Taxation Types:
There are four types of Taxation:
1. Proportional Tax
2. Progressive Tax
3. Regressive Tax and
4. Degressive Tax
(i) Proportional Taxation is a method, where the rate of tax is same regardless size of the income. The tax amount realized will vary in the same proportion as that of income. If tax rate is 5% on income, Mr. X getting an income of Rs.1000 will pay. Rs.50, Mr. B will be getting an income Rs.5,000 will pay tax of Rs.50. In short, proportional tax leaves the relative financial status of taxed persons unchanged.
(ii) Progressive Taxation is a method by which the rate of tax will also increase with the increase of income of the person a case of progressive taxation if a person with Rs.1000 income per annum pay a tax of 10% (i.e) Rs.100, a person with an income of Rs. 10,000 per annum pays a tax of 25% (i.e) Rs.2,500 and a person with income of 1 lakh per annum pay the tax of 50% that is Rs.50,000.
(iii) Regressive taxation: it implies that hire the rate of tax furrow income groups than in the case of higher income groups it is a very opposite to progressive taxation.
(iv) Digressive Taxes which are to mildly progressive, hence not very steep, so that high income earners do not make a due sacrifice on the basis of equity, are called digressive. In digressive taxation, a tax may be progressive up to a certain limit; after that it may be charged at a flat rate.
