Proportional tax

 

A proportional tax is the one where the tax rate remains in the same proportion whatever may be the income level of the tax payer. Here, the tax liability of the individual remains in fixed proportion to his income. Basically, taxes are classified into progressive, proportional and regressive; based on the relative burden or liability of taxes. In the case of regressive tax, tax liability of the individual decreases with taxable income. On the other hand, in the case of progressive taxes, the tax liability increases 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%

December 4, 2017
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