(b) Capital Budget: Capital budget contains capital receipts and capital expenditure of the government. A surplus budget occurs when the estimated revenues exceed the expected expenditure. (ii) Components: For instance, sales tax is an indirect tax because indirect tax is collected by government from the seller of the commodity who in turn realizes the tax amount from the buyer by including it in the price of the commodity. Such expenditure is incurred on long period development. 7. It estimates capital receipts and revenues. Solution Show Solution. (ii) In other words, when sum of revenue receipts and capital receipts fall short of the sum of revenue expenditure and capital expenditure, budgetary deficit is said to occur. 30,000 per year. -> Non-tax revenue refers to government revenue from all sources other than taxes. Expenditure on agriculture, industry, public utilities, health and education etc. Repeaters, Vedantu (a) Activities to secure a reallocation of resources: Objectives of budget: Explain the Role of Government Budget in Fighting Inflationary and Deflationary Tendencies. Examples of revenue expenditure are: salaries of government employees, interest : payment on loans taken by the government, pensions etc. Explains actual receipts and expenditure of the closing year and reasons for deficit or surplus in that year. Budget Expenditure & Its Related Concepts. 11. This objective organically strengthens the economic structure of a nation. Disinvestment means selling whole or a part of the shares (i.e., equity) of selected public sector enterprises held by government. 1. (i) Primary deficit is defined as fiscal deficit minus interest payments. Economic growth- The overall economic growth of a nation relies on savings and investments. It determines government expenditure and receipts. Announces financial and economic policies for the upcoming year. 20 lessons • 3h 8m . 1) Tax concessions or subsidies:- to encourage investment government can give tax to producers for ex: government discourage the production of harmful by providing subsidies. assist in the redistribution of revenues based on social priorities. Candidates who are ambitious to qualify the Class 12 with good score can check this article for Notes. Pro Lite, Vedantu Reducing inequalities in income and wealth 3. (b) Capital receipts: A government budget is an annual financial statement showing item wise estimates of Non-developmental expenditure: Non-developmental expenditure of the government is the expenditure on the essential general services of the government. Apart from the three main types of budget, there are Zero budgeting, Outcome Budget and Gender budgeting. importance of govt budget are : (i) Economic growth: To promote rapid economic growth so as to improve living standards of the people. Progressive Tax: A tax the rate of which increases with the increase in income and decreases with the fall in income is called a progressive tax. Do you know who presented the first Union Budget of independent India? (a) Balanced Budget: If the government revenue is just equal to the government expenditure made by the general government, then it is known as balanced budget. (a) Neither create any liabilities for the government; and ♦ Fee: Fee refers to a payment made to the government for the services that it renders to the citizens. Let us discuss them in detail: (ii) Government should increase its receipts from various sources of tax and non-tax revenue. This deficit provides an indication of the financial health of the economy. (a) Meaning: Zero budget starts from the zero base, and it is made based on needs and cost of government. These plans s the objectives of the company and the proposed way of accomplishing them. Revenue Deficit = Total Revenue Expenditure – Total Revenue Receipts Fiscal deficit indicates capacity of a country to borrow in relation to what it produces. It is essential because it helps to set a goal for future financial planning. Indirect Tax: When (a) liability to pay a tax (Impact of tax) is on one person; and Pro Lite, CBSE Previous Year Question Paper for Class 10, CBSE Previous Year Question Paper for Class 12. An annual budget provides financial aid to such businesses to grow. Objectives of Government Budget. • Capital receipts include items which are non-repetitive and non-routine in nature, Let us discuss them in detail: A budget is in deficit if the expenditure of the government is higher than that revenue generated in a fiscal year. This also includes loans given by the government to enterprises like Sahara for the purpose of development. Explain the role of the government budget infighting inflationary and deflationary tendencies. Non-tax revenue: It refers to government revenue from all sources other than taxes called non-tax revenue. Tax: A tax is a legally compulsory payment imposed by the government on income and 5. (a) Plan and non-plan expenditure: Chapter at a Glance, Government Budget And Its Related Concepts. 6. 