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Budget Terminology
Terminology
T
he term Budget refers to the financial as possible. Accuracy becomes essential if
statement (or documents) placed by the equilibrium established in the estimates is to be
government before the legislature every maintained to the end and realised in actuals.
year on a specific date. The budget comprises data for three years:
A budget sets forth the anticipated expenditure of (a) actual figures for the preceding year;
the government during the next financial year (b) budget estimates for the current year;
(called the budget year) and the receipts for the (c) revised estimates for the current year, and
same period: (d) budget estimates for the following year.
(a) under existing laws in force, and For example, the Union Budget for 200809
(b) as a result of taxation proposals, if any, contains:
contemplated by the government. (a) actuals for 200809;
More often than not, the budget is the (b) budget estimates for 200809;
manifestation of the political philosophy of the (c) revised estimates for 200809, and
party in power. (d) budget estimates for 20092010.
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sales tax and excise duties). These are Regressive Taxation: If the rate of tax
imposed upon and collected from producers decreases with an increase in income, it is
and sellers. But producers and sellers can shift called regressive taxation.
the burden of these taxes on to the consumers. Receipts
However, when these taxes are passed on to When you scan the budget document, you come
the consumers, they indirectly tax the income across terms like Revenue Receipts and Capital
of the consumers. Receipts. What do these terms mean?
(b) Proportional, Progressive, and Regressive (a) Revenue Receipts may be classified into two
Taxation: A tax may be proportional, major components: Tax Revenue and
progressive or regressive according to the Non-Tax Revenue.
relationship between its rate structure and the Tax Revenue is one of the most important
income, wealth, and economic power of the resources of public revenue. It refers to
tax-payer. funds raised through taxation and implicit
A tax is proportional, progressive or in it is an element of compulsion. It is
regressive according to the percentage of the compulsory in the sense that once the taxes
tax to the tax payers income. are imposed, the person liable to pay them
has to do so. Refusal to do so is treated as
Proportional Taxation: If the tax is the
a crime for which the law prescribes severe
same percentage on all incomes, large or
punishment. Tax revenue is a steady source
small, it is called proportional taxation.
and is always certain to come because taxes
Progressive Taxation: In this system, the are paid periodically. Some of the
rate of tax goes on increasing with every important taxes are income tax, excise
increase in income. In other words, lower duty, customs duty, sales tax, estate duty,
income is taxed at a lower percentage, wealth tax, and gift tax. In addition to these,
whereas higher income is taxed at a higher the term tax revenue also includes special
percentage. assessment and fees.
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Non-Tax Revenue is raised by the (5) voluntary gifts (such as donations to hospitals
government in the form of the prices paid and charitable institutions) received by state
for the use of specific services and goods authorities
offered by it. It is purely voluntary in the
(b) Capital Receipts include loans raised by the
sense that the individual concerned has to
Government of India from the general public,
pay the price for a particular good or
governments borrowings from the RBI as
service, in case he purchases it, otherwise
well as other similar bodies (through sale of
not. The revenue under this head comes
treasury bonds), external loans (like from the
irregularly and is somewhat uncertain.
IMF), recoveries of loans granted to states /
Non-Tax revenue includes: UTs, and savings invested in PPF, etc.
(1) revenue from state monopolies and state
undertakings (like railways, electricity, Expenditur
Expendituree
telecom, forests, and irrigation); Expenditure may be classified into (a) Revenue
(2) revenue from social services (like education, Expenditure and Capital Expenditure, (b) Plan
hospital receipts); and Non-Plan Expenditure, and (c) Development
(3) revenue from public property (like lease / rent and Non-Development Expenditure.
from land); (a) Revenue Expenditure and Capital
(4) charges for specific benefits or improvements Expenditure: All expenditure incurred in the
i.e. development charges, and normal day-to-day running of the government
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is termed Revenue Expenditure. This includes while you are borrowing and spending, you
expenditure incurred on provision of services, are not creating any durable asset. This implies
salaries, subsidies, interest payments made to that there will be a repayment obligation
service debts, etc. (sometime in the future) and at the same time
Capital Expenditure is incurred in the creation there is no asset creation via investment.
of assets like land, plant & machinery, and (b) Budget Deficit refers to the excess of total
investments in securities. Also, loans and expenditure over total receipts. Here, total
advances granted to state governments and receipts include current revenue and net
PSUs by the Centre are treated as Capital internal and external capital receipts of the
Expenditure. government.
(b) Plan and Non-Plan Expenditure: Any (c) Fiscal Deficit refers to the difference between
public expenditure incurred on current total expenditure (revenue, capital, and loans
development and investment outlays that arise net of repayment) on one hand, and on the
due to plan proposals (five year plan other hand, revenue receipts plus all those
proposals) is termed Plan Expenditure. capital receipts which are not in the form of
Deficits borrowings but which in the end accrue to
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