What are Government Receipts and Expenditure

Receipts

When you scan the budget document, you come across terms like Revenue Receipts and Capital Receipts. What do these terms mean?

(a)  Revenue Receipts may be classified into two major components: Tax Revenue and Non-Tax Revenue.

Tax Revenue is one of the most important resources of public revenue. It refers to funds raised through taxation and implicit in it is an element of compulsion.

It iscompulsory in the sense that once the taxes are imposed, the person liable to pay them has to do so. Refusal to do so is treated as a crime for which the law prescribes severe punishment. Tax revenue is a steady source and is always certain to come because taxes are paid periodically. Some of the important taxes are income tax, excise duty, customs duty, sales tax, estate duty, wealth tax, and gift tax. In addition to these, the term tax revenue also includes special assessment and fees.

 Non-Tax Revenue is raised  by the government in the form of the prices paid for the use of specific services and goods offered by it. It is purely voluntary in the sense that the individual concerned has to pay the price for a particular good or service, in case he purchases it, otherwise not. The revenue under this head comes irregularly and is somewhat uncertain.

Non-Tax revenue includes:

(1)  revenue from state monopolies and state undertakings (like railways, electricity, telecom, forests, and irrigation);

(2)  revenue from social services (like education, hospital receipts);

(3)  revenue from public property (like lease / rent from land);

(4)  charges for specific benefits or improvements i.e. development charges, and

(5)  voluntary gifts (such as donations to hospitals and charitable institutions) received by state

Authorities

(b) Capital Receipts include loans raised by the Government of India from the general public, government’s borrowings from the RBI as well as other similar bodies (through sale of treasury bonds), external loans (like from the IMF), recoveries of loans granted to states / UTs, and savings invested in PPF, etc.

Expenditure

Expenditure may be classified into (a) Revenue Expenditure and Capital Expenditure, (b) Plan and Non-Plan Expenditure, and (c) Development and Non-Development Expenditure.

(a) Revenue Expenditure and Capital Expenditure: All expenditure incurred in the normal day-to-day running of the government is termed Revenue Expenditure. This includes expenditure incurred on provision of services, salaries, subsidies, interest payments made to service debts, etc.

Capital Expenditure is incurred in the creation of assets like land, plant & machinery, and investments in securities. Also, loans and advances granted to state governments and PSUs by the Centre are treated as Capital Expenditure.

(b) Plan and Non-Plan Expenditure: Any public expenditure incurred on current development and investment outlays that arise due to plan proposals (five year plan proposals) is termed Plan Expenditure