BQ Explains: How India Earns Its Revenue

The government announces its gross revenue in the Union Budget. How does the government generate this revenue?

(Source: BloombergQuint)
(Source: BloombergQuint)

The Indian government, like most others, gets most of its revenue by taxing citizens, corporations, goods and services. As part of its budget presentation, the government presents a receipt budget, which lays down its source of earnings.

Gross tax revenue estimates are laid out each year, and a revised estimate is provided at the end of each year. In 2018-19 for instance, the government is estimated to have earned Rs 22.4 lakh crore in gross tax revenue.

The gross tax revenue is made up of the corporation tax, which forms the largest chunk, followed by taxes on individuals and the Goods and Services Tax.

Apart from tax revenue, the government also earns revenue from a few other sources. Prominent among these are receipts in the form of dividends from public sector enterprises. State-owned banks and financial institutions and even the Reserve Bank of India also pay dividends. In tough times, you will often hear of the government seeking higher dividends from these entities.

And then there are proceeds from divestment in public sector enterprises. The government collected Rs 80,000 crore by selling stake in state-run firms in 2018-19.