What are the components of budgets?

Budget constitutes two accounts:

Revenue Account shows the current financial year receipts of the government and the expenditure that can be met from these receipts.

Capital Account is an account of the assets as well as liabilities of the central government which takes into consideration changes in capital.

These two accounts are further classified into receipt and expenditure.

Revenue Receipts: Revenue receipts are those receipts that do not lead to a claim on the government. They are therefore termed non-redeemable. They are divided into tax and non-tax revenues.

Tax revenues, an important component of revenue receipts, have for long been divided into direct taxes (personal income tax) and firms (corporation tax), and indirect taxes like excise taxes (duties levied on goods produced within the country), customs duties (taxes imposed on goods imported into and exported out of India), Goods and Services Tax etc.

Non-tax revenue of the central government mainly consists of interest receipts on account of loans by the central government, dividends and profits on investments made by the government, fees and other receipts for services rendered by the government.

Revenue expenditure: It includes interest payments, subsidies, wages to government employees, pensions, social services and so on. Any expenditure that does not lead to formation of any asset or liability for the government will fall under this category.

Capital Receipts: All those receipts of the government which create liability or reduce financial assets are termed as capital receipts. The main items of capital receipts are market borrowing, loans from central bank and recovery of loans granted by the central government.

Capital expenditure: These are those expenditure that create some liability/asset for the government. These include loans to public enterprises, loans to States, Union Territories and foreign governments and acquisition of valuables.

 

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