Top 35 Examples of Direct Tax – Best Guide – 2025

Direct taxes are one of the most essential details of any economy as they provide income to the government while at the same time attempting to share the responsibility of paying taxes among the people. 

But what do we mean by direct tax? How does it change the situation of the participants, both personal and commercial? If you are interested in learning more about direct taxes, their classification, and a direct tax example, continue reading.

If you haven’t slept yet or if you have insomnia, then I will provide you with a one-stop-shop blog post on what direct taxes are, what they do, and how they work in real life. 

This is one of the few websites that will provide information on income tax, corporate tax, wealth tax, capital gains tax, and any other direct tax. 

We will also give you more information related to these taxes and how to understand them in relation to your business life as well as national economic policies.

Be it a student, a working professional, or anyone who has ever thought of quenching their thirst for tax knowledge, this blog post is the answer. 

By the end of this blog post, you will agree that direct taxes are necessary in a civilized society and are part of our daily lives. 

So, without further delay, we invite you to learn about direct taxes and examples of direct tax and their operation in today’s world, as well as how they can affect you.

What is Direct Tax?

But, before going into the examples of these types of taxes, let me tell you what direct taxes are. Direct taxes are taxes that are levied on income, property, or any other asset owned by an individual or an organization.

These taxes are paid to the government, and their burden cannot be passed on to another individual. This makes them different from indirect taxes, which are taxes that can be passed around.

For example, if someone is paid a salary, then the income tax paid on such wage is another example of a direct tax because you cannot pass this responsibility on to someone else.

Similarly, if a company earns profits, the corporate tax it pays is a direct tax on the company’s income.

What are the Top Examples of Direct Tax?

Now that we’ve understood what direct taxes are let’s take a look at some common examples.

1. Income Tax
2. Corporate Tax
3. Wealth Tax
4. Capital Gains Tax
5. Property Tax
6. Inheritance Tax
7. Gift Tax
8. Estate Tax
9. Dividend Tax
10. Securities Transaction Tax (STT)
11. Customs Duty
12. Excise Duty
13. Social Security Tax
14. Fringe Benefits Tax
15. Land Revenue Tax
16. Motor Vehicle Tax
17. Agricultural Income Tax
18. Stamp Duty
19. Tobacco Tax
20. Luxury Tax
21. Hotel Tax
22. Cess Tax (e.g., Education Cess, Health Cess)
23. National Defence Tax
24. Service Tax (when applicable to certain services)
25. Environmental Tax
26. Banking Transaction Tax
27. Windfall Tax
28. Carbon Tax
29. Pollution Tax
30. Water Tax
31. Electricity Tax
32. Surcharge on Income Tax
33. Toll Tax
34. Sugar Tax
35. Petroleum Tax

Income Tax

Income tax is one of the most substantial types of direct taxes that is familiar to most people in the community. It is levied on income earned by residents, companies, and Hindu Undivided Families (HUFs). This tax is generally based on a tax bracket determined based on the age and income of the taxpayer. 

• Example: Every person who is liable to pay income tax has to pay an amount that is calculated by the government according to his income for each financial year as per the slab rates, irrespective of income. A person has to pay income tax as per the following tax slabs for the income earned in the financial year 2020-2021; taxpayers with a gross income of ₹12,00,000 are as follows. 
• Significance: It is a key point for the collection of government revenue and is a major provider of social needs ranging from education and healthcare to infrastructure services.

Income Tax is the 1st example among the top 35 Examples of Direct Tax and also a very important one.

Corporate Tax

Corporate tax is imposed when the taxable profit or net income of corporations for a given year is more significant than zero. It is applicable to any domestic or international organization operating in a country.

• Example: A company earning Rs 50 crore annually will pay a corporate tax of Rs 11 crore in India (for domestic companies that do not get any exemptions).
• Significance: It puts pressure on firms to report good financial operations and has a significant share in the country’s income.

Corporate Tax is the 2nd example among the top 35 Examples of Direct Tax and also a very important one.

Wealth Tax

Wealth tax applies to the net worth of individuals, HUFs, and companies’ assets. It was outlawed in India in 2015 but is still in force in some places today. 

