While studying economics, one of the important things to keep in mind is the Budget of that year. We took a look at this in current affairs topic as well. Similarly, the current year’s Finance Commission report, its main points, chairman and members, etc., need to be noted. Our country’s fiscal policy, budget, Consolidated Fund of India, Contingency Fund of India, public account of India, taxes, deficits, surpluses, etc., are very important for our examination. Now we shall see one line explanations for some important terms.
Capital receipts - Cash coming from sale of or loan raised over fixed assets. Even though this is a receipt, in accounting terms, this capital receipts are not kept as income, but are accounted as liability or decrease in company assets.
Revenue receipts - Denotes the income received by sale of goods and services. Shown as receipt itself in accounts also.
Capital expenditure - Expenditure incurred to create fixed assets.
Revenue expenditures - All expenditures except for capital expenditure.
Revenue deficit - When revenue expenditure is greater than revenue receipts.
Fiscal deficit - When revenue and capital expenditure is higher than revenue and capital receipts.
Primary deficit - Fiscal deficit minus interest payments
Deficit financing - The difference between government receipts and expenditure is met by borrowing from Reserve Bank or minting fresh currency.
Direct taxes - taxes directly paid to the Government by the customer. Example - income tax, house tax, etc
Indirect taxes - Taxes paid from the goods and services consumed by the customer. Example - GST
Budget has a total of 7 documents. 1. Statement by Finance Minister 2. Summary of the Budget 3. Budget receipts 4. Demands for grant 5.End-of-year financial statement 6. Finance bill 7. Budget expenditures. Also learn about various kinds of budgets.
Sample question (UPSC 2010)
Which of the following departments are entrusted with the preparation and presentation of the Budget?
Department of Revenue
Department of Economic Affairs (answer)
Department of Financial Services
Department of Expenditure
Learn in detail about all types of taxes. Direct taxes, indirect taxes - which of those are charged by central government and which by state government, etc., should be learned.
Which of the following is a direct tax charged by the state government ?
1) Professional tax
3) Income Tax
4) Service Tax
All the above
1 only ( answer )
Since recently enacted, it is important to learn all about GST. It can be asked anywhere from preliminary examination to the interview. Similarly learn about all taxes including income tax, and all efforts by government in relation to them, fighting black money, government’s efforts to curb hawala and all other financial crimes, list of sources of revenue for state and central governments, etc. Similarly, learn about all committees commissioned by the Government regarding finances and tax allotments. For example, Vijay Kelkar committee, Raja Chelliah Committee, Rangarajan Committee, Sree Krishna Committee, etc. There will be about 5-10 main recommendations by each committee. Those are very important. Along with it, learn when and why the committee was constituted.
- We shall meet in next topic.