Taxes:
Taxes are the main source of revenue for the government. There are a variety of taxes collected by the government. You might have heard about some of these like VAT(Value added tax), service tax, excise duty, income tax, property tax, customs duty, etc; the taxes can broadly be classified into indirect taxes and direct taxes. Now briefly discuss the difference between the Income-tax and Excise duty.
Income tax:
Income tax is charged on the personal income of individuals. There can be a variety of sources of individual incomes like wages, salaries, and pensions. An individual can also earn interest income on money that is kept in banks and also rent on properties that he owns like house rent. All these are considered as incomes on which taxes have to be paid.
Excise duty:
Excise duty is charged on goods that are produced or made in factories. The owner or manager of the factory pays the money (tax) to the government according to the amount of production.
Example:
- Tax on iron
- Tax on alcohol
- Tax on cigarette
Let’s summarize the Difference between Income tax and Excise duty
Difference between Income tax and Excise duty:
| Income tax | Excise duty |
|---|---|
| Meaning | |
| Income tax is charged on the personal income of individuals. | Excise duty is charged on goods that are produced or made in factories. |
| Type of form | |
| It is a form of direct tax. | It is a form of indirect tax. |
| Source | |
| Sources of individual incomes like wages, salaries, and pensions. | The factory owners sell their goods after adding to the price that they pay in tax. |
| Charged on | |
| Income tax is charged only for those who earn above a certain amount. | Excise duty is charged on all factory goods. |
| Charged as a | |
| This is charged as a percentage of the income earned. | This is charged from the factory itself, but in reality, the tax is passed to those who buy the goods. |
| Proportion | |
| Those who earn a higher income have to pay a greater proportion of their income as tax. | While all taxes on goods add the price, taxing certain goods raises the overall prices more. |
Bottom line:
As a result of the preceding discussion, It is clear that the difference between income tax and excise duty is a tax imposed on the person’s income whereas Excise duty is imposed on the factory goods.
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