Union Budget

RENVENUE RECEIPTS

The term “Revenue Receipt” is made up of two words revenue and receipts.

Those receipts which neither create any liability nor cause any reduction in the assets of the government. In other word, any income that does not generate a liability is revenue.

For example: if the Government borrows money from World Bank, it will increase its liabilities (because this money has to be paid back) - so cannot be called revenue. However, if the government gets the same money from grant (donation), its revenue receipt because grants are not to be paid back.

Taxes are the most important revenues receipts of the governments. However, some revenue receipts are non-tax revenues such as grants. On this basis, revenue receipts are of two types –

1. Tax Revenue

2. Non-tax revenue.

Tax Revenues

Ø  Tax revenues are either from direct taxes or indirect taxes.

Ø  Direct tax generally means a tax paid directly to the government by the persons on whom it is imposed.

Ø  Income Tax, Gift Tax, Wealth Tax and Property tax etc. are direct taxes.

Ø  Indirect tax is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer).

Ø  Sales tax, Value Added Tax (VAT), Goods and Services tax (GST) or any other such tax is an indirect tax.

Ø  Largest chunk of tax revenues of government of India currently comes from Corporation Tax, followed by Income Tax, followed by Union Excise duties, customs and thereafter service tax.  

Non-Tax Revenue

Ø  Non Tax Revenue Receipts are those revenue receipts which are not generated by taxing the public.

Ø  Money which the Government earns as  “Dividends and profits” from its profit making public enterprises (PSUs).

Ø  Interest which the Government earns on the money lent by it to external or internal borrowers , Thus this revenue receipts may be in foreign currency as well as Indian Rupees.

Ø  The money which the government receives out of its fiscal services such as stamp printing, currency printing, medal printing etc .

Ø  Money which the Government earns from its “General Services” such as power distribution, irrigation, banking services, insurance, and community services etc. which make the part of the Government business.

Ø  Money which the government accrues as fees, fines, penalties etc .

Ø  Grants the Government of India receives from the external sources. 

REVENUE RECIEPTS
Tax Revenue	Non Tax Revenue
Gross Tax Revenue	1. Interest Receipt
1. Corporation Tax	2. Dividend & Profits
2. Income Tax	3. External Grants
3. Other Taxes & Duties	4. Other Non Tax Revenue
4. Customs	5. Receipts of Union Territories.
5. Union Excise Duties
6. Service tax
7. Tax of the Union Territories

Net Tax Revenue: Gross tax Revenue – NCCD transferred to the National Calamity Contingency Fund – State’s Share

Total Revenue Receipts: Net Tax Revenue + Total Non Tax Revenue

Capital Receipts

Capital receipts are receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows.

Loans from the general public, foreign governments and the Reserve Bank of India (RBI) form a crucial part of capital receipts.

All capital receipts are tax-free, unless there is a proviso to tax it. Capital receipts can be both non-debt and debt receipts.

Non-debt capital receipts

Ø  Non-debt receipts are those which do not incur any future repayment burden for the government. Almost 75 per cent of the total budget receipts are non-debt receipts.

Ø  Recovery of loans and advances, disinvestment, issue of bonus shares, etc

Debt capital receipts

Ø  Debt Receipts have to be repaid by the government. Around 25 per cent of government expenditure is financed through borrowing. A reduction in debt receipt (or borrowing) can be a big leap for the economy's financial health. Most of the capital receipts of the government are debt receipts

Ø  Market loans, issuance of special securities to public-sector banks, issue of securities, short-term borrowings, treasury bills, securities against small savings, state provident funds, relief bonds, saving bonds, gold bonds, external debt, etc, are all example of debt capital receipts.

EXPENDITURE

Ø  Expenditure refers to payments made or liabilities incurred in exchange for goods or services.

Ø  There are two component of Expenditure – Non Plan Expenditure and Plan Expenditure.

Ø  Non-plan expenditure is what the government spends on the so-called non-productive areas, such as salaries, subsidies, loans and interest, while plan expenditure pertains to the money to be set aside for productive purposes, like various projects of ministries.

EXPENDITURE
NON PLAN EXPENDITURE		PLAN EXPENDITURE
REVENUE	CAPITAL	REVENUE	CAPITAL
1. Interest payment and prepayment of premium	1. Defense	1. Central Plan	1. Central Plan
2. Defense	2. Other non plan capital outlay	2. Central assistance for state and union territory plan	2. Central assistance for state and union territory plan
3. Subsidies	3. Loan to Public Enterprises
4. Grant to State and U.T. Governments	4. loan to State & U.T. Govt.
5. Pension	5. loan to foreign Govt.
6. Police	6. Others
7. Assistance to State from NCCF
8. Economic Services
9. Other Gen Services
10. Social Services
11. postal Deficit
12. Expenditure of U.T
13. Amount met from NCCF
14. Grant of Foreign Govt.

DEFICIT

A budget deficit occurs when expenses exceed revenue.

Revenue Deficit: Excess of Revenue Expenditure over Revenue Receipts.

Gross Fiscal Deficit: Excess of Total Expenditure including loans, net of recoveries over revenue receipts (including external grants) and non-debt receipts

Net fiscal deficit: Difference between Gross Fiscal Deficit and Net Lending.

Gross primary deficit: Difference between the Gross Fiscal Deficit and interest payments.

Net primary deficit: Net fiscal deficit - Net interest payments