uniform tax rate is forced on the rich and also the poor. The tax paid by the people is set in proportion to their income and wealth and other tax basis.

b) Progressive tax:
In the situation of a progressive tax, the tax rate rises as the tax base rises. With the raise in income, a taxpayer has to pay a higher tax. For illustration, in the situation of income tax, exemption limit and tax slabs are characterized by the income tax structure. Since each income slab rises, there is an augment in the rates of the tax.

c) Regressive tax:

Whenever the tax liability on income falls with the augment in the tax payer’s income, it is referred as a regressive tax. Here, the tax rate reduces as the tax base raises. Under this tax system, the poorer parts of the society are taxed at higher rates than the richer parts and therefore this tax is not just unbiased.

d) Digressive tax:

Digressive tax is a merge of progressive tax and proportional tax. The rate of taxation rises up to a point. After that limit, a consistent rate is charged. Here the rate of tax does not rise in the similar proportion as the raise in income. Under this tax system, the higher income classes make less sacrifice than the lower income classes.

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