It is divided into two primary categories: the Revenue Account and the Capital Account
These accounts are further classified into Receipts (money coming in) and Expenditure (money going out)
I. Revenue Account
The revenue account covers “one-way transactions”—money that is received or spent without creating assets or reducing liabilities
1. Revenue Receipts
These are regular, recurring incomes for the government. They are sub-divided into:
- Tax Revenue: Income from all taxes imposed by the Central Government.
- Direct Taxes: Levied on individual income and wealth (e.g., Personal Income Tax and Corporate Tax) [5, 6].
- Indirect Taxes: Levied on the consumption of goods and services (e.g., GST, Excise Duty, and Customs) [5, 7].
- Non-Tax Revenue: Recurring income from sources other than taxes. This includes fines, penalties, dividends/profits from public enterprises, interest received on loans given by the government, and earnings from services like coin printing or railways [5, 8].
2. Revenue Expenditure
These are recurring expenses necessary for the day-to-day functioning of the government that do not create assets [9].
- Major Items: Interest payments on past borrowings, salaries and pensions for government employees, grants and subsidies to states and other parties, and spending on education, health, and defense services [9].
II. Capital Account
The capital account records “two-way transactions” that result in a change in the government’s assets or liabilities [3].
1. Capital Receipts
These are non-regular receipts that either create a liability or reduce a financial asset [4].
- Debt Capital Receipts: Money the government borrows to fund its expenditure. This creates a liability because it must be paid back with interest [10].
- Internal Borrowings: Loans from the public, borrowings from the RBI, sale of treasury bills, and small savings schemes (e.g., Post-Office Savings, Provident Funds) [11].
- External Borrowings: Loans from international organizations like the IMF, World Bank, and BRICS bank [11].
- Non-Debt Capital Receipts: Money that does not need to be paid back. This includes the recovery of loans made by the government in the past and disinvestment proceeds from selling shares in Public Sector Enterprises (PSEs) [5, 11].
2. Capital Expenditure
These are one-time expenses that create assets or reduce liabilities [12].
- Asset Creation: Construction of infrastructure such as roads, bridges, and buildings; purchase of land and machinery; and investment in shares [12].
- Liability Reduction: Repayment of loans previously taken by the government [12].
- Loans: Providing loans to state governments or foreign nations [12].
III. Key Changes in Budgeting Structure
- Railway Budget Merger: Since 2017, the separate Railway Budget was merged into the General Budget to form a single Union Budget [13, 14].
- Elimination of Plan/Non-Plan: Historically, spending was divided into “Plan” (developmental) and “Non-Plan” (recurring) categories. In 2018-19, this was simplified into the current classification of Capital and Revenue spending to create a clearer link between earnings and outcomes [8, 9, 15].
IV. Budget Deficit Indicators
A budget deficit occurs when total expenditure exceeds total receipts [16].
- Revenue Deficit (RD): The excess of total revenue expenditure over total revenue receipts. It implies the government is “dissaving” and cannot cover its regular expenses [16, 17].
- Fiscal Deficit: The difference between total expenditure and total receipts (excluding borrowings). It shows the total borrowing requirement of the government [18].
- Primary Deficit: The fiscal deficit minus interest payments on previous borrowings. It measures the government’s current fiscal imbalance [19].