ABSOLUTE AND RELATIVE TAXABLE CAPACITY INTRODUCTION Taxation on people must be levied with great care and rationality. In order to practice this rationality and care, the taxing agency must follow certain code of conduct in the form of principles of taxation while determining the type and amount of tax. ‘Taxes’ are the compulsory payments made to government without expectation of any direct return or benefit to the tax payer. The term ‘taxable capacity’ occupies an important place in public finance particularly in the domain of taxation. Meaning of taxable capacity : According to Josiah Stamp “taxation capacity is the total production minus the amount required to maintain the population at subsistence level”. According to this definition total production refers to the total volume of income produced and available for the people. Taxable capacity is normally used into two senses; (a)The absolute taxable capacity and (b) The relative taxable capacity. (a) The absolut