ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In progressive taxation, the tax liability increases with individual or entity income. This is based on the principle of ability to pay. Under this system, the lowest income people are generally exempted while the highest income people pay the highest taxes. Income Tax is thus an example of a progressive tax.

Detailed explanation-2: -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. Description: Under progressive taxes, it is believed that people who earn more should pay more. The income tax is divided into slabs.

Detailed explanation-3: -If one tax code has a low rate of 10% and a high rate of 30%, and another tax code has tax rates ranging from 10% to 80%, the latter is more progressive. Income Tax, Luxury Sales Tax, Estate tax and surcharge on net income beyond Rs 50 Lakhs are a few examples of Progressive tax.

Detailed explanation-4: -An increase in the rate of tax with an increase in income is called proportional tax.

Detailed explanation-5: -Income Tax is thus an example of progressive tax. Progressive taxation results in redistribution of income from rich to poor.