Revenue Budget • Revenue Budget consists of the revenue receipts of the government (tax revenues and other revenues) and the expenditure met from these revenues.
Revenue Receipts • Those receipts which neither create any liability nor cause any reduction in the assets of the government. • They are regular and recurring in nature and the government receives them in the normal course of activities. • Revenue receipts include the proceeds from taxes and other duties levied by the Centre; the interest and dividend it receives on its investments; and the fees and charges the government receives for its services. For the government, there are two sources of revenue receipts — tax revenues and non-tax revenues.
Tax Revenues • It gives a detailed report on revenue collected from different items like corporation tax, income tax, wealth tax, customs, union excise, service, taxes on Union Territories like land revenue, stamp registration, etc. • Taxes collected from both direct and indirect tax are considered in Tax Revenue.
Non-tax Revenues • Non-Tax Revenue is the recurring income earned by the government from sources other than taxes.
Direct tax • A direct tax is a tax an individual or organization pays directly to the imposing entity. • Direct taxes include income tax, property tax, corporate tax, estate tax, gift tax, valueadded tax (VAT), sin tax, and taxes on assets.
Indirect tax • An indirect tax is collected by one entity in the supply chain and paid to the government, but it is passed on to the consumer as part of the purchase price of a good or service. • The consumer is ultimately paying the tax by paying more for the product. • Example: GST
Revenue Expenditure • Part of government expenditure that does not result in the creation of assets. Payment of salaries, wages, pensions, subsidies, and interest fall in this category as revenue expenditure examples.
Capital Budget • The capital budget consists of capital receipts and payments. • It also incorporates transactions in the Public Account.
Capital Receipts • Those receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows. • Capital receipts can be both non-debt and debit receipts. • Capital receipts are loans taken by the government from the public, borrowings from foreign countries and institutes, and borrowings from the RBI.
Non-debt capital receipts • Non-debt receipts are those which do not incur any future repayment burden for the government. • Examples of non-debt capital receipts: Recovery of loans and advances, disinvestment, issue of bonus shares, etc.
Debt capital receipts • Debt Receipts must be repaid by the government. A reduction in debt receipt (or borrowing) can be a big leap for the economy’s financial health. • Examples of debt capital receipts: Market loans, issuance of special securities to public-sector banks, issue of securities, short-term borrowings, etc. are all examples of debt capital receipts.
Capital Expenditure • It is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc. • It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividends in the future.
Capital expenditure includes money spent on the following: • Acquiring fixed and intangible assets • Upgrading an existing asset • Repairing an existing asset • Repayment of loan
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