Sources of tax revenue in India
There are two main sources of government revenue, they are Tax Revenue and Non-Tax Revenue. The major source of tax in India is generated from direct taxes such as Income tax, securities transaction tax, corporate income tax, etc.
Other important sources of tax revenue are Corporation tax, Customs, Union excise duties, service tax, etc. In 2016-17, Direct taxes such as personal tax and corporate taxes accounted for 51.3% of the total taxes collected by the government and in 2020-21 direct tax increased to 56.4% of total taxes collected by the government.
Introduction to Public revenue | Why it is important?
Public Revenue occupies an important place in Public Finance. The Government needs to perform many functions to the people’s welfare.
To do this the Government involves a substantial amount of Public expenditure, which can only be provided through public revenue.
The amount of public revenue to be raised depends on the necessity of public expenditure and people’s ability to pay.
The income of the government by all sources is called Public income or public revenue. The government creates and finds different Sources of revenue and updates them regularly.
As per Dalton, the Public Income is of two senses one is Wide and the other is narrow.
Wider in the sense it is “All the income or receipt which a public authority may secure during any period of time“.
In a narrow sense, it is “It includes only those sources which are ordinarily known as revenue resources“.
To avoid confusion, the Wider sense is termed as Public Receipts and the Narrow sense is termed as Public Revenue.
In a narrow sense, it includes only those sources of income that are described as Revenue Resources by the Government. In the Broad Sense, it includes loans raised by the Government also.
Classification of Public Revenue
There are different sources of revenue for the government but the Tax Revenue is most important. Tax is paid compulsory by the citizens to the government to meet public expenditure.
Tax is legally imposed on the taxpayer by the government and the taxpayer cannot refuse to pay taxes.
Anatol Murad“A Tax is a compulsory payment made by a person or a firm to a government without reference to any benefit the payer may derive from the government.”
Dalton“A Tax is a compulsory contribution imposed by public authority, irrespective of the exact amount of service rendered to the the taxpayer in return and not imposed as a penalty for any legal offence.”
Characteristics of Tax
Tax is compulsory, it is legally imposed by the government. Refusal to pay tax is a punishable offense.
There is no quid pro quo (favor or advantage granted in return for something) between a taxpayer and public authorities. A tax is not levied as a fine or penalty for breaking the law.
Sources of Revenue
Income Tax, Corporate Tax, Sales Tax, Surcharge, Cess
It is obtained by the government from sources other than tax is called Non-Tax Revenue.
A fee is charged by public authorities for rendering a service to the citizens. It is compulsory levied like tax.
The government provides certain services and charges certain fees for them. Examples of fees are Issuing of Passport, Driving Licenses, etc.
It is a penalty imposed on an individual for violating the law. An example of a fine is the Violation of Traffic rule, non-payment of income tax on time, etc.
Earnings from Public Enterprises
The government gets revenue from Public enterprises. Some public sector/enterprises make profits. The profits or dividends that the government gets can be used for public expenditure.
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: Because of Construction of Public park or Construction of Road or Railways, People in that area may experience an Appreciation in the value of their property or land.
Gifts, Grants, and Aids
A Grant from one government to another is an important source of revenue in modern days.
The Central Government provides Grants to the State Government and State Government provides grants to the local government to carry out their function.
Grants from Foreign countries are known as Foreign Aid. Developing countries receive military, food, technological aid, etc from other countries.
Escheats refer to the claim of the state to the property of persons who die without legal heirs or documented will.