NMIMS Solved Assignment Taxation – Direct and Indirect
NMIMS Solved Assignment Taxation – Direct and Indirect Any country’s economy is heavily reliant on taxes, and both professionals and students must comprehend the subtle differences between direct and indirect taxes. Taxation is one of the many courses that the National Management Institute of Mumbai (NMIMS) offers as part of its curriculum. The main ideas of direct and indirect taxes that are essential for students getting ready for the June 2025 test are covered in this article.
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Understanding Taxation: An Overview
Taxation refers to the process by which governments collect revenue from individuals, businesses, and corporations to fund public services and government functions. The taxation system is divided into two broad categories:
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Direct Taxes
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Indirect Taxes
1. Direct Taxes: In-Depth Analysis
Definition and Characteristics
NMIMS Solved Assignment Taxation – Direct and Indirect Direct taxes are taxes that are directly imposed on the income, wealth, or assets of individuals and businesses. The burden of the tax falls directly on the taxpayer, and it cannot be transferred to others.
Some key examples of direct taxes include:
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Income Tax: Tax levied on the income earned by individuals, corporations, and other entities.
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Wealth Tax: Tax on an individual’s wealth, including assets such as property, vehicles, and investments.
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Corporate Tax: Tax imposed on the profits of a corporation.
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Capital Gains Tax: Tax levied on profits from the sale of assets or investments.
Types of Direct Taxes
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Progressive Tax: The tax rate increases as the income or wealth of the individual increases. For example, income tax in India follows a progressive tax system.
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Proportional Tax: A tax that remains constant regardless of income levels.
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Regressive Tax: A tax that takes a larger percentage of income from lower-income individuals than from higher-income ones.
Key Features of Direct Taxes
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The tax is directly paid by the individual or corporation to the government.
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The rate of taxation is generally based on the taxpayer’s income or wealth.
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The administration and enforcement of direct taxes can be complex and require extensive record-keeping.
Solved Example
NMIMS Solved Assignment Taxation – Direct and Indirect Consider a scenario where an individual has an annual income of ₹12,00,000. In India, income tax is calculated based on progressive tax slabs. For an income of ₹12,00,000, the tax calculation would be as follows (assuming the applicable tax rates for the financial year 2025):
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First ₹2,50,000: No tax.
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₹2,50,001 to ₹5,00,000: 5% of ₹2,50,000 = ₹12,500.
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₹5,00,001 to ₹10,00,000: 20% of ₹5,00,000 = ₹1,00,000.
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₹10,00,001 to ₹12,00,000: 30% of ₹2,00,000 = ₹60,000.
Total Tax = ₹12,500 + ₹1,00,000 + ₹60,000 = ₹1,72,500.
Thus, the individual will need to pay ₹1,72,500 as income tax for the year.
2. Indirect Taxes: In-Depth Analysis
Definition and Characteristics
NMIMS Solved Assignment Taxation – Direct and Indirect Indirect taxes are levied on goods and services rather than on income or wealth. The primary distinction between direct and indirect taxes is that indirect taxes are paid by the consumer, but the tax is collected by the business from the consumer. Businesses act as intermediaries in the collection of indirect taxes.
Common examples of indirect taxes include:
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Goods and Services Tax (GST): A comprehensive indirect tax on the manufacture, sale, and consumption of goods and services in India.
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Excise Duty: Tax on the manufacture of goods within a country.
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Customs Duty: Tax imposed on the import or export of goods.
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Value Added Tax (VAT): A tax on the value added to goods and services at each stage of production or distribution.
Types of Indirect Taxes
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Sales Tax: A tax on the sale of goods, which is typically paid by the consumer at the point of purchase.
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Excise Duty: A tax on the manufacture of goods within the country.
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GST (Goods and Services Tax): A multi-stage tax levied on every stage of the production process, with a credit for taxes paid on inputs.
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Customs Duty: A tax on imports and exports.
Key Features of Indirect Taxes
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Indirect taxes are paid by the consumer, but they are collected by businesses.
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The tax rate is usually uniform and does not depend on the consumer’s income.
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They are easier to collect and enforce compared to direct taxes.
Solved Example
NMIMS Solved Assignment Taxation – Direct and Indirect Consider a product that is sold for ₹1,000. If the GST rate on the product is 18%, the GST collected on the sale would be:
GST = ₹1,000 × 18% = ₹180.
The total price the consumer pays for the product would be ₹1,180, where ₹180 is the GST collected by the business on behalf of the government.
Comparison: Direct vs. Indirect Taxes
| Feature | Direct Taxes | Indirect Taxes |
|---|---|---|
| Imposition | Imposed on income, wealth, or property | Imposed on goods and services |
| Payment | Paid directly by the taxpayer to the government | Paid by the consumer, collected by businesses |
| Progressivity | Can be progressive, proportional, or regressive | Generally regressive |
| Example | Income tax, corporate tax, capital gains tax | GST, excise duty, sales tax, customs duty |
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FAQs
1. What is the difference between direct and indirect taxes?
NMIMS Solved Assignment Taxation – Direct and Indirect Direct taxes are levied directly on income, wealth, or property, and the burden is on the taxpayer. Indirect taxes, on the other hand, are levied on goods and services, and the burden is passed to the consumer through businesses.
2. How is income tax calculated in India?
Income tax is calculated based on tax slabs set by the government. For individuals, it varies depending on the income level, with higher incomes being taxed at higher rates.
3. What is GST and how does it work?
GST is a value-added tax that applies to the sale of goods and services in India. It is a multi-stage tax collected at every point of production or distribution, with credits given for taxes paid on inputs.
4. How do businesses handle GST?
Businesses need to register for GST if their annual turnover exceeds the prescribed limit. They collect GST on behalf of the government and file regular returns.
Conclusion
Understanding both direct and indirect taxes is crucial for students of taxation, especially those enrolled in courses like those offered by NMIMS. The differences, features, and application of these taxes provide essential insights into the functioning of the tax system in India and globally. The NMIMS assignments for June 2025 provide students with a platform to practice solving real-world problems and enhance their knowledge of taxation.
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