PUBLIC EXPENDITURE

AND
PUBLIC REVENUE

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 INTRODUCTION

We all know that our families have revenue and expenditure. Likewise, our government too have expenditure
and revenue. Do you know what are activities undertaken by government? Distribution of drinking water,
Distribution of welfare pension, Protection of environment, Protection of the country, Road construction, Health
centres, Center for distributing food are some of the activities undertaken by government. Why are these
activities carried out? They are for the welfare of the people. Money is required for all these activities. Do you
know from where this money comes from?

In this we will learn about the government expenditure and public revenue and the different sources of revenue
to the government under five main heading. Every portion contains multiple choice question with their
respective slide numbers to go to. So, let’s learn….

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 PUBLIC EXPENDITURE
 

The expenditure incurred by the government is known as public expenditure. Expenditure increases with an
increase in the activities of the government. Expenditure is undertaken for the welfare of the people.
Government undertakes welfare activities in the form of education, health, infrastructure, food, urbanization
which leads to increase in public expenditure automatically. Natural calamities make more expenditures and
unemployment also rise the expenditure that is to control unemployment and to attain economic, development
industrialization must be encouraged.  

Q 1. _____________ refers to the expenses incurred by the government for the maintenance of the government
and to preserve the welfare of the society as a whole.

a) Public revenue [go to slide no: 23] b) Public expenditure [go to slide no: 9]

c) Public debt [go to slide no: 16] d) Private expenditure [go to slide no: 11]

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 YAY!! THE ANSWER IS CORRECT
 

Tax is a compulsory payment made by public to the government. It is collected for meeting expenditure
towards welfare activities, developmental activities etc. Tax is the major source of revenue to the government.

You are ready to learn about classification of tax

Go to slide no: 7 

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 YAY!! THE ANSWER IS CORRECT

Interest Payment is a part of non-developmental expenditure. Expenditures that do not create any assets are
called non-developmental expenditure. For example, war, defence, pension, interest etc.

Now you are ready to learn about public revenue

Go to slide no: 18

 
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 OOPS!! THE ANSWER IS INCORRECT

Capital levy is a tax by means of which the state appropriates a fixed proportion of private
wealth.

Please refer back to slide no: 18 and Try Again

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 CLASSIFICATION OF TAXES

Tax

Direct Tax Indirect Tax

DIRECT TAX 

Land tax is paid by the person on whom it is imposed. Here the burden of the tax is borne by the same person on whom tax is imposed. These types of taxes
are called direct taxes. The unique feature of direct tax is that the tax payer undertakes the burden of the tax.

For example, corporate tax, personnel income tax

INDIRECT TAX

An important feature of indirect tax is that the tax burden can be shifted from the person on whom it is imposed to another person. For example, in the case
of sale tax the tax burden initially falls on the trader. But the trader transfers the burden of the tax along with its price to the consumer. The tax is included in
the price paid by the consumer.

Q3. The burden of direct taxes is borne by 

(a) Rich person [go to slide no: 15] (b) poor person [go to slide no: 22]

(c) on whom it is levied [go to slide no: 27] (d) traders [go to slide no: 18]
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 YAY!! THE ANSWER IS CORRECT
Fees is a source of non-tax revenue. fees are the reward collected for the government's services.

CONGRAGULATIONS!!
You have finished studying about public expenditure and public revenue 

Now go to slide no: 28

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 OOPS!! THE ANSWER IS INCORRECT

Income tax is direct tax. It is the tax imposed on the income of individuals 

Please refer back the slide no: 23 and Try Again

9
 OOPS!! THE ANSWER IS INCORRECT 

Private expenditure is carried out by individuals and businesses that are not government owned 

Please refer back the slide no: 3 and Try Again

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 YAAY!! THE ANSWER IS CORRECT
 

Public expenditure refers to the expenses incurred by the government for the maintenance of the
government and to preserve the welfare of the society as a whole. The expenditure is undertaken for the
welfare of the society. Government undertakes welfare activities in the form of education, health,
infrastructure, etc. 

Now you are ready to learn about the classification of public expenditure.

Go to slide no: 12

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 CLASSIFICATION OF PUBLIC EXPENDITURE

Public
Expenditure

Non-
Developmental
developmental
expenditure
Expenditure

Public expenditure can be classified into developmental expenditure and non-developmental expenditure. The expenditure
incurred by the government for constructing roads, bridges and harbours, starting up new enterprises, setting up educational
institutions, etc. are considered as developmental expenditure. Expenditure incurred for war, interest, pension, etc. are
considered as non-developmental expenditure.

Q2. Interest payments are a part of ________

a) Development Expenditure [go to slide no: 26] b) Non-Development Expenditure [go to slide no: 22]

c) Capital Expenditure [go to slide no: 28] d) Plan expenditure [go to slide no: 17]
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 OOPS!! THE ANSWER IS INCORRECT
 

Grand in aid are the financial aid provided by one government or organisations for
meeting a specific objective. 

