Since Russia has rich resources of fresh underground waters, one of the major practical problems in their fund managing is a rational use of its resources and protection of aquifers from contamination and depletion. Economic instrument in the structure of state groundwater extraction management is a system of taxation. Modern system of groundwater extraction taxation is currently imperfect and has definite drawbacks. Among them are: incorrect system of tax rates for underground waters usage, budget deficit, that shifts to other areas of the national economy. The purpose of this article is the improvement of system of groundwater extraction taxation, which should be directed to the state for reimbursement of expenses for groundwater exploration, monitoring, and should provide differentiation of water tax rates, depending on hydrogeological characteristics of aquifers, types of water users and other parameters.