ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Under a progressive income tax the average income tax rate rises with income.

Detailed explanation-2: -Increasing the tax rates on higher income group implies that the government is following progressive tax policy.

Detailed explanation-3: -Definition: Progressive tax is the taxing mechanism in which the taxing authority charges more taxes as the income of the taxpayer increases. A higher tax is collected from the taxpayers who earn more and lower taxes from taxpayers earning less. The government uses a progressive tax mechanism.

Detailed explanation-4: -Progressive and regressive tax A progressive tax is a tax where the tax rate increases with increase in the taxpayer’s income. Here, individual who get high income pay higher proportion of there income as tax. On the other hand, in the case of regressive tax, tax rate decreases with increase in income.