The classification table (reproduce in full): Kind The test Nepal examples Direct The burden stays where the law places it Income tax; house and land (property-type) tax Indirect The burden shifts to another (the consumer) VAT, excise, customs Progressive The rate rises with ability to pay Income tax slabs Proportional A flat rate whatever the amount Some turnover-type levies Regressive Takes a larger share of the poor's income Flat-rate consumption taxes Specific A fixed sum per unit Excise per litre Ad valorem A percentage of value VAT on price The concepts the classification feeds: Incidence: who finally BEARS the tax — the statutory payer and the economic bearer may differ (the seller remits VAT; the consumer bears it). "The payer of a tax is not always its bearer." Impact vs. incidence: the impact falls on the person who pays first; the incidence on the person who cannot pass it on. Excess burden (deadweight loss): the value lost by changed behaviour — the trade that did not happen because of the tax. The canons (Adam Smith's four — the opening of every course): equity (ability to pay), certainty (not arbitrary), convenience (easy to pay), economy (cheap to collect) — with the modern additions: efficiency, flexibility, simplicity, productivity.
The federal dimension (Nepal's special face): after the Constitution 2072, taxation is a THREE-TIER power — federal (income tax, VAT, customs, excise — Schedule 5's list), provincial (Schedule 6's taxes), local (house-and-land-type and service-type local rates — Schedule 8), with concurrent heads (Schedule 9) and the revenue-sharing machinery (Articles 59–60; the National Natural Resources and Fiscal Commission). The full constitutional map is Unit 3's subject.
Exam Focus Long questions: (i) Define tax and distinguish it from fee, penalty, cess and rate (the definition + neighbours table); (ii) The objectives of taxation (four heads) and its nature (statutory, sovereign, non-punitive, prospective); (iii) Kinds of tax with incidence (the classification + "payer ≠ bearer" discussion). Short questions: direct vs. indirect tax; progressive vs. regressive; incidence; excess burden; Smith's canons. Trick areas: (i) "Unrequited" — the taxpayer gets NO specific return; if there is a specific service, it is a fee; (ii) VAT is INDIRECT even though the seller remits it — incidence analysis, not remittance, decides; (iii) A progressive income tax with flat consumption taxes means the SYSTEM is progressive while a single consumption tax is regressive — answer the question asked.