• Example: Anyone owning assets worth more than ₹10 crores over and above the permissible exceptions may be liable to pay tax at a certain percentage annually. 
• Significance: It also discourages the growth of idle capital while it supports a fair and equitable distribution of wealth.

Wealth Tax is the 3rd example among the top 35 Examples of Direct Tax and also a very important one.

Capital Gains Tax

As for capital gains tax, it is levied on income that arises from the sale of an asset that is not inventory, such as real estate, shares or bonds. Based on the holding period, it is divided into types such as short-term capital gain and long-term capital gain. 

• Example: Transferring a house bought two years ago for ₹70 lahks for ₹90 lahks attracts long-term capital gain tax. 
• Significance: It ensures that direct and indirect returns from investments become a part of government income.

Capital GainsTax is the 4th example among the top 35 Examples of Direct Tax and also a very important one.

Property Tax

Property tax is a regular tax paid for real estate by local authorities or city hall. 

• Example: As per Indian tax regulation, the owner of a residential property in Mumbai has to pay an annual property tax based on the time, size, use and location of the property. 
• Significance: It raises capital for repairing and building local civic utilities such as water, sanitation and even roads.

Property Tax is the 5th example among the top 35 Examples of Direct Tax and also a very important one.

Inheritance Tax

This tax is levied on gifts and bequests made by the deceased to the beneficiaries of the deceased. Although there is no existing law against inheritance tax in India, it is still applicable in many other countries. 

• Example: A beneficiary who inherits property worth ₹1 crore in the UK may have to pay 40% of IT after certain exemptions are given. 
• Significance: It curbs the tendency of wealth accumulation and creates government revenue.

Inheritance Tax is the 6th example among the top 35 examples of direct tax and is also a very important one.

Gift Tax

Gift tax is applicable when property is transferred with inadequate consideration. Gifts in India, if received during a financial year and the value of the gift exceeds ₹50,000, are taxable in the hands of the recipient unless:

• Example: If the car costs ₹10 lakh and the giver is not a close relative, it may attract gift tax.
• Significance: It prevents tax evasion through asset transfers disguised as gifts.

Gift Tax is the 7th example among the top 35 Examples of Direct Tax and also a very important one.

Estate Tax

Estate tax is paid on the entire estate of a person when that person dies before it is distributed to the heirs. Although it is not relevant in countries like India, it exists in countries like the United States. 

• Example: Currently, US estates valued at $5 million or more are subject to estate tax beyond the exemption limit. 
• Significance: It provides a level playing field for wealth accumulation, and there is no accumulation of wealth.

The estate tax is the 8th example among the top 35 examples of direct tax and is also a very important one.

Dividend Tax

This tax is also levied on the income from share dividends to shareholders. In India, dividends received in excess of ₹ 5000 in a particular financial year are taxable in the hands of the recipient. 

• Example: Dividends received from equity shares amounting to ₹ 1,00,000 may be taxed as per the tax slab rate applicable to the individual’s income as per the Income Tax Act. 
• Significance: It helps the government to make additional revenue from the distribution of profits among corporations.

Dividend Tax is the 9th example among the top 35 examples of direct tax and is also a very important one.

Securities Transaction Tax (STT)

STT is levied on the trading of shares and other securities, including bonds and mutual funds, in the stock market. 

• Example: On a bullish note, shares can be bought or sold on the Bombay Stock Exchange (BSE) at a certain percentage of STT linked to the value of the transaction. 
• Significance: It reduces excessive volumes in trading and makes the securities market free from any manipulation.

Securities Transaction Tax (STT) is the 10th example among the top 35 examples of direct tax and is also a very important one.

Customs Duty

Customs duty is referred to as an indirect tax; however, when it applies to individuals or companies importing personal effects, it is classified as a direct tax. 

• Example: Indirect customs duty applied to the value of a product such as watches or cars is paid when importing goods. 
• Significance: It creates barriers to protect domestic industries and also restricts import industries.

Customs Duty is the 11th example among the top 35 examples of direct tax and is also a very important one.

