Kautilya has stressed on adequate financing for the state, because according to him all the functions of the king depend on the state treasury. If the funds are not sufficiently available to the king then the smooth operation of the state functions becomes also difficult to conduct. Kautilya has said while emphasizing the importance of public finance, that religion is protected only through finance, so the treasury should always be filled. His public finance system is truly linked to the concept of welfare state.

He has mentioned four objectives of the state apart from law and order and justice :

1. Acquiring the unobtained 

2. Protecting the acquired 

3. Ensuring growth of the protected and 

4. Utilizing the accumulated for the welfare of the subjects, or spending the earnings from taxes for welfare of citizens.

” Kautilya has listed the following sources of State Income :

1. Different types of land tax, house tax in town, incidental tax, etc, 

2. Tax on items sold in market, Import-Export Tax, 

3. Road Tax, Canal Tax and Tax on heavy loading vehicles, 

4. Artist Tax, Fisheries Tax, 

5. Taxes on intoxicants, 

6. Property Tax, Forest Produce Tax, Mining Tax, Monopolistic Tax on Salt, etc, 

7. Labour Tax 

8. Contingent Income Tax 

9. Interest on Loans 

10.Charitable Tax 

11.Penalties 

12.State Profits 

13.Taxes on horses, wool, elephants, fruits and trees.

The key rules for taxation in the tax system of Kautilya are as follows:

• Timely Tax collection : According to Kautilya, agricultural tax should be collected only when the crop has ripened. The King should not impose taxes at inopportune time to collect wealth. 
• Appropriate and justified Taxation : The king should not realize taxes at his whim and fancy. In adverse times, the king should request politely for heavy taxation and impose it only once. Infertile land should never be taxed heavily. 
• Taxation in accordance with capability : Taxes should be levied on all persons according to their capability. 
• Importance of Financial Discipline : Kautilya laid a lot of emphasis on financial discipline. Appointment of revenue workers should be done very thoughtfully, and it should be ensured that whatever is recovered, the entire amount of money is deposited in the state treasury.