The Government Budget can be classified as Revenue Account and Capital Account.
(A) Revenue Account: The revenue account of the Government consists of two categories viz., Revenue Receipts and Revenue Expenditure.
I. Revenue Receipts: The revenue receipts refer to revenue earned by the Government from both Tax and Non tax sources.
(a)Tax revenue: – It is one of the main sources of revenue’to the Government. Tax is a compulsory payment made by the people to the Government without expecting any direct benefits from the Government. Tax revenue can be classified as Direct tax and Indirect tax.
(i) Direct tax- The direct tax is the tax levied by the Government which cannot be shifted by the person on whom it is levied. Here, the impact and incidence of tax will be on the same person. This tax is levied on the income and wealth of the people. Personnel income tax, wealth tax, interest tax, expenditure tax are a few examples.
(ii) Indirect tax: – It is the tax levied on goods and services paid indirectly by the consumers. The impact and incidence of tax will be on different people. Indirect tax is the largest source of revenue to the Government. Tlie various sources of indirect tax are Central excise duties, Custom duties etc.
(b) Non-tax revenue: The revenue collected from sources other than the tax revenue is called non tax revenue. It consists of
- Income from Public enterprises,
- Income from receipts,
- Revenue from administration and
- Income from railways.
II. Revenue Expenditure: The revenue expenditure of Government is that expenditure incurred out of its current revenue receipts. These expenses are made by the Government on its various departments and services, interest payments on public debt, subsidies etc. The Revenue expenditure is classified as follows:
(a) Plan Revenue Expenditure: The plan revenue expenditure is that expenditure spent by the Government on implementation of economic schemes, financial assistance to local Governments.
(b) Non-Plan expenditure: This type of expenditure is related to the expenses incurred on internal and external securities like defence forces, law and order, subsidies, civil administration etc.
B. Capital Account: This account shows the capital requirements of Government and its way of financing various categories. The capital account of Budget of Government consists of two divisions viz., Capital Receipts and Capital expenditures.
(i) Capital Receipts: The capital receipts refer to those receipts of Government which create liability or reduce financial assets. These are obtained through raising loans from the market, central Bank and foreign sources. It also includes loans raised through issuing indemnity bonds, debentures etc. The other sources of this kind are loans recovered from local Governments, small savings, public provident fund etc.
(ii) Capital Expenditures: It is that expenditure of Government which is spent on acquisition of assets like land, building, tools, machines, investment on shares, stocks, loans and advances made etc. The capital expenditure is also categorized as Plan capital expenditure and non-plan capital expenditure.
- Plan capital expenditure: This expenditure is made to create permanent revenue yielding assets. For example for construction of roadways, irrigation projects, power stations, education, public health, housing, etc. This expenditure is incurred on creation of economic and social infrastructures.
- Non-plan capital expenditure: This type of expenditure is spent to provide rehabilitation facilities to the people who are affected by natural calamities, compensation paid to the victims of accidents and payment of interest on loans borrowed.
