(Source: BloombergQuint)

BQ Explains: How India Earns Its Revenue

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 fiscal 2017-18 for instance, the government hoped to earn Rs 19 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, customs duties, excise duties, and service taxes. Starting this year, the Goods and Services Tax will replace excise and service taxes.

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 Rs 72,500 crore that the government hopes to earn from divestments this year is the highest since at least 2008-09.