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    Question

    _________ means as the income of a person goes up, the

    rates of tax goes down
    A Direct Tax Correct Answer Incorrect Answer
    B Progressive Tax Correct Answer Incorrect Answer
    C Regressive Tax Correct Answer Incorrect Answer
    D Proportional Tax Correct Answer Incorrect Answer

    Solution

    • Progressive tax means that as the income of person goes up, the rates of tax goes up. Thus at higher incomes, more tax is levied. Eg Income tax in India • A proportional tax applies the same tax rate to all individuals regardless of income • Regressive tax means that as income goes up the rate of tax goes down  • A specific tax is imposed on basis of any specific feature of a commodity eg its weights, its length, its volume etc. Thus, it is applicable per unit. Eg tax on cloth by length, tax on television by size. • Ad valorem tax is imposed on the basis of total value of a commodity i.e proportional to price

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