A. Tax revenue – It consists of the proceeds of taxes & other duties levied by the government. The various taxes that are imposed by a government can be categorised into two groups.
1. Direct Taxes
2. Indirect Taxes
1. Direct taxes – Direct Taxes are those taxes which are paid by the same person on whom they have been imposed. Tax burden cannot be shifted on to others.
Example- Income Tax, wealth tax.
2. Indirect taxes – Those taxes whose burden (partial or whole) can be shifted.
Example- Excise duty.
Note- the Basis of classifying taxes into direct tax & Indirect tax is whether the burden of the tax is shiftable to others or not.
B. Non-Tax revenue – It includes receipts from sources other than taxes. The main sources of non-tax revenues are -Interest, Profits & dividends, Fees & fines, Special assessment, Gifts & grants, Escheats
Capital receipts- Capital receipts are defined as any receipt of the government which either creates a liability or leads to the reduction in assets. Capital receipts include the following 3 items.
Recovery of loans
Budget expenditure – It refers to the estimated expenditure of the government under various heads. In India, it is classified into two categories.
1. Revenue expenditure
2. Capital expenditure
Revenue Expenditure – It refers to all those expenditures of the government which
do not result in a creation of physical or financial assets.
do not cause any reduction in liability of the government.
It relates to those expenses incurred for the normal functioning of the Government departments & provision of various services, interest payments on debt incurred by government & grants given to state government & other parties.
Capital expenditure – An expenditure which either creates an Asset or reduces liability is called capital expenditure. It consists mainly of expenditure on Acquisition of Assets like land, buildings, machinery, equipment, investments in shares, etc. & loans and advances granted by the central government to state & union territory government, government companies, corporation & other parties.
Other classifications of Public Expenditure:-
1. Plan Expenditure and Non-plan expenditure:-Public expenditure is classified as plan expenditure and non-plan expenditure.
Plan expenditure- Plan expenditure refers to that expenditure which is provided in the budget to be incurred on the programmes. For example, expenditure on agriculture, power, communication, industry, transport, general economic and social services etc.
Non-plan expenditure- It refers to the government expenditure other than the expenditure related to the plan of the government. Such an expenditure is a must for every Country having planning or no planning e.g. expenditure on police, judiciary, military, expenditure on normal running of government departments, expenditure on relief measures for earthquake/flood victims.
2. Developmental Expenditure and Non-Developmental Expenditure:- Public expenditure is also classified as development expenditure and non-development expenditure.
Development expenditure- It refers to expenditure on activities which are directly related to the economic and social development of the country. This includes expenditure on education, agricultural and industrial development, rural development, social welfare, scientific research etc. Such expenditure it not a part of the essential functioning of the government. It directly contributes to the development of the economy. It adds to the flow of goods and services.
Non-development expenditure- It refers to expenditure incurred on essential general services of the Government such expenditure is essential from the administrative point of view. Expenditure on police. Judiciary, defence, general administration, interest, payments tax collection, subsidies on food etc. fall under this category.