Progressive Tax Policy
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- A tax policy wherein, the tax rate rises with the rise in the taxable amount is called progressive taxation policy.
- It benefits lower income groups as lower income groups are either exempted from paying taxes or are levied a very low rate of tax.
- In India, direct taxes like Personal Income Tax and Corporate Taxes are progressive in nature as the tax liability increases with the increase in income or profit.
Regressive Tax Policy
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- A tax policy in which there are flat tax rates, irrespective of the level of income is called as regressive taxation policy
- It benefits higher income groups since the rates are same for all, so the tax paid as a proportion of total income is lower as compared to lower income groups for the same purchase value of goods and services.
- In India, indirect taxes like GST are regressive in nature as all the consumer irrespective of the income tax pay a common rate of tax for specified goods and services.
