Revenue,Major components of Revenue and Capital Budget India notes-CSEET
Revenue,Major components of Revenue and Capital Budget India:
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We are now going to discuss the details of CSEET Paper-3 Economics and Business Environment notes – Revenue,Major components of Revenue and Capital Budget India notes.
Revenue,Major components of Revenue and Capital Budget India notes
The Revenue Budget records all the revenue receipts and expenditure. If the revenue expense is more than that of receipts, it indicates that there is a revenue deficit. Revenue expenditure is for the normal running of government departments and various services, interest payments on debt, subsidies, etc. Revenue receipts are divided into tax and non-tax revenue. Tax revenues are made up of taxes such as income tax, corporate tax, excise, customs and other duties that the government levies.
In non-tax revenue, the government’s sources are interest on loans and dividend on investments like PSUs, fees, and other receipts for services that it renders.
The Capital Budget part of the Union Budget has accounts for capital payment and receipts of the government. Capital receipts include:
(i) Loans from the public;
(ii) Loans from RBI
Capital receipts are loans raised by the government from the public (which are called market loans), borrowings by the government from the Reserve Bank of India and other parties through sale of treasury bills, loans received from foreign bodies and governments, and recoveries of loans granted by the Central government to state and Union Territory governments and other parties.
Capital payments include expenses incurred towards building long term assets and facilities like land, buildings, machinery, etc.
The expenditure budget refers to the estimated expenditure of the government during a given financial year. It shows the capital and revenue disbursements of various ministries/departments and presents it under ‘Plan’ and Non Plan’. Expenditure Budget provides analysis of various types of expenditure. Demand for grants of the Central government is also a part of the Expenditure Budget.
MAJOR COMPONENTS OF REVENUE AND CAPITAL BUDGET
Government receipts which neither create asset nor reduce any liability are called Revenue Receipts. Essentially, these are current income receipts for the government from all sources. Revenue Receipts are further classified into tax revenue and non-tax revenue.
Tax Revenue will include receipts from direct tax which is in the form of income tax is paid to the government. It will also include various indirect taxes like GST and Cess levied and collected by the government on various goods and services.
Non-tax Revenue will include receipts from the government’s divestment process which are nothing but the proceeds from the stake sale in various public sector undertakings. Non-tax Revenue will also include the dividend income which the government receives as a shareholder of the various public sector undertakings.
As the name suggests, Revenue Expenditure is also called income statement expenditure. It denotes short-term cost-related assets that are not capitalised. To put it simply, these are the maintenance expenditure which the government makes towards the assets which it owns in order to keep them functioning. These expenditures are recurring in nature and are incurred by the government regularly.
Revenue Expenditure does not create an asset for the government. For example, payment of salaries or pension as it does not create any asset. However, the amount spent on construction of Metro is not Revenue Expenditure as it leads to the creation of an asset.
Revenue Expenditure also must not decrease the liability for the government. For example, repayment of borrowings is not Revenue Expenditure as it leads to a reduction in liability of the government.
The difference between Revenue Receipt and Revenue Expenditure is known as Revenue Deficit. A Revenue Deficit does not denote an actual loss of revenue for the government but it only means a shortfall in revenue from what was expected by the government.
Capital Budget is one of the two parts of the government budget. Generally, the budget is divided into revenue budget and capital budget. This classification is made by considering the items that comes under the two budget components. Capital budget is considered to be productive as it shows the investment type activities of the government.
Capital budget consists of capital receipts and payments. The capital receipts are:
(1) loans raised by Government from public, called market loans, borrowings by Government from Reserve Bank and other parties through sale of Treasury Bills, loans received from foreign Governments and bodies,
(2) disinvestment receipts and
(3) recoveries of loans from State and Union Territory Governments and other parties.
Capital expenditure consists of expenditure for acquiring of assets like land, buildings, machinery, equipment, investments in shares, etc., and loans and advances granted by Central Government to State and Union Territory Governments, Government companies, Corporations and other parties.