Tuesday, May 19, 2015

Public Funds

Sources of Public / Government Funds

Government earns revenue from both tax and non-tax sources as follows -

1.  Tax revenues -

  • Taxes levied on the incomes and wealth accumulation of individuals, as well as, corporations
  • Taxes on the goods and services produced
  • Taxes on exports and imports

2.  Non-Tax revenues -
  • Government-owned corporations, or Public Sector Undertaking (PSU) incomes
  • Inter-governmental aids
  • Central bank (RBI) revenue and capital receipts in the form of External loans and debts from international financial institutions, etc.

Accounts of government

The accounts of government are kept in three parts, as follows -

1.  Consolidated Fund of India (Article 266(1) of Constitution)

This is the chief account of Government of India. 

All revenues received by means of taxes, like Income Tax, Customs, Central Excise, etc. and non-tax revenues, like income through government business, PSUs, etc. are credited into the Consolidated Fund of India. Loans raised by issue of Treasury Bills are also credited to this account.

The government meets all its expenditure, including loan repayments, etc. from this fund.

Note that, no amount can be withdrawn from this fund without the authorization of the Parliament. The Comptroller and Auditor General of India (C&AG) audits these funds and reports to the relevant legislatures on their management.

2.  Contingency Fund of India (Article 267(1) of Constitution)

This account is set up for the purpose of meeting unforeseen expenditure, like natural disasters, etc., which are resumed to the fund to the full extend as soon as Parliament authorized additional expenditure. Thus, this fund acts like an imprest account of Government of India.

This account is held on behalf of President, by the Secretary of Ministry of Finance, Department of Economic Affairs.

Note that the corpus of this fund is currently Rs. 500 crore (In 2005, it was raised from Rs. 50 crore to Rs. 500 crore)

3.  Public Account of India (Article 266(2) of Constitution)

All other public moneys, other than those covered under Consolidated Fund of India, received by or on behalf of the government of India are credited to the Public Account of India.

The transactions under debt, deposits and advances in this part are those in respect of which, government incurs a liability to repay the money received or has a claim to recover the amounts paid. e.g., Provident Fund, Pension Scheme, etc. of government is stored in this account.

The receipts under Public Account do not constitute normal receipts of government. Parliamentary Authorization for payments from the Public Account is therefore not required. 

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