Income Tax

An income tax is classified as a direct tax as it burdens the individual or entity who pays it. A tax imposed by the government, it is based on the income generated by businesses and individuals within their jurisdiction. Most countries impose a progressive income tax system in which higher-income earners pay a higher tax rate compared to their lower-income counterparts, with earnings subjected from diverse sources, including wages, salaries, dividends, interest, royalties, rents, gambling winnings, and product sales. Income taxes are a source of revenue for governments, used to fund public services, pay government obligations, and provide goods for citizens. In the US, individual income taxes are the single largest source of revenue for the federal government.