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    Question

    Indian Taxation law is based on which of the following principle?

    A Horizontal Equity Correct Answer Incorrect Answer
    B Vertical Equity Correct Answer Incorrect Answer
    C Cost of Service Correct Answer Incorrect Answer
    D Benefit Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Vertical Equity : This means that unequals should be treated unequally. This concept is also known as ability-to-pay principle . It means the total tax burden will be distributed among individuals according to their capacity to bear it, taking into account all of the relevant personal characteristics. •         The ethical base of this principle rests on the assumption that one rupee paid in taxes by a rich person represents less sacrifice than does the same rupee tax paid by a poor man and that fairness demands equal sacrifice by both rich and poor in support of government.  •         Example : Income tax- a progressive tax structure.

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