final policy
TRANSCRIPT
-
7/27/2019 Final Policy
1/37
-
7/27/2019 Final Policy
2/37
MEANING OF FISCAL POLICY
The Word Fisc means state treasury so FiscalPolicy refers to policy concerning the use of statetreasury or the Govt. Finances to achieve the
macro economic goals DEFINITION : Fiscal Policy is defined as the govt.
Programme of taxation, expenditure, & otherfinancial operation to achieve national goals
2
-
7/27/2019 Final Policy
3/37
OBJECTIVES
FISCAL POLICY HAS TWO MAJOR OBJECTIVES
General Objectives - Aimed at achieving
macroeconomic goals
Specific Objectives Related to any typical
problems of economy
3
-
7/27/2019 Final Policy
4/37
-
7/27/2019 Final Policy
5/37
INSTRUMENTS OF FISCAL POLICY
Budgetary Surplus & Deficit
Govt. Expenditure
Taxation Direct & Indirect
Public Debt
Deficit Financing
5
-
7/27/2019 Final Policy
6/37
HOW DOES FISCAL POLICY AFFECT THE
ECONOMY?
Aggregate demand which is the total demand for goodsand services in the economy depends on three mainvariables :
Consumption
Private investment &
Government Spending
When the Govt. Increases its expenditure then it spurs
the aggregate demand in the economy. A higheraggregate demand in turn will stimulate output, growth& employment. Whereas if the govt. Lowers its spendingthen it decreases the aggregate demand & hence slow
down the growth of economy 6
-
7/27/2019 Final Policy
7/37
TERMS RELATED TO FISCAL POLICY
FISCAL DEFICIT
It is an economic phenomenon where the govt.s
expenditure surpasses the revenue generated
It is the difference between the govts Total
receipts excluding the borrowing & Totalexpenditure i.e. Total govt expenditure
Revenue receipt + Non - Debt capital receipt
7
-
7/27/2019 Final Policy
8/37
GOVERNMENT RECEIPT
8
Total GovernmentReceipt
Revenue Receipt
TaxRevenue
Non TaxRevenue
RecoveryOf Loans
Capital Receipt
Public sectorDisinvestment
-
7/27/2019 Final Policy
9/37
CAPITAL RECEIPT
A capital receipt is a receipt which is derived
from sale or purchase of capital assets like
plant & machinery, furniture ,investment(long-term) etc . which shall not be occurring
all the time
9
-
7/27/2019 Final Policy
10/37
REVENUE RECEIPT
It consists of tax collected by the govt. & other
receipts consisting of interest & dividend on
investment made by govt. & other receipts forservices referred by govt.
Revenue Receipt includes:
Tax Revenue Receipt
Non tax revenue receipt10
-
7/27/2019 Final Policy
11/37
DIFFERENCE BETWEEN CAPITAL
RECEIPT & REVNUE RECEIPT
The main difference between CR & RR is that
revenue receipt are recurring in nature, which
the government can expect to receive year
after year whereas capital receipt are a kind of
one time income
11
-
7/27/2019 Final Policy
12/37
-
7/27/2019 Final Policy
13/37
PLANNED EXPENDITURE
It refers to the expenditure incurred by the
government on programmes/projects which
are recommended by the planning
commission
13
-
7/27/2019 Final Policy
14/37
NON PLANNED EXPENDITURE
It is a generic term used to cover all
expenditure of government not included in
the plan.
For example Interest payment, pensionery
charges, expenditure on external affairs,
currency & mint etc.
