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Every year we come to hear that our government is spending lakhs and crores of money for the development of our economy. But have you ever wondered that how the government earns money? Today, we’ll talk about the revenue and expenditure aspect of the Union budget.
The revenue which the Indian government earns can be broadly categorized into two major categories namely revenue receipts and capital receipts.
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How does the Govt earn revenue in Union Budget?
Revenue receipts
These are income generated from the operating activities of the business. Under revenue receipts, we have-
Tax revenue – It is the largest source of revenue for the government. The important heads under this segment include Income tax, wealth tax, service tax, customs duty, excise duty etc.
Non-tax revenue – The important heads under nontax revenue include interest receipts, fees collected from various sources, grants, profits, and dividends. Want to know more about the role of Government in the economy?
Capital receipts
This includes income earned from investment and other financing activities of the firm.
Under Capital receipts; we have disinvestment of government equity, a sale of fixed assets, issuance of a debt instrument, a loan from RBI and foreign government etc.
Learn about various Government Financial Schemes by Market Experts
Now, we will talk on the expenditure front which includes capital expenditure and revenue expenditure. is an expense where the benefit continues over a long period:
Capital expenditure – It’s an expenditure where the benefits can be enjoyed over a longer time period and used to expand the business operations. It includes expenditure on plant and equipment, acquisition of long-term assets etc.
Revenue expenditure – It is incurred for day to day expense of the business and for routine repairs. It comprises of expenses on repairs and maintenance, renewal expenses and so on.
Know More: How does Government Spending Affect the Economy?
Bottomline:
This is a brief write up on the source of revenue and the expenditure front of the Union government. We are going to come with more write-ups on the budget in our upcoming blogs.
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