Excise Duty

Excise duty is levied on the production or manufacturing of goods locally, i.e. with reference to a specific country. In India, it has almost been eliminated due to the GST regime, but it is still applicable to certain goods like petroleum products. 

• Example: Excise duty on manufactured tobacco products is at specific rates, under which manufacturing includes the production of tobacco products. 
• Significance: It provides good revenue income to the government.

Excise Duty is the 12th example among the top 35 examples of direct tax and is also a very important one.

Social Security Tax

This is another tax that is being levied for the purpose of social causes like pensions, unemployment, and the bible. 

• Example: In the United States, employers and employees pay mandatory social security taxes. 
• Significance: It provides cash provider to people in their old age as well as when they are unemployed.

Social Security Tax is the 13th example among the top 35 examples of direct tax and is also a very important one.

Fringe Benefits Tax

This tax is applicable to the value of benefits received by employees from their employers in the form of free cars or subsidized housing.

• Example: If a company provides free meals to employees, the organization may be subjected to fringe benefits tax. 
• Significance: Moreover, it prevents the organization from moving towards the extreme end of lavish privileges and ensures payment of taxes on time.

Fringe Benefits Tax is the 14th example among the top 35 examples of direct tax and is also a very important one.

Land Revenue Tax

Land revenue tax is levied on the area and productivity of agricultural land owned by a person.

• Example: A farmer owning a large tract of fertile land may have to pay land revenue tax annually.
• Significance: It finances the development and physical construction of the rural areas of the country.

Land Revenue Tax is the 15th example among the top 35 examples of direct tax and is also a very important one.

Motor Vehicle Tax

This tax is levied on vehicle owners based on the type and size of the vehicle.

• Example: Consumers buying high-end cars in India have to pay motor vehicle tax at the time of verification.
• Significance: It promotes the construction of roads as well as reduces the use of vehicles that emit hazardous chemicals.

Motor Vehicle Tax is the 16th example among the top 35 examples of direct tax and is also a very important one.

Agricultural Income Tax

This tax is levied on the income from agricultural practices; however, cultivators with low capital do not pay this tax. 

• Example: Large agribusiness organizations in states, including Kerala, may possibly be able to pay agricultural income tax. 
• Significance: This helps avoid inconsistent taxation with respect to different incomes.

Agricultural income tax is the 17th example among the top 35 examples of direct tax and is also a very important one.

Stamp Duty

Stamp duty is levied on documents such as property papers, marriage certificates and legal contracts for various businesses.

• Example: Stamp duty is levied on buying property in Delhi at the rate of 6% of the agreed price for the property.
• Significance: It authenticates legal documents and generates revenue.

Stamp Duty is the 18th example among the top 35 examples of direct tax and is also a very important one.

Tobacco Tax

A tobacco tax is a type of tax that is imposed on the use of various tobacco products that are manufactured and sold to the public. 

• Example: The reason why high tobacco taxes are imposed on cigarette manufacturers is that they increase the price of cigarettes for consumers. 
• Significance: They do not use tobacco products and also support various public health causes.

Tobacco Tax is the 19th example among the top 35 examples of direct tax and is also a very important one.

Luxury Tax

The luxury tax is levied on luxuries that are considered unnecessary or unneeded in society.

• Example: The luxury tax is essentially used when someone spends a night in a five-star hotel in India based on the room rent.
• Significance: It operates mainly in affluent markets and generates additional sales.

Luxury Tax is the 20th example among the top 35 examples of direct tax and is also a very important one.

Hotel Tax

Hotel tax is charged as a percentage of the total price of rooms in hotels and lodges and is usually determined based on the room rent. 

• Example: As per the taxation laws of India, any hotel with a rent of more than Rs 7,500 per night is charged 18% GST, which is a hotel tax. 
• Significance: From there, it creates additional income for the government from the hospitality industry and contributes to infrastructure development.

Hotel Tax is the 21st example among the top 35 examples of direct tax and is also a very important one.

Cess Tax (e.g., Education Cess, Health Cess)

On the other hand, a cess is an additional fee that the government pays for a specific destination, including education or health and can be levied as a percentage of the basic tax. 

