Tax refers to Income Tax is a tax you pay directly to the government basis your income or profit. Income tax is collected by the Government of India. Taxes are of two types - direct tax and indirect tax. Direct tax is the tax paid by you on your income directly to the government and is levied on profits and income. we pay tax for Taxes are used by the government for carrying out various welfare schemes including employment programmes. There are Lakhs of employees in various departments and the administrative cost has to be borne by the Government