February 21, 2024

Non-tax revenue serves as a stabilising factor, offering a steady and gradual income stream from diverse sources

Finance Minister Nirmala Sitharaman will present the Union Budget 2024 on February 1. This is going to be an Interim Budget as the full Budget will be presented by the new government after the Lok Sabha elections.
The Union Budget carries the revenue and expenditure details for a particular financial year. The revenue generated by the government includes both tax and nontax receipts.

Non-tax revenue

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While taxes constitute a major part of revenue, the central government also generates revenue from other sources. Non-tax revenue refers to the income earned from sources apart from taxes. These receipts comprise the government’s earnings from interest on loans, dividends on investments such as from PSUs, fees and earnings for the services it provides.

Non-tax revenue in Budget 2023

For the fiscal year 2023-2024, the Union Budget projected non-tax revenue at Rs 3,01,650 crore, marking a 15.2 percent rise from the revised estimate of 2022-2023.

Components of Non-Tax Revenue

The government receives non-tax revenue from various sources. Here are examples of some components of non-tax revenue:

Interest: This includes interest earned on loans extended to states and Union Territories for non-planned projects, planned projects with a 20-year maturity period. These receipts also include interest on loans provided to public sector enterprises (PSEs), port trusts and other statutory bodies.
Petroleum Licencing: This involves the fees paid for acquiring exclusive rights to conduct exploration activities in specific areas. These fees could manifest as royalties, a share of profits generated from designated areas over a defined period, costs for Petroleum Exploration Licenses (PELs) or Production Level Payments (PLPs).
Dividends and Profits: Includes transfer from the Reserve Bank of India’s surplus, dividends and profits from PSEs.
Communication Services Fees: Primarily the licencing fees paid by telecom operators to the Department of Telecom for spectrum usage (DoT).
Electricity Supply Charges: Covering fees received by the Central Electricity Authority for supplying electricity under the Electricity (Supply) Act.
Broadcasting Fees: Includes licence fees paid by DTH providers, commercial FM radio services, commercial TV services and similar entities.Road and Bridge Usage Charges: Consisting of payments made at toll booths for the use of public roads and long-span bridges.

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Non-tax Revenue: Importance

Tax revenue is the primary income source for the government. Non-tax revenue serves as a stabilising factor, offering a steady and gradual income stream from diverse sources. Beyond aiding in covering service expenses, non-tax revenues also contribute to the government’s overall income.

Difference between Tax Revenue and Non-tax Revenue

Direct taxes apply to an individual’s or entity’s income, as well as to the cost of products and services exchanged (indirect tax). Non-tax revenue, however, is linked to payments for government services, including interest on loans extended by the government for various purposes. Taxes apply to a portion of one’s income and the goods/services they consume, while non-tax revenue is only generated due to the usage of government services and assets.