• Example: India has an education cess of 4% on income tax required to fund various education-related programs. 
• Significance: It is also seen as providing substantial and direct funding for sensitive sectors, including education and health.

Cess Tax is the 22nd example among the top 35 examples of direct tax and is also a very important one.

National Defence Tax

This is another direct federal tax levied to finance national defence and all military services. Though this specific form of tax is not collected in India, the same form of tax is collected in other countries during war or conflict. 

• Example: In some countries, citizens have to pay some price to finance defence. 
• Significance: Thus, it supports national security and the continuity of military power.

National Defence Tax is the 23rd example among the top 35 examples of direct tax and is also a very important one.

Service Tax (When Applicable)

Service tax is levied on services provided by businesses in India. It has since been subsumed under GST; however, in the current analysis of historical returns, it is still applicable. 

• Example: Consultants and hotels used to levy service tax at the rate of 15% on their services. 
• Significance: This supported taxation of the part of the business whose main activity was in the service industry.

Service Tax is the 24th example among the top 35 examples of direct tax and is also a very important one.

Environmental Tax

Policy duties are mainly used to focus on the protection of the environment, wherein duties are imposed on certain economic activities that are deemed to have a negative impact on the natural environment. 

• Example: Certain activities that cause the emission of greenhouse gases may be subject to taxes in an attempt to compensate for the damage caused to the environment. 
• Significance: Introducing environmentally friendly products and donating the proceeds to the protection of the environment.

Environmental Tax is the 25th example among the top 35 examples of direct tax and is also a very important one.

Banking Transaction Tax

It is a form of one-time tax that is levied on bank charges on cash withdrawals or transfers of large amounts.

• Example: The new changes may impose a banking transaction tax of 0.1% on withdrawals of more than ₹1 lakh in a day.
• Significance: That is it does not allow businesses to issue too many currency notes and encourages them to accept digital payments.

Banking Transaction Tax is the 26th example among the top 35 examples of direct tax and is also a very important one.

Windfall Tax

Windfall tax is levied on firms that have recorded higher revenues due to market conditions.

• Example: When the price of crude oil rose internationally in 2022, oil companies in India were taxed.
• Significance: This helps ensure that the excess profits are used for the benefit of the public.

Windfall Tax is the 27th example among the top 35 examples of direct tax and is also a very important one.

Carbon Tax

Carbon tax can be used to refer to the carbon content of fuels with the aim of reducing carbon dioxide emissions. 

• Example: Certain industries that use coal or petroleum are taxed on every tonne of CO2 produced. 
• Significance: It supports the use of renewable energy resources and responds against climate change.

Carbon Tax is the 28th example among the top 35 examples of direct tax and is also a very important one.

Pollution Tax

Environmental pollution tax is imposed on organizations that pollute the environment through air, water and other physical substances. 

• Example: Factories that release raw wastewater into rivers may have to pay water pollution tax. 
• Significance: This puts pressure on industries to adopt environmentally friendly practices.

Pollution Tax is the 29th example among the top 35 examples of direct tax and is also a very important one.

Water Tax

Water tax is primarily levied on the use of water for production in businesses or industries and other organizations. 

• Example: A beverage company that is using groundwater in its production process may be required to do so at a specified price according to the quantity used. 
• Significance: It covers the efficient use of water and supports water-saving measures.

Water Tax is the 30th example among the top 35 examples of direct tax and is also a very important one.

Electricity Tax

This tax is levied on the use of electricity, usually on commercial energy producers. 

• Example: Industries that use large amounts of electricity are charged electricity duty based on this usage.
• Significance: It provides resources for energy facilities and develops energy savings.

Electricity Tax is the 31st example among the top 35 examples of direct tax and is also a very important one.

Surcharge on Income Tax

The surcharge is an additional amount levied on the income tax liability of individuals or companies earning high income. 

• Example: Anyone earning more than Rs 50 lakh annually in India has to pay a surcharge in addition to the regular tax.
• Significance: It is aimed at the rich and also confirms progressive taxation.

