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      Question

      Which of the following best describes a progressive tax

      system?
      A A flat percentage applied to all income levels Correct Answer Incorrect Answer
      B Higher income earners pay a higher rate of tax Correct Answer Incorrect Answer
      C Lower income earners are exempt from tax Correct Answer Incorrect Answer
      D All income is taxed at the same rate regardless of source Correct Answer Incorrect Answer
      E Tax collected only from corporate entities Correct Answer Incorrect Answer

      Solution

      A progressive tax system is designed to place a higher tax burden on individuals or entities with greater ability to pay. As income increases, so does the tax rate. This system aims to promote economic equity and reduce income inequality. тАв For example, India follows a progressive slab system under the Income-tax Act, 1961, where taxpayers are grouped into slabs and taxed at increasing rates (e.g., 5%, 10%, 20%, 30%) based on income levels. Options A and D describe proportional (flat) taxation. Option C partially describes exemptions, not the system itself. Option E refers to corporate taxation, not progressivity.

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