Taxation is not a new system, but it was practiced in the olden days itself when the kingdoms existed. Tax is the charge a person or entity owes to the governing body for the smooth running of the government. Governmental agencies collect the taxes; usually it is in the form of money. If some one fails to pay the levied tax, the defaulter has to face civil or criminal penalties. Taxes can be direct or indirect. Direct taxes are imposed on a person or organization and their possessions while indirect taxes are levied on some of their activities or for the privileges they enjoy. Taxes are intended to be used for the people, especially for the weaker sections of the society. In that way, taxation is beneficial in the gradual diminution of inequality prevalent in the society. They are used sometimes to reprice an item whose sale has to be discouraged.