Classification of Receipts in Government Budget in india

Jul 11, 2022 - 22:57

Revenue Receipts:

Revenue receipts are those receipts that do not lead to a claim on the government.

They are therefore termed non-redeemable.

They are divided into tax and non-tax revenues.

Tax revenues, an important component of revenue receipts, have for long been divided into direct taxes (personal income tax) and firms (corporation tax), and indirect taxes like excise taxes (duties levied on goods produced within the country), customs duties (taxes imposed on goods imported into and exported out of India) and service tax1 .

Other direct taxes like wealth tax, gift tax and estate duty (now abolished) have never brought in a large amount of revenue and thus have been referred to as ‘paper taxes. The redistribution objective is sought to be achieved through progressive income taxation, in which the higher the income, the higher the tax rate.

Firms are taxed on a proportional basis, where the tax rate is a particular proportion of profits. With respect to excise taxes, necessities of life are exempted or taxed at low rates, comforts and semi-luxuries are moderately taxed, and luxuries, tobacco and petroleum products are taxed heavily.

Non-tax revenue of the central government mainly consists of interest receipts on account of loans by the central government, dividends and profits on investments made by the government, fees and other receipts for services rendered by the government.

Cash grants-in-aid from foreign countries and international organisations are also included. The estimates of revenue receipts take into account the effects of tax proposals made in the Finance Bill (A Finance Bill, presented along with the Annual Financial Statement, provides details on the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget.)

Capital Receipts:

The government also receives money by way of loans or from the sale of its assets.

Loans will have to be returned to the agencies from which they have been borrowed.

Thus they create liability.

The sale of government assets, like the sale of shares in Public Sector Undertakings (PSUs) which is referred to as PSU disinvestment, reduces the total amount of financial assets of the government. All those receipts of the government which create liability or reduce financial assets are termed capital receipts.

When government takes fresh loans it will mean that in future these loans will have to be returned and interest will have to be paid on these loans. Similarly, when the government sells an asset, then it means that in future its earnings from that asset will disappear. Thus, these receipts can be debt-creating or non-debt creating.

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