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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Concepts in Taxation

Which of the following is a feature of a progressive tax structure such as the slab-based income tax on individuals?

A progressive tax structure charges a higher rate on additional income as total income crosses higher slab thresholds. This differs from a flat or proportional tax, where the same percentage applies to all income, and from a regressive tax, where the burden falls as income rises.

  1. AThe same percentage is charged on every rupee irrespective of income
  2. BThe tax rate on additional income rises as total income crosses higher slab thresholdsCorrect
  3. CThe tax amount is the same for all taxpayers
  4. DTax falls as a percentage of income when income rises

Explanation

In a progressive system, higher slices of income are taxed at higher rates, so the marginal rate increases with income. Option A describes a proportional (flat) tax. Fixed amounts are a lump-sum tax, and falling rates describe a regressive tax.

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