Tax is the significant source of revenue for the government, the improvement of any nation's economy to a great extent relies upon the tax structure it has embraced. A Taxation Structure which encourages simple of working together and getting no opportunity for tax avoidance conveys prosperity to a nation's economy. Then again taxation structure which has provisions for tax avoidance and the one which does not encourage simplicity of working together hinders the development of nation's economy. In this way as taxation structure assumes a significant job in nation's improvement. We endeavor to know the contribution of direct and indirect taxes in tax gathering of any nation. In this investigation we look at the tax changes of India and Nepal. Numerous issues like Tax Evasion, Reliance on indirect taxes, Black money, and presence of parallel economy demonstrate that taxation system requires some significant changes later on ahead to address this issues. In the accompanying paper, the investigation is simply founded on secondary data. Different figures are gotten from the distinctive sites of government. It is seen that there are different number of taxes and distinctive tax gathering experts in India. Likewise it is seen that there is significant reliance on indirect taxes for tax gathering than the direct taxes. Both Indirect taxes and Direct taxes have their own focal points and disservices. We utilized secondary data from Economic Survey Reports. The period of study is from 1996-97to 2010-11, since the data is accessible for the said period on public space. We likewise utilized programming bundles like Gretl and Excel to research the data.