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A tax is a compulsory financial charge or other levy imposed on a taxpayer by a government in order to have the funds for different sorts of public expenditures. When a person falling in the tax slab, fails to show any investments and still hasn’t paid tax comes in the eyes of Income Tax Department, he or she is punished by the law.

Nevertheless, there are three types of tax, which are, proportional tax, regressive tax, and the progressive tax.

The ability of the government to raise taxes is known as its fiscal capacity. When the tax revenue is less than the expenditure, the government goes in debt. To clear past debts, the portion of tax collected can be used.