Public Finance deals with the income and expenditure of the government. It has two main components: Public Revenue and Public Expenditure. Public Revenue refers to the government's sources of income, which are categorized into Tax Revenue (like income tax, GST) and Non-Tax Revenue (like fees, fines, and profits from public sector enterprises). Public Expenditure is the spending by the government, classified into Revenue Expenditure (recurring, day-to-day expenses) and Capital Expenditure (creation of assets). The government's annual financial statement is the Budget, which outlines planned revenue and expenditure. A budget can be balanced, surplus, or deficit. Understanding these components is key to analyzing the government's role in the economy.
- Public Finance is the study of the government's revenue and expenditure.
- Public Revenue sources are Tax and Non-Tax.
- Direct Tax (e.g., Income Tax) is paid by the person on whom it is levied.
- Indirect Tax (e.g., GST) can be shifted to others.
- Public Expenditure is classified as Revenue Expenditure and Capital Expenditure.
- Revenue Expenditure is for regular functioning (e.g., salaries, pensions).
- Capital Expenditure creates assets (e.g., building roads, bridges).
- The Budget is the annual statement of estimated government receipts and expenditure.