The finances of Panchayati Raj were summarized in the Second Administrative Reforms of 2005-2009. In this the financial problems and the sources of revenue of PRI (Panchayati Raj institutions) with summarized.
Panchayat receives funds in the following ways:
Based on Finance commission by Article 280, gets grants from Union Government.
Based on the State finance commission Article 243-I, gets devolution from the state government. Also, get grants from the State government.
Get finances from Centrally sponsored schemes for Programme Specific Allocation. Example: Rashtriya Gram SWARAJ Abhiyaan (RGSA)
Tax and Non-Tax by Internal Resource Generation.
The Panchayat raj was not given enough fiscal empowerment by the state government. The states like Tamil Nadu, Kerala, Karnataka etc were progressive in Panchayati Raj Institution. But even in these states, the Panchayat were dependent on government grants.
Financial Situation of Panchayati Raj
Panchayati Raj has very weak internal revenue generation. This is because of the thin tax domain and reluctance in collecting revenue.
Panchayats have a high dependence on grants from state and union governments.
A major part of grants is Programme Specific, from Union and state governments. Panchayat has limited discretion in incurring expenditures.
State governments do give enough funds to panchayat, due to their own financial position.
In terms of resource collection, the gram panchayat is in a better position as they have its tax domain. The state panchayat acts gave most taxation powers to village panchayats.
On the other hand, intermediate and district panchayats ie tax and non-tax have been kept much small, confined to ferry services, markets, water, and conservancy services, registration of vehicles, cess on stamp duty etc.
List of Panchayat Taxes
Tax Type
Description
Octroi
A local tax on goods entering the jurisdiction of the Panchayat, often used to regulate trade and commerce.
Property/House Tax
Tax levied on residential and commercial properties within the Panchayat jurisdiction.
Profession Tax
Tax imposed on individuals engaged in professional activities or trade within the Panchayat area.
Land Tax/Cess
Tax or levy on land, either agricultural or non-agricultural, for local infrastructure and maintenance.
Taxes/Tolls
Levied on goods or services passing through Panchayat-controlled roads, bridges, or other infrastructure.
Entertainment Tax/Fees
Tax on entertainment venues like cinema halls, theaters, and other public events within the Panchayat area.
Non-Agriculture Land Tax
A tax on non-agricultural land within Panchayat jurisdiction, often levied on industrial or commercial use.
Fee on Registration of Cattle
A fee charged for registering livestock within the Panchayat area to maintain animal health and records.
Sanitation/Drainage/Conservancy Tax
Tax used for maintaining sanitation, waste management, and drainage systems in rural or urban Panchayat areas.
Water Tax
Tax charged on water supplied to households or businesses by the Panchayat or local authorities.
Lighting Rate/Tax
Tax levied on electricity or street lighting services in Panchayat areas, often contributing to infrastructure.
Education Cess
A tax used for the development and improvement of education facilities within Panchayat jurisdiction.
Fairs and Festival Tax
Tax imposed on commercial activities during local fairs, festivals, and events to manage infrastructure costs.
