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Which tax is levied and collected by the Union government but the proceeds are distributed between the Union and states?

The Income Tax Department, also referred to as IT Department, is a government agency undertaking direct tax collection of the Government of India. It functions under the Department of Revenue of the Ministry of Finance.

Ans: Income tax

Taxes in India can be categorized as direct and indirect taxes. Direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that somebody else collects on your behalf and pays to the government eg restaurants, theatres and e-commerce websites recover taxes from you on goods you purchase or a service you avail. This tax is, in turn, passed down to the government.

Direct Taxes are broadly classified as :

  1. Income Tax – This is taxes an individual or a Hindu Undivided Family or any taxpayer other than companies, pay on the income received. The law prescribes the rate at which such income should be taxed

  2. Corporate Tax – This is the tax that companies pay on the profits they make from their businesses. Here again, a specific rate of tax for corporates has been prescribed by the income tax laws of India.


Indirect taxes take many forms: service tax on restaurant bills and movie tickets, value-added tax or VAT on goods such as clothes and electronics. Goods and services tax, which has recently been introduced is a unified tax that has replaced all the indirect taxes that business owners have to deal with.

Source: wikipedia, cleartx.in
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