(i) Distinguish between direct tax and indirect tax with the help of suitable examples. (ii) Explain the 'redistribution of income' objective of the Government Budget. (i) Suppose the following data is presented for an imaginary economy : Calculate Revenue Deficit and Fiscal Deficit. (ii) Differentiate between public provision and public production.

Question

Accepted Answer

(i) Direct tax vs Indirect tax:

Direct Tax:
- Paid directly by taxpayer
- Cannot be shifted
- Example: Income tax

Indirect Tax:
- Paid by one, burden shifted
- Example: GST

(ii) Redistribution of income objective:
1. Tax the rich more (progressive taxation)
2. Spend on welfare of poor
3. Reduce income inequalities
4. Ensure social justice
5. Promote equitable growth

Examples: Free LPG connections, subsidized food grains, MGNREGA

This objective helps in reducing economic disparities and promoting inclusive growth.