Finance Government of India

reserve bank of india s headquarters in mumbai, india s financial capital

india has three-tier tax structure, wherein constitution empowers union government levy income tax, tax on capital transactions (wealth tax, inheritance tax), sales tax, service tax, customs , excise duties , state governments levy sales tax on intrastate sale of goods, tax on entertainment , professions, excise duties on manufacture of alcohol, stamp duties on transfer of property , collect land revenue (levy on land owned). local governments empowered state government levy property tax , charge users public utilities water supply, sewage etc. more half of revenues of union , state governments come taxes, of 3/4 come direct taxes. more quarter of union government s tax revenues shared state governments.

the tax reforms, initiated in 1991, have sought rationalise tax structure , increase compliance taking steps in following directions:

reducing rates of individual , corporate income taxes, excises, customs , making more progressive
reducing exemptions , concessions
simplification of laws , procedures
introduction of permanent account number (pan) track monetary transactions
21 of 29 states introduced value added tax (vat) on 1 april 2005 replace complex , multiple sales tax system

the non-tax revenues of central government come fiscal services, interest receipts, public sector dividends, etc., while non-tax revenues of states grants central government, interest receipts, dividends , income general, economic , social services.

inter-state share in union tax pool decided recommendations of finance commission president.

total tax receipts of centre , state amount approximately 18% of national gdp. compares figure of 37–45% in oecd.

general budget

the finance minister of india presents annual union budget in parliament on last working day of february. however, f.y. 2017-18, tradition had been changed. budget presented on 1st day of february. budget has passed lok sabha before can come effect on 1 april, start of india s fiscal year. union budget preceded economic survey outlines broad direction of budget , economic performance of country outgoing financial year

india s non-development revenue expenditure had increased five-fold in 2003–04 since 1990–91 , more tenfold since 1985–1986. interest payments single largest item of expenditure , accounted more 40% of total non-development expenditure in 2003–04 budget. defense expenditure increased fourfold during same period , has been increasing because of india s desire project military prowess beyond south asia. in 2007, india s defence spending stood @ us$26.5 billion.