Please refer back to slide no: 18 and Try Again

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 OOPS!! THE ANSWER IS INCORRECT

The burden of direct tax is not borne by rich person.

Please refer back to slide no: 7 and Try Again

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 OOPS!! THE ANSWER IS INCORRECT

Public debt is the total amount, including total liabilities, borrowed by the government to meet its
development budget. 

Please refer back to slide no: 3 and Try Again

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 OOPS!! THE ANSWER IS INCORRECT

Plan expenditure is that component of government expenses which helps increase the
productive capacity in the economy hence interest payment is not a plan expenditure. 

Please refer back to slide no: 12 and Try Again

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 OOPS!! THE ANSWER IS INCORRECT 

The burden of direct tax is not borne by traders

Please refer back to slide no: 7 and Try Again

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 Till now we studied about the expenditures of government. Government need income to meet the expenditure. Let's see
what are the sources of revenue to the government.
 

PUBLIC REVENUE
The income of the government is known as public revenue. Think about the sources of revenue to the government. Government earns
income primarily from two sources. They are given in the chart below:

Public Revenue

Tax Revenue Non-tax Revenue

Taxes

Taxes are the main source of income to the government. Tax is a compulsory payment to the government made by the public for
meeting expenditure towards welfare activities, developmental activities etc. The person who pays tax is called tax payer.

Q3. Compulsory payment made by public to the government is called _____________ 

(a) Tax [go to slide no: 4] (b) Capital Levy [go to slide no: 6]

(c) Grants in aid [go to slide no: 13] 18 (d) excise duty [go to slide no: 20]
 OOPS!! THE ANSWER IS INCORRECT

Gifts are not non tax revenue.

Please refer back to slide no: 23 and Try Again

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 OOPS!! THE ANSWER IS INCORRECT

Excise duty refers to the taxes levied on the manufacture of goods within the country

Please refer back to slide no: 18 and Try Again

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 OOPS!! THE ANSWER IS INCORRECT

The burden of direct tax is not borne by poor person.  

Please refer back to slide no: 7 and Try Again

21
 OOPS!! THE ANSWER IS INCORRECT 

Public revenue is the income of the government 

Please refer back to slide no: 3 and Try Again

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 NON-TAX REVENUE
Non-Tax Revenue is the recurring income earned by the government from sources other than taxes.

Sources of non-tax revenue

 Fees- Fees is the reward collected for the government's services. License fees, registration fees, tuition fees, etc. are examples. 
 Fines and penalties- Fines and penalties are punishments for violating the laws.

 Grants -Grants are the financial aid provided by one government or organisations for meeting a specific objective. For example, grants are
provided by central and state governments to local self-governments. 
 Interest- Government receive interest for loans given to various enterprises, agencies and countries. 

 Profit - Profit is the net income received from the enterprises operated by the government. For example, profit from the Indian Railways.

Q5. Which of the following is a non-tax revenue?

a) Fees [go to slide no: 8] b) Profit of private enterprises [go to slide no:24]  

c) Gifts [go to slide no: 19] d) Income tax [go to slide no: 9]

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 OOPS!! THE ANSWER IS INCORRECT

Profit of the private enterprise is not a source of non-tax revenue. 

Please refer back to slide no: 23 and Try Again

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 OOPS!! THE ANSWER IS INCORRECT 

Interest Payment is not a developmental expenditure. Developmental expenditure refers

to the expenditure of the government which helps in economic development by increasing
production and real income of the country. 

Please refer back to slide no: 12 and Try Again

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 YAY!! THE ANSWER IS CORRECT

The burden of direct taxes is borne by whom it is levied. whom it is imposed. These types of taxes
are called direct taxes. The unique feature of direct tax is that the tax payer undertakes the burden of
the tax.

For example, corporate tax, personnel income tax

Now you are ready to learn about Non-tax revenue. 

Go to slide no: 23
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 OOPS!! THE ANSWER IS INCORRECT

Interest payment is not a capital expenditure. Capital expenditure includes investment by

the government that yields profits or dividend in future. In interest payment government
does not incur any profits.

Please refer back to slide no: 12 and Try Again

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 CONCLUSION

Now you are clear about the public expenditure of government and the sources of revenue of
government. Let’s recall what we learnt till now.

Public expenditure is the expenditure of government.

There are two types of public expenditure – development expenditure and non-development
expenditure.

Public revenue is the income received by the government. 

The two sources of income are tax revenue and non-tax revenue.

There are two types of taxes- direct tax and indirect tax. 
The sources of non-tax revenues are fees, fines and penalties, grant, interest, profits.
 

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REFERENCE:

 SCERT (2019) Social Science Standard X part 1, Public Expenditure and Public Revenue,
State Council of Educational Research and Training, Government of Kerala, Department of
Education, Kerala

 https://www.hsslive.guru/kerala-syllabus-10th-standard-social-science-solutions-part-2-
chapter-5/

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