Non tax Revenue

• The recurring income earned by the government from sources

other than taxes.
• It plays a role in enhancing the national macro-control ability ,
mobilizing the enthusiasm of local governments and departments ,
making up for the shortage of financial budget finds , setting up
public welfare and promoting local economic development
 Some examples
Income from interest
Dividend
Fines
Fees and more
Example : when people available services offered by the
government, like electricity, telecommunication, DTH,
broadband etc, they pay bills, which include the share of non-tax
revenue as the government provides infrastructure support to
facilitate the services. The government also collects interest as
non-tax revenue on the loans and funds advanced to states for
various purposes. So, the government collects non-tax revenue
in return for providing/facilitating any goods or services.
 Importance
• It is a source of earning for the government.
• The amount of tax collection may vary due to
employment situation, non tax revenue kepps
the revenues somewhat balanced.
• It is a steady flow of revenue from a wide
variety of sources.
• It also helps in recovering the cost of services
offered.
Table showing the various taxes collected throughout the years
 Sources
1. Fees: A fee is charged by public authorities for rendering a service to the citizens. Unlike tax, there is no
compulsion involved in case of fees. For example, fees are charged for issuing of passports, driving licenses,
etc.

2. Fines or Penalties : Fines or penalties are imposed as a form of punishment for breach of law or non
fulfillment or certain conditions or for failure to observe some regulations. But while taxes are generally
imposed to collect revenue. Fines are imposed as a form of punishment or to prevent people from breaking
the law. They are not expected to be a major source of revenue to the government.

3. Surplus from Public Enterprises: The Government also gets revenue by way of surplus from public enterprises.
In India, the Government has set up several public sector enterprises to provide public goods and services.
Some of the public sector enterprises do make a good amount of profits. The profits or dividends which the
government gets can be utilized for public expenditure. This is because, the public gets goods and services,
and the government gets prices, and consequently profits from selling such goods and services.

4. Special assessment of betterment levy: It is a kind of special charge levied on certain members of the
community who are beneficiaries of certain government activities or public projects. For example, due to a
public park in a locality or due to the construction of a road, people in that locality may experience an
appreciation in the value of their property or land. Thus, due to public expenditure, some people may
experience 'unearned increments' in their asset holding..
 Sources
5. Grants and Gifts: Gifts are Voluntary contributions by individuals or institutions to the government. Gifts are
significant source of revenue during war and emergency. A grant from one government to another is an important
sources of revenue in the modern days. The government at the Centre provides grants to State governments and the
State governments provide grants to the local government to carry out their functions. Grants from foreign countries
are known as Foreign Aid. Developing countries receive military aid, food aid, technological aid, etc. from developed
countries.

6. Deficit Financing : Deficit means an excess of public expenditure over public revenue. This excess may be met by
borrowings from the market, borrowings from abroad, by the central bank creating currency. In ca se of borrowing
from abroad, there cannot be compulsion for the lenders, but in case of internal borrowings there may be compulsion.

7. Interest: It comprises of interest of loans given to states and union territories for reasons like non-plan schemes (e.g.
flood control) and planned schemes with maturity period of 20 years such as modernization of police forces and also
interest on loans advanced to Public Sector Enterprises (PSEs), Port Trusts and other statutory bodies etc.

8. Dividends and profits: This includes dividends and profits from PSEs as well as the transfer of surplus from Reserve
Bank of India (RBI)

9. Petroleum license: This includes fees to get the exclusive right for exploration in a particular region. Such fees may be
in the form of royalty, share of the profit earned from contact areas during a specific period, Petroleum Exploration
License (PEL) fee or Production Level Payment (PLP).

10. Fees for Communication Services: This mainly includes the license fees from telecom operators on account of
spectrum usage charges that licensed Telecom Service Providers pay to the Department of Telecom (DoT).
 Sources
11. Fees for Communication Services: This mainly includes the license fees from telecom
operators on account of spectrum usage charges that licensed Telecom Service Providers pay
to the Department of Telecom (DoT).
12. Broadcasting fees: It includes license fee paid by DTH operators, commercial TV services,
commercial FM radio services etc.
13. Road, Bridges usage fees: This includes receipts through toll plazas on account of the usage of
national highways, permanent bridges etc

• Source of non tax by state government

– Police services
– Home guards
– Electricity
– Administrative services
– Municipal services
– Jobs through state public services
 Long run disadvantages of non tax revenue
• Increases burden on enterprises
• Disperses the financial resources of the government
• Can have negative impact on economic growth as non tax revenue and
economic growth are inextricably linked.