5. Reducing regional disparities. (vi) So, finally government has to reallocate resources in accordance to social and economic considerations in case the free market fails to do or does so inefficiently. Just like the former one, Capital revenue is classified into capital receipts and expenditure. (b) Implications of primary deficit: While fiscal deficit shows borrowing requirement of the government for financing the expenditure inclusive of interest payments, primary deficit reflects the borrowing requirements of the government for meeting expenditures other than interest payments on earlier loans. Share. It means that the Government is taking more money under its control which leads to fall in prices. Government can also levy hefty taxes upon production of harmful products like cigarettes and alcohol to discourage the production of those. (i) Revenue deficit, (ii) Fiscal deficit and (iii) Primary deficit It means a tax in which impact and incidence of tax falls on the same persons, then it is termed as direct tax. The government accounting is maintained according to the government rules and regulation. General objectives of a government budget are as under: 20. (iv) Another point to be noted here is that as the government borrowing increases, its liability in future to repay loan with interest also increases leading to a higher revenue deficit. (i) Meaning: • Recovery of Loans and Advances: Loans offered to others are assets of the government. (iv) It reduces income of the rich and raises the living standard of the poor, thus, leads to equitable distribution of income. (a) Revenue Budget: Revenue Budget contains both types of the revenue receipts of the government, i.e., Tax revenue and Non tax revenue ; and the Revenue expenditure. They are: Provide structure. 30. Surplus Budget: If the revenue received by the general government is more in comparison to expenditure, it is known as surplus budget. 10,00,000. In revenue receipts both the conditions should be satisfied. Such grants and gifts are received during national crisis such as earthquakes, flood, war etc. (i) Capital Receipts: Government receipts that either creates liabilities (of payment of loan) or reduce assets (on disinvestment) are called capital receipts. They encourage small industries like “Khadi” to flourish by allowing subsidised loans and reduced taxes on raw material, needed for production. Components of Budget. Fiscal deficit: 9. It helps to uplift underprivileged sections of society by introducing new policies. • Tax Revenue: (ii) Increase in Foreign Dependence: Government also borrows from rest of the world. • Disinvestment: A government raises funds from disinvestment also. 4. What is a Budget ? In other words, indirect taxes are the taxes of whose burden can be shifted to others. (v) Expenditure on special anti poverty and employment schemes will be increased to bring more people above poverty line. (i) Budgetary deficit refers to the excess of total budgeted expenditure (both revenue expenditure and capital expenditure) over total budgetary receipts (both revenue receipt and capital receipt). This type of budget is best suited for developing economies, such as India. 15. It may be of two types: Similarly, itemwise details of government receipts indicate the sources from where the government intends to get money to finance the expenditure. 3. Overview. 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As a result, government assets are reduced. • Borrowing (Domestic and External): Borrowings are made to meet the financial requirement of the country. Objective of the Government Budget The objective that are pursued by the government through the budget are-I. In this case, imposed taxes surpass the expenses. Taxes are of two types: Direct taxes and Indirect taxes. The objectives of government budget are already explained in our study material. 1. Economic growth- The overall economic growth of a nation relies on savings and investments. Budget is used as an important policy instrument to combat(solve) the situations of deflation and inflation. In case of an indirect tax, person first pays the tax but he is able to transfer the burden of the tax to others. 8,78,804 crore. Sheelu Singh. All the budget needs to be passed by assembly or parliament before implementing. If income rises to Rs. In the beginning of every year, the Government of India prepares a document and presents it before Lok Sabha. Proportional Taxation: A tax is called proportional when the rate of taxation remains constant as the income of the taxpayer increases. In this way budget is the most important instrument in hands of governments to achieve their objectives and there lies the importance of the government budget. Budget is also known as the Annual Financial Statement of the nation. are examples of plan expenditure. For example, The Government of India may give Rs. This includes both consumption and investment expenditure by the government or Planning Commission of a country. • Non-Tax Revenue: (a) Today every country aims at its economic growth to improve living standard of its people. Here the value of asset is Rs. Gender budget aims at gender equality, specifically by introducing new schemes and policies to empower women. Itemwise estimates of expenditure discloses how much and on what items, the government is going to spend. Government budget and its components assist in the redistribution of revenues based on social priorities. Symbolically, Deficit budget = estimated expenditure > estimated revenues. An annual budget provides financial aid to such businesses to grow. Pro Lite, NEET Interest receipts from these loans are an important source of non-tax revenue. It means a tax in which impact and incidence of tax lie on two different persons, then it is termed as indirect tax. 2,00,000 and Rs. (ii) These refer to the phases of recession, depression, recovery and boom in the economy. The federal government encompasses the country … -> Nor cause any reduction in assets of the government, are called revenue receipts. 5,00,000; 20% on incomes between Rs. Apart from that, a few other important points of the government budget are listed below. 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