Surcharges on income tax are the 32nd example among the top 35 examples of direct tax and are also very important.

Toll Tax

A toll tax is a tax levied on the use of specific roads, highways or bridges or a fee paid for using a specified facility. 

• Example: While using the Mumbai-Pune Expressway, people pay tolls according to the categories of vehicles they are using.
• Significance: Federal aid supports the repair and construction of the road network.

Toll Tax is the 33rd example among the top 35 examples of direct tax and is also a very important one.

Sugar Tax

A sugar tax is imposed on products that contain added sugar or sweetened food products, with the aim of reducing the consumption of added sugar. 

• Example: Coden has argued that taxes on sweetened beverages, as seen in the UK, are used to control unhealthy consumption. 
• Significance: It is beneficial for public health and also reduces the cost of various diseases caused by the wrong lifestyle.

Sugar Tax is the 34th example among the top 35 examples of direct tax and is also a very important one.

Petroleum Tax

The petroleum tax is levied on petroleum products produced, imported or sold, such as diesel, petrol and LPG. 

• Example: Especially in India, the excise duty levied on petrol and diesel has a substantial share in generating government revenue.
• Significance: It subsidizes infrastructure projects and promotes the use of energy-efficient alternatives.

Petroleum Tax is the 35th example among the top 35 examples of direct tax and is also a very important one.

What are the Advantages of Direct Tax?

Here are the main five advantages of direct tax:

1. Equity: Direct taxes are progressive; this means that individuals with higher incomes pay more taxes. 
2. Certainty: The beneficiaries of taxes are fully aware of how much they have to pay, so financial planning is much more precise. 
3. Economic Regulation: Consumers can also be influenced by their savings through taxes – this is the role of governments. 
4. Administrative Simplicity: Direct taxes are those that are collected directly from the source, which reduces the rate of tax evasion. 
5. Social Welfare: The money raised is used for both construction and renovation of public infrastructure and social services.

Why Do Direct Taxes Matter?

It is worth noting that direct taxes have a dynamic impact on the growth of a country’s economy. They are indispensable in terms of being the primary source from which the government obtains revenue to perform a number of functions associated with welfare services, such as education, health, physical development, and defence.

1. Revenue Generation: Direct taxes are defined as the primary means through which governments generate their revenue. The ministry also collects income tax from employed individuals and corporate tax from businesses employed by both national and local governments in their financial operations.
2. Wealth Redistribution: In this way, direct taxes such as income tax assist in the attainment of the objective of equity. In this way, direct taxes such as income tax assist in the attainment of the aim of equity.
3. Economic Stability: Other forms of taxation that governments use to regulate business include corporate tax and capital gains tax, by which governments encourage or discourage specific investment and economic activity.

How do Direct Taxes Affect You?

These are taxes that are levied directly from your income, whether you are an individual taxpayer or a corporate taxpayer. Here is how:

• Individuals: Personal direct taxes are most likely and often affect people through income tax. It affects the basic salary, house allowance, other allowances and bonuses that one may get. With the help of deductions and exemptions, one can save taxes, but he will need to understand which taxes are to be paid.
• Businesses: Being subject to corporation taxes, firms must pay taxes on their income, and this factor affects their corporate revenue. They also have to monitor taxes on dividends and capital gains, apart from other direct taxes that affect business operations.

Is VAT a Direct Tax?

Actually, VAT or Value Added Tax is an indirect tax as it is levied on the sale of goods and services, and the burden of paying this tax is shifted to the end consumer, as the value-added tax is not paid directly by the individual or business earning the income.

Also Read: Indirect Tax Examples

In Conclusion

Everyone, whether it is a taxpayer, a business owner or a citizen who wants to know how taxes are collected, should have an understanding of examples of direct taxes. In the previous section, we considered the following taxes: income tax, corporate tax, capital gains tax, property tax and more.

Remember that paying taxes is inevitable in our lives, but knowing how taxes are processed and what impact they have on our budget can provide better financial management and increased compliance with taxation law. It is a good idea to keep this guide at your disposal, especially when you try to get out of the trap of direct taxes.

Stay informed, and take control of your financial future!

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