14
-
7/27/2019 Final Policy
15/37
REVENUE EXPENDITURE (REVEX)
Revenue expenditure is a expenditure
concerned with costs of doing business on a
day to day business
15
-
7/27/2019 Final Policy
16/37
CAPITAL EXPENDITURE
(CAPEX)
Capital expenditure are expenditures creating
future benefits. A CAPEX is incurred when a
business spends money either to buy fixedassets or to add to the value of an existing
fixed asset with a useful life extending beyond
the taxable income
16
-
7/27/2019 Final Policy
17/37
-
7/27/2019 Final Policy
18/37
18
-
7/27/2019 Final Policy
19/37
MEASURES OF DEFICIT
Revenue Deficit = Expenditure Receipt
Fiscal Deficit = (Total Expenditure) (Revenue
Receipt + Non Debt Capital Receipts)
Primary Deficit = Fiscal Deficit Interest Payment
19
-
7/27/2019 Final Policy
20/37
20
-
7/27/2019 Final Policy
21/37
TAXATION
It is the act of levying taxes
A tax is a compulsory charge on payment
imposed by Govt. On Individuals or Corporation
The most important source of Revenue of the
Govt.
The tax may be imposed on the Income & wealth
21
-
7/27/2019 Final Policy
22/37
OBJECTIVES OF TAXES
Raising Revenue
Encouraging Domestic Industry
Reducing Income Inequalities
Promoting Economic Growth
Development Of Backward region
Ensuring price stability 22
-
7/27/2019 Final Policy
23/37
CLASSIFICATION OF TAXES
On the basis of form, nature & method the mostcommon & traditional classification is to classify
tax into
Direct tax
Indirect tax
23
-
7/27/2019 Final Policy
24/37
DIRECT TAX
Direct tax is that tax whose burden is borne bythe same person on whom it is levied . It is based
on the Income & property of a person
Example Income tax , Corporation tax ,
tax on companys profit , Property tax ,
Wealth tax etc
24
-
7/27/2019 Final Policy
25/37
INDIRECT TAX
Indirect tax is that tax which is initially paid byone individual but the burden of which is passed
over to some other individual who ultimately
bears it
Example- excise duty , sales tax,
entertainment tax , custom duty etc.
25
-
7/27/2019 Final Policy
26/37
ON THE BASIS OF DEGREE OF
PROGRESSION TAXES ARE
CLASSIFIED INTO :
Progressive tax
Regressive tax
26
-
7/27/2019 Final Policy
27/37
PROGRESSIVE TAX
When the rate of taxation increases as thepayers income increases , it is called a
progressive tax
In this system the rate of tax goes on increasing
with every increase in income
27
-
7/27/2019 Final Policy
28/37
REGRESSIVE TAX
A Regressive tax is one in which the rate of
taxation decreases as the tax payers income
increases. Lower income is taxed at a higher ratewhereas higher income is taxed at a lower rate
28
-
7/27/2019 Final Policy
29/37
-
7/27/2019 Final Policy
30/37
30
-
7/27/2019 Final Policy
31/37
31
-
7/27/2019 Final Policy
32/37
32
-
7/27/2019 Final Policy
33/37
SURCHARGE
It is basically an additional sum(tax) added to
the usual amount or cost(tax)
CESS
It is an alternative term for tax
For example Road cess, Oil cess, Education
cess, water cess
33
-
7/27/2019 Final Policy
34/37
DEDUCTION FROM TAXABLE INCOME
Under section 80C
Under section 80D (Medical Insurance premium)
Under section 88 of Income Tax Act (1961)rebate on certain investment
Interest on Housing loan
34
-
7/27/2019 Final Policy
35/37
CONCLUSION
We can say that the instrument of Taxation is of greatsignificance on :
Increasing the level of economic activity
Reducing income inequalities Promoting economic growth
Social welfare objectives (i.e.. tax payment helpsreduce the gap between the have & have not as it
helps in mobilizing the surplus income from thehaves & reinvesting them for public welfare , it helpsthese surplus funds to reach the haves not)
35
-
7/27/2019 Final Policy
36/37
REFERENCES :
D N DWIVEDI : Managerial Economics
http://finance.indiamart.com/taxation/income_tax/rate
s
http://en.wikiprdia.org/wiki/income_tax.india
36
-
7/27/2019 Final Policy
37/37