What is Tax?

A tax is a mandatory financial charge or a financial obligation that is placed on an individual or corporation by the government to finance public expenditures and government spending as a whole. A tax system refers to the set of rules and regulations that govern the collection and distribution of taxes in a particular country. It is designed to generate revenue for the government to fund public infrastructure, social programs, defense, and other necessary expenses.

A good tax system can be defined as one that is efficient, fair, transparent, and capable of generating sufficient revenue to fund public services and government operations. In India, Goverment mainly levies two type of taxes, i.e., Direct Tax and Indirect Tax. Direct tax can be defined as a type of tax in which the incidence and impact of the tax are levied on the same person. Indirect Tax can be defined as a type of tax in which the incidence and impact of the tax are passed on to another individual or entity, i.e., the end consumer of the product. Tax systems vary across different countries and they can be designed in various ways. Taxes are often imposed on people, corporations, and other organizations based on their income, wealth, consumption, or certain actions. Taxes are collected by the government to ensure the proper functioning and maintenance of a society, allowing the government to address the needs and priorities of its citizens.