Which type of taxes are directly levied on income or profits?

Direct taxes are those that are levied directly on an individual's income or a corporation's profits. These taxes are based on the taxpayer's ability to pay and are usually progressive in nature, meaning that as an individual's income increases, the tax rate also generally increases. Examples of direct taxes include income tax and corporate tax, where the taxpayer pays the tax directly to the government based on their earnings.

In contrast, indirect taxes, such as sales taxes or value-added taxes, are imposed on goods and services rather than on income. These taxes are not directly tied to an individual's income level but are paid as consumers make purchases. While capital gains taxes are also a form of direct tax, they primarily apply to the profit from the sale of assets or investments and may not cover the broader category of taxes based on general income or profits. Thus, the correct answer highlights the broader class of taxes that are assessed directly on income and profits.