Kautilya was of the opinion that the king should try to increase his income more and more due to the conditions generated from time to time and for the smooth management of the state. All the functions of the king depend on the state treasury. If the King’s treasury will be empty, then how will various tasks be accomplished?

Kautilya had said that the king should levy different types of taxes to increase his income, such as land tax, municipal tax, house tax, sales tax, employment tax, tax on drugs, import export etc. The king’s income from various taxes, business, etc. should be spent on the development of the state and public welfare, and the treasurer should keep an account of the state’s income and expenditure. If the income is more than the expenditure, then it should be shown in the fund.

The King should also make adequate arrangements for inspection of income expenditure, and the name of the accountant should be mentioned in the income register. He must also arrange to punish the state’s accountant for misconduct or malpractices.

According to him, not entering the income received in the register, not writing the regular tax in the register and refusing to acknowledge the savings, are the three types of embezzlement. According to Kautilya, a penalty of 12 times the loss thus incurred to the state treasury, should be imposed on the officials who harm the treasury by,embezzlement.

It is clear from the above explanation that Kautilya’s tax system had the qualities of equality, diversity, warning of greedy conduct, jurisprudence and he also gave the provision for welfare work from the income received.