Government Expenditure

  1. Payment of Interest: The central government spends the lion’s share of it expenditure towards payment of interest every year. When the government takes a loan, it has to pay interest on such credit.  For fiscal 2020-21, interest on debts will be paid with 23.31% of the budget.
  2. Defense Allocation: The central government spends on the country’s defense and security-related expenditure. India is one of the world’s largest importers of weapons. Approximately 11.1%, which is Rs 3.4 crores, of the annual union budget is allocated for the country’s defense. About 35% of the defense budget goes for capital spending, which includes the expansion of the military and the modernization of existing weapons. The remaining proportion goes towards running the forces’ daily expenses. Hence, taxes help strengthen the country’s defense mechanism and security.
  3. Government and Welfare Schemes: Government spending kind of is split between for all intents and purposes several schemes, generally such as healthcare, education, fairly social security, and others. The really central sponsored schemes (CSS), which particularly are implemented by the state but funded by the Centre.
  4. Subsidies: All goods or services provided below cost to certain sections of the population are subsidies (e.g., fertilizers, train tickets, LPG, metro rail fares).
  5. Pension: In order to demonstrate its responsibility as an employer, the government provides pensions to its retired employees. Pensions are another major expense. After retirement, former government employees and former military personnel receive a pension. Approximately 6.42% of the government’s income is used to pay pensions.
  6. Transfer to the States and Union Territories: The central government gives approximately 8% in the form of grants and transfers to the union territories and states for emergency management and development.
  • For the overall development of the country, every individual who earns income must pay taxes.
  • The government uses the money received to improve infrastructure, provide public health care services, and develop rural areas.
  • Every individual and company will benefit if they pay their taxes on time every year because this will allow the government to establish profitable schemes and infrastructure.
  • The government allows various economic ways to save tax such as life insurance products.

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