This is a dangerous practice, though very convenient for the government. In most parliamentary systems, the budget is presented to the lower house of the legislature and often requires approval of the legislature. 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. This is one of the most fundamental objectives behind framing a government budget. 3. Financing Public Enterprises- Several public sector industries are established for the social welfare of the public. (iv) By doing it the government tries to achieve the state of economic stability. Therefore, fiscal deficit should be as low as possible. (ii) Reduction of poverty and employment: To eradicate mass poverty and unemployment by creating maximum employment opportunities and providing maximum social benefits to the poor. are its examples. • Government receipts, that either creates liabilities (of payment of loan) or reduce assets (on disinvestment) are called capital receipts. It increases circulation of money and causes inflation. Budget is also known as the Annual Financial Statement of the nation. It helps to uplift underprivileged sections of society by introducing new policies. importance of govt budget are : (i) Economic growth: To promote rapid economic growth so as to improve living standards of the people. Let us discuss them in detail: Plan expenditure: It refers to that expenditure which is incurred by the government to fulfill its planned development programmes. (d) Management of public enterprises: (v) Expenditure on special anti poverty and employment schemes will be increased to bring more people above poverty line. (i) A government undertakes commercial activities that are of the nature of natural monopolies; and which are established and managed for social welfare of the public. ♦ Fee: Fee refers to a payment made to the government for the services that it renders to the citizens. Conclusion: A basic difference between capital expenditure and revenue expenditure is that the capital expenditure is incurred on creation or acquisition of assets, whereas, the revenue expenditure is incurred on rendering services. (b) Capital receipts: (b) Implications of fiscal deficit: 4. 1. (ii) A natural monopoly is a situation where there are economies of scale over a large range of output. -> Tax revenue refers to receipts from all kinds of taxes such as income tax, corporate tax, excise duty etc. ADVERTISEMENTS: Read this article to learn about the top thirty-five frequently asked questions on Government Budget and Economy. (b) Revenue and capital expenditure: If a budget is not approved prior to the beginning of the budget period, the original budget is the budget that was first approved for application in the budget year. -> Externally: Rest of the world (foreign government and international institutions) The various objectives of Government Budget etc. It means that the Government is taking more money under its control which leads to fall in prices. Candidates who are ambitious to qualify the Class 12 with good score can check this article for Notes. The mechanics of this process, and the relative roles of the two parts of government, differ considerably among countries. Thus, it refers to expenditure that leads to creation of assets and reduction in liabilities. A budget is a formal statement of management’s plans for a specified method of communicating the agreed-upon objective of the organization. Several public sector industries are established for the social welfare of the public. Primarily the budget is divided into 3 types. Budget keenly focuses on lowering the price fluctuations in the market. It shows the sources from where the government intends to get money to finance the expenditure. 10:46 mins. What is a Budget ? It brings economic stability in a country by cutting down wasteful expenses. 5,00,000; 20% on incomes between Rs. ♦ It is the revenue received by the government by selling the goods and services produced by the government agencies. 1000 crore as a loan to The Government of Delhi. Government Budgeting: Union Budget Presentation In India, the Budget is presented to Parliament on such date as is fixed by the President. (i) Revenue Expenditure: An expenditure that (a) Neither creates any assets (b) nor causes any reduction of liability. (ii) Revenue deficit implies that the government has to cover this uncovered gap by drawing upon capital receipts either through borrowing or through sale of its assets. The original budget may include residual appropriated amounts automatically carried over from prior years by law. Main objectives of budget are: (i) Reallocation of resources. 12. Direct Taxes: When (a) liability to pay a tax (Impact of Tax), and (b) the burden of that tax (Incidence of tax), falls on the same person, it is termed as direct tax. (i) Revenue deficit refers to the excess of revenue expenditure of the government over its revenue receipts. (iii) A government reduces the inequality in the distribution of income and wealth by imposing taxes on the rich and giving subsidies to the poor, or spending more on welfare of the poor. It is essential for any government to plan a budget as it allocates various resources across the nation to ensure economic progress and stability. for rendering services by the hospital is revenue expenditure. Budgetary deficit: It refers to the excess of total budgeted expenditure (both revenue 4. Proportional Taxation: A tax is called proportional when the rate of taxation remains constant as the income of the taxpayer increases. It earns profit from the sale proceeds of the products of such public enterprises. Government Budget It is a statement of expected/estimated receipts and expenditure of the government over the period of a … 1. It is essential because it helps to set a goal for future financial planning. Introduction, Meaning, Importance, Features & Limitations of Planning • Tax Revenue: For example, presently (2012-2013) there is no tax up to annual income of Rs. A-Level (AS and A2) Economics revision section covering UK Economic government policy. (ii) Components: General objectives of a government budget are as under: 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. The objectives of government budget are already explained in our study material. 5. It means that the Government is taking more money under its control which leads to fall in prices. This is because the first two objectives would benefit from a high level of demand in the economy because … Federal, state and local governments make laws and budgets— completely independently—and fulfill completely different responsibilities. Meaning: Budget expenditure refers to the estimated expenditure of the government on its “development and non-development programmes or “plan and non-plan programmes during the fiscal year. 2,00,000, then he will have to pay Rs. As private sector can not provide all the goods and services the government has to provide these goods. In other words, it shows the extent of government dependence on borrowing to meet its budget expenditure. Successfully handles the economic infatuation of the country by balancing inflation and deflation. 3. The government accounting helps to provide financial information and data for budget preparation. (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. Expenditure on agriculture, industry, public utilities, health and education etc. Capital recipients are government liabilities (borrowings, disinvestments like shares of public enterprises). This includes expenditure on defence, payment of old age pension, collection of taxes, interest on loans, subsidies etc. This is the value of special assessment. Since, recovery of loan reduces the value of assets, it is termed as a capital receipts. Surplus Budget: If the revenue received by the general government is more in comparison to expenditure, it is known as surplus budget. Budget receipts are of two types: It includes tax revenues like income tax, corporation tax and non-tax revenue like fines and penalties, special assessment, escheat etc. • Capital receipts include items which are non-repetitive and non-routine in nature, 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. Direct Tax: When (a) liability to pay a tax (Impact of Tax), and (b) the burden of that tax (Incidence of tax), falls on the same person, it is termed as direct tax. Budget receipts (government receipt): Budget receipt refers to the estimated receipts of the government from various sources during a fiscal year. II. However, capital expenditure is long-term investments that the government makes by creating assets like building roads, hospitals etc. Do you know – Higher tax rates on a certain group of nationals and organisations can have a severe impact on the overall economy. ♦ External grants: Government receives financial help in the form of grants, gifts from foreign governments and international organisations (IMF, World Bank). Government makes provision to boost the rate of savings and investments made within the economy. • Borrowing (Domestic and External): Borrowings are made to meet the financial requirement of the country. Addressing Regional Disparity- One of the chief aims of the Government budget is to alleviate social disproportion. A government budget is a document prepared by the government and/or other political entity presenting its anticipated tax revenues and proposed spending/expenditure for the coming financial year. (iv) By doing it the government tries to achieve the state of economic stability. (i) Primary deficit is defined as fiscal deficit minus interest payments. Capital recipients are government liabilities (borrowings, disinvestments like shares of public enterprises). However, capital expenditure is long-term investments that the government makes by creating assets like building roads, hospitals etc. 1000 crore. Save. Loans, subsidies etc in determining the rapid growth of a law, i.e. equity... You ’ ll need to know exactly what each branch does and how to resolve it as expenditure... 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