New Delhi, Jan 30: The most significant and most awaited budget is just round the corner and will be presented on February 1. Finance Minister Arun Jaitley will present his fourth budget for the fiscal year 2017-18 in the Parliament. Last year, the Indian government had presented a budget of Rs 19,78,060 crore to be spent in the economic year 2016-17.
For this year as well, the government is all set to roll out a planned budget allocation to the various sectors of the Indian economy. However, have you ever thought how does the government earn that money that it allocates to various sectors at the presentation of the budgets? Tax, yes. But tax is just a little part of government’s income.
Let us walk you through the sources of the government’s income:
There are basically three sources of the government’s income that goes directly in its pocket and a lot is covered in these three:
- Taxes i.e., all the revenue collected from various taxes
- Non-tax revenue i.e., revenue collected from interest, assets in form of dividend and profits, fees, fines and miscellaneous receipts.
- Capital receipts i.e., borrowings and other liabilities
- Corporation tax is tax on the income of various companies.
- A large part of corporation tax comes from direct collection
- Rest of it comes from surcharge and education cess
- Income tax is tax on the income earned by individuals
- A large part of the Income tax collected, comes from actual collection
- Rest of the total income tax collected comes from surcharge, education cess and others
- Service tax is tax collected from providing services
- A large part of service tax comes from actual service.
- The rest part of the service tax is collected from Swacch Bharat cess and education cess. Together they make up the total service tax.
- Customs duty is tax on imports
- A large part of this comes from additional customs duty.
- Rest comes from basic customs duty, education cess, national calamity duty and others.
- Excise duty if tax imposed on goods manufactured and sold in India
- A large of excise duty is collected from basic and special excise duties
- Rest of the total excise duty earned by the government comes from additional duty on petrol and diesel, surcharge on tobacco products, clean environment cess, and others.
In the year 2015-16, corporation tax made 31% and income tax made 20.5% of the total tax revenue collected by the government. In the year 2016-17, corporation tax made 21% and income tax made 14% of the total tax revenue.
- Non-tax revenue comes from the money earned by the government other than taxes.
- The largest part of the non-tax revenue is collected from profits and dividends of Public Sector Undertakings (PSU).
- Revenue collected from sale of spectrum forms the second largest part of the non-tax revenue.
- Rest of the non-tax revenue is collected from royalty on inland petroleum, fees collected from national highways, interests and others.
- Non tax revenue is 11% of the total receipts.
- Collection of capital receipts come from borrowings and other liabilities.
- The largest part of capital receipts is collected from market loans.
- Rest of it is collected from recovery of loans, disinvestment, small savings securities, external debt and others.
- Capital receipts forms the 26% of the total receipts.
Government Earning from Taxes:
Now, of these, corporation tax and income tax which comes under ‘Taxes’ category makes one-third of the government’s total earning.
Where does the government spend the tax money?
- The income tax and corporate tax mostly spent on Interest payment, subsidies, to meet the loss of post office and PSUs etc.
- The service tax collection is mostly spent or allocated on salaries and maintenance of defence, police department, and as natural calamity fund.
- The excise duty collection goes to funding of states and union territories, general services of the government like salaries, travelling, maintenance etc.
- The custom duty collection is spent on modernisation and maintenance of defence, loan to foreign governments, loan to public enterprises, etc.
Where does the government spend the money collected from various sources?
Every year during the budget presentation session, the government allocates some amount of money for the desired development of that particular sector. Last year, Finance Minister Arun Jaitley proposed a budget of Rs 19,78,060 crore in the fiscal year 2016-17, which was 10.8% higher than Rs 17,65,436 crore which was presented for the fiscal year 2015-16.
Every year, the government allocated a substantial amount to the following sectors: Defence, Urban, Railways, Women and Child development, Power, Chemical and Fertilizers, Agriculture and Farmers Welfare, Road Transport and Highways, Rural development, Health and Family welfare, Home affairs, HR development, Consumer affairs, Housing and poverty alleviation, Communications and Information Technology etc.
Here’s the complete breakdown of last year’s allocation:
The budget allocation for the financial year 2016-17 for the rest of the sectors:
|Ministry||Allocation||% of Total Budget||Ministry||Allocation||% of Total Budget|
|1||Water resources rejuvenation||6,192 crores||0.31%||20||Union Territories||14,180 crores||0.72%|
|2||Skill development and entrepreneurship||1,804 crores||0.09%||21||Statistics and Program Implementations||4,753 crores||0.24%|
|3||Youth Affairs and Sports||1,592 crores||0.08%||22||Social Justice and Empowerment||7,335 crores||0.37%|
|4||Shipping||1,531 crores||0.08%||23||Space||7,509 crores||0.38%|
|5||Law and Justice||5,336 crores||0.27%||24||Tribal Affairs||4,827 crores||0.24%|
|6||Mines||1,213 crores||0.06%||25||Tourism||1,590 crores||0.08%|
|7||Labour and Employment||6,243 crores||0.32%||26||Heavy Industries and Public Enterprises||1,320 crores||0.07%|
|8||Earth Sciences||1,672 crores||0.08%||27||Textiles||4,595 crores||0.23%|
|9||Science and Technology||10,353 crores||0.52%||28||Culture||2,500 crores||0.13%|
|10||Personnel, Public Grievances and Pensions||1,478 crores||0.07%||29||Housing and Urban Poverty Alleviation||5,384 crores||0.27%|
|11||Panchayati Raj||768 crores||0.04%||30||Ayurveda||1,320 crores||0.07%|
|12||New and Renewable Energy||5,036 crores||0.25%||31||The President, Parliament, UPSC and the Secretariat of the VP||1,276 crores||0.06%|
|13||Minority affairs||3,816 crores||0.19%||32||Communications and Information Technology||30,768 crores||1.56%|
|14||Micro, Small and Medium Enterprises||3,465 crores||0.18%||33||Shipping||1,531 crores||0.08%|
|15||Commerce and Industry||7,389 crores||0.37%||34||Power||12,253 crores||0.62%|
|16||Atomic Energy||11,682 crores||0.59%||35||External Affairs||14,663 crores||0.74%|
|17||Information and Broadcasting||4,084 crores||0.21%||36||Development of North Eastern Region||830 crores||0.04%|
|18||Civil Aviation||2,591 crores||0.13%||37||Corporate Affairs||344 crores||0.02%|
|19||Environment, Forest, Climate Change||2,250 crores||0.11%|
There are a total of 52 sectors that the government allocates money to with an aim of development of the sectors.