In percentage terms, the Centre's fiscal deficit at the end of February stood at 82.7 per cent of the full year budget target, mainly on account of higher expenditure. In the last financial year, the fiscal gap between the expenditure and revenue was 76 per cent of the Revised Estimate of 2020-21. In actual terms, as per the data released by the Controller General of Accounts, the deficit stood at Rs 13.16 trillion at the end of February. The total receipts of central government were 83.9 percent of the Revised Estimate of Budget 2021-22. or Rs 18.27 trillion in absolute terms. It was 88.2 per cent of the Revised Estimate of 2020-21 in the corresponding period last financial year. The government's total expenditure was at Rs 31.43 trillion or 83.4 per cent of the current year's RE. It was 81.7 per cent of Revised Estimate in the corresponding period last financial year.

What is the nature of Indirect taxes?

Regressive

The correct answer is Option 2: Regressive

Indirect taxes are regressive in nature – they impact all income groups equally. A poor person buying a biscuit has to pay the same amount of tax on it as a higher income person pays on that same biscuit. So, in case of indirect taxes, as income increases, the tax does not. This is unlike the direct taxes, where higher income groups earning higher incomes are taxed at higher rate.

• Progressive Tax: This type of tax takes a larger percentage from higher-income individuals. Income taxes with higher rates for higher income brackets are examples of progressive taxes. Indirect taxes do not fit this description.

• Proportional Tax: This type of tax takes the same percentage from all income levels. Indirect taxes do not fit this description as they impact different income groups differently.