A progressive tax is the one where tax liability of the individual increases with taxable income. Here, the tax rate of an income tax payer goes up with his income. Basically, the taxes are classified into progressive, proportional and regressive; based on the relative burden or liability of taxes. In the case of proportional taxes, tax liability increases in the same proportion. On the other hand, in the case of regressive taxes, the tax liability decreases with increase in income.
Table: example for progressive, regressive and proportional taxes
|
Taxable income (Rs) |
Progressive tax (rate) |
Regressive tax (rate) |
Proportional tax (rate) |
|
10000 |
10% |
30% |
20% |
|
30000 |
20% |
20% |
20% |
|
50000 |
30% |
10% |
20% |
