Public finance deals with the income and expenditure of public authorities. Public authorities include all sorts of governments. Hence it can be said that it deals with the finances of the Govt. Central, State, and Local that are studied in the science of public finance. Prof. Dalton defined public finance as: “It is concerned with the income and expenditure of public authorities and with the adjustment of one to another.” In short, public finance is a study of the nature and principles of state expenditure and state revenue.

Direct Tax: A direct tax is one that cannot be shifted or passed on. It implies that in the case of direct taxes the impact or immediate money burden and the incidence or the ultimate money burden are on the one and the same person. According to Dalton, “A direct tax is really paid by a person on whom it is legally imposed.”

In the group of direct taxes, thus, income tax, wealth tax, property tax, estate duties, capital gains tax may be included.

Indirect Tax: An indirect tax is one that can be shifted or passed on. In case of indirect taxes, the immediate money burden and the ultimate money burden of taxes are on different persons. According to Dalton, “An indirect tax is imposed on one person, but paid partly or wholly by another.” Commodity taxes or sales tax, excise duties, etc. may be grouped as indirect taxes.