The following points highlight the two main sources of government revenue in India.
A. Tax Revenue:
Union Excise Duties:
They are, presently, by far the leading source of revenue for the Central Government and are levied on commodities produced within the country, but excluding those commodities on which State excise is levied (viz., liquors and narcotic drugs).
The most important commodities from the revenue point of view are sugar, cotton, mill cloth, tobacco, motor spirit, matches and cement.
Customs:
Customs duties include both import and export duties. These are the second-most important source of revenue for the Central Government.
Income Tax:
ADVERTISEMENTS:
Income tax is at present another important source of revenue for the Central Government. It is levied on the incomes of individuals, Hindu undivided families and unregistered firms.
Corporation Tax:
The income-tax on the net profits of joint stock companies is called corporation tax.
Wealth Tax:
It is an annual tax on the net wealth of individuals and Hindu undivided families. It is a progressive tax.
Gift Tax:
It is a tax on gifts of property by an individual in his lifetime to future successors.
Capital Gains Tax:
ADVERTISEMENTS:
It is applicable to capital gains resulting from the sale, exchange or transfer of capital assets.
Hotel Expenditure Tax:
Recently, a new tax has been levied on those who patronise high class hotels.
Tax on Foreign Travel:
Another new tax levied on foreign travel for conserving foreign exchange as well as to raise revenue.
B. Non-Tax Revenue:
Interest Receipts:
This largest non-tax source of Central Government’s revenue receipts is the interest it earns mainly on the loans it has advanced to State Governments, to financial and industrial enterprises in the public sector.
Surplus Profits of the Reserve Bank of India (RBI):
ADVERTISEMENTS:
The surplus profits of the RBI is also a part of the revenues of the Central Government. In recent years, these have been quite substantial because of the large borrowing by the Government from the RBI against Treasury Bills for financing the Five-Year Plans.
Currency, Coinage and Mint:
The Government also derives income from running the Currency Note Printing Presses. Moreover, profits are made from the circulation of coins — this profit being the difference between the face value of the coins and their manufacturing cost.
Railways:
The railways in India are owned and run by the Government of India. Accordingly, they pay a fixed dividend to general revenues, i.e., to the Central Government, on the capital invested in the railways. Besides, a part of the net profits made by the railways is also payable to the Central Government.
Profits of Public Enterprises:
Public enterprises owned by the Central Government, e.g., the Steel Authority of India (SAIL), Hindustan Machine Tools (HMT), Bharat Heavy Electricals Ltd. (BHEL), State Trading Corporation (STC). The profits of such Public Sector Units (PSUs) are another source of revenue for the Government of India.
Other Non-Tax Sources of Revenue:
The main source among them is the Departmental Receipts of the various ministries of the Central Government by way of fees, penalties, etc.