Taxation is considered an essential part of state government since antiquity and is used to establish public welfare and economic stability as well as to create effective systems of government. Chanakya's Arthashastra, one of the first comprehensive texts on governing, provides a detailed structure to determine how to ethically tax (based upon the concepts of justice and fairness, moderation, accountability and the welfare of the people). Chanakya's perspective did not just look at taxation for the purposes of revenue collecting the state, but rather that it is considered a moral duty of the state and requires balance between the interests of the state and citizen. The focus of this chapter will be to establish the concept of ethical taxation in the context of good governance through the lens of the Indian Knowledge System (IKS). The chapter will illustrate that the Arthashastra provides a holistic approach to governance where ethical taxation builds public confidence, promotes administrative efficiency, and creates a sustainable and inclusive development strategy. Through the integration of IKS principles and modern discussions about governance, the chapter will show how Chanakya's fiscal philosophy is still relevant today to a variety of stakeholders, including policymakers, scholars, and public administrators, who are looking for ethical, culturally based methods and opportunities for the twenty-first century.