Which of the following statements are correct ? 1. Ability to pay principle of taxation holds that the amount of taxes people pay should relate to their income or wealth 2. The Benefit Principle of taxation states that individuals should be taxed in proportion to the benefit they receive from Government programmes 3. A progressive tax takes a larger share of tax from poor families than it does from rich families 4. Indirect taxes have the advantage of being cheaper and easier to collect Select the correct answer using the code given below:

Statement 1 is correct as the ability-to-pay principle posits that tax burdens should be distributed based on a person's financial capacity, typically measured by income or wealth. Statement 2 is correct; the benefit principle suggests individuals should pay taxes in proportion to the benefits they receive from public services. Statement 3 is incorrect because a progressive tax imposes a higher tax rate as income increases, placing a greater real burden on the rich [2]. Conversely, a regressive tax is one where the burden is greater on the poor [1]. Statement 4 is correct; indirect taxes are generally considered easier and cheaper to collect because they are integrated into the price of goods and services and collected by intermediaries, reducing the administrative burden of individual filings . Thus, statements 1, 2, and 4 are correct.

Sources

1. [1] Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > TAX REVENUE > p. 85
2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > Taxes can be classified in several ways: > p. 166