Question

1. Describe pros and cons of CIT tax

2. Describe pros and cons of PIT tax

Answer 1

Corporate Income Tax (CIT) :-

CIT refers to tax rate imposed on the ‘net income’ of companies registered under the Companies Act, 1956 or foreign companiesearning income in India.

Pros or merits or advantages

1) This tax is used to gain revenue for the government. Corporate taxes effectively do this because corporations are the largest money makes in the economy.

2) The tax is effective in that it takes from large companies and distributes the benefit to everybody.

3) This tax is equitable in that everybody pays taxes.

Cons or demerits or disadvantages

1) corporate taxes are meant to tax wealthy companies, the costs actually end up being sent somewhere else.

2) it takes away funds from companies/corporations,this is economically inefficient.

3) A corporate tax can scare away potential and current investors to other countries, leading to a reduction of economic activity.

Personal Income Tax (PIT)

PIT is a direct tax levied on income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate.

Pros:-

1)Equity

2)Certainty

3)Elasticity

4)Productivity

Cons:-

1)Lack of popularity

2)Evasion

3)Dis incentive to work

4)peoples indifference