Page 249 - DECO201_MACRO_ECONOMICS_ENGLISH

Macro Economics

Notes Capital Budget

It consists of capital receipts and payments.

Capital Receipts

This includes loans raised by the government from the public called market loans, borrowings
by the government from RBI and other parties through sale of treasury bills, loans received
from foreign bodies and governments, and recoveries of loans granted by the union government
to states and union territory governments and other parties.

Capital Payments

These payments consist of capital expenditure on acquisition of assets like land, buildings,
machinery, equipment, infrastructure, as also investment in shares, etc. and loans and advances
granted by the union government to state and union territory government companies,
corporations and other parties.
Sources of Revenue

The sources of funds to finance development expenditure of a country are:
Taxation

Some important types of taxes are as follows:
Income Tax: There are two type of income tax that is personal income tax and corporation
tax. Personal Income tax is levied on individuals by the central government and the
proceeds are shared between sates and Center. It is based on principle of "ability to pay"
that is those who can pay more should pay more to the government. Corporation is a tax
on income of the companies. The central govt. has been imposing corporation tax on the
profits of the large and small companies.

Interest Tax: The interest tax act provided for the levy and a special tax on the gross
amount of interest accruing to the commercial banks on loans and advances made by them
in India. The tax is levied on the gross interest income of "credit institutions" that is banks,
financial institutions, financial companies, etc.
Estate Duty: Estate duty was imposed on the estate of a person, which was inherited by his
heirs.
Wealth Tax: Wealth tax is imposed on accumulated wealth or property of every individual.
Taxes on Commodities: Revenue from commodity taxation is the most important source
of taxation for the central govt. Central excise and custom duties are two important taxes
of the central govt.

Central Excise (Indirect): These duties are levied by the centre on commodities which is
produced within country MODVAT was introduced for central excise in 1988. Now it has
been converted to VAT.
Customs Duties (Indirect): These are duties or taxes imposed on commodities imported
into India.

VAT (Value Added Tax): It is imposed on sales.

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