An important of the government budget is to reduce the income inequalities.The government budget helps in achieving the objective of reducing inequalities of income through progressive taxation.Under progressive taxation, burden of the tax falls more on the rich and less on the poor.The rate of tax increase as the income increases.Thus, progressive tax is equitable.Appropriate expenditure policy in the government budget also helps in reducing the inequalities of income.

The objectives of a budget are as follows:
(i) Reallocation of Resources.
(ii) Reducing Inequalities in income and Wealth
(iii) Economic Stability
(iv) Management of Public Enterprises
(v) Economic Growth
(vi) Reducing Regional Disparities.

the government budget is an annual statement of the estimated receipts and expenditure of the government over the fiscal year, which runs from April 1 to 31.
Non-tax revenue receipts are the receipts received by the government in the form of prices paid for government supplied goods and services.The sources of non-tax revenue receipts include payments for postage and railway services.
Capital receipts of the government are those receipts, which either cause reduction in the assets or create a liability for the government.Small savings and deposits in the public provident fund are the two sources of the capital receipts.

Following are the points of distinction between revenue expenditure and capital expenditure:

Public goods are those goods which are consumed collectively. These are financed by the government through the budget and made available free of any direct payment. National defence, roads, the government administration, etc. are known as public goods. These goods must be provided by the government because of the following reasons:
(i) People have no compelling reason to voluntarily pay for public goods as they have with private goods. This gives rise to free-rider problem, which refers to the problem of enjoying benefits of a good without paying for its costs.
(ii) The benefits of public goods are not limited to a particular consumer; rather they become available to all.The consumption of such goods by several individuals is non-rivalry as an individual can enjoy the benefits without reducing their availability to others.
(iii) In case of private goods, anyone who does not pay for the good can be excluded from enjoying its benefits However, there is no feasible way of excluding anyone from enjoying the benefits of the public goods. They are non-excludable. Since non-paying users usually cannot be excluded, it becomes difficult or impossible to collect fees for the public good.

Revenue Deficit: Revenue deficit is the excess of current revenue expenditure over the current revenue receipts.
Revenue Deficit = Current Revenue Expenditure - Current Revenue Receipts
Current revenue expenditure includes both plan and non-plan expenditure of the government to be met through revenue receipts. Current revenue receipts include the net tax and non-tax revenue receipts of the central government. Until the middle of 1970's, the central government in India enjoyed revenue surplus as the revenue receipts of the central government exceeded the revenue expenditure. The phenomenon of revenue deficit made its appearance during the latter 1970's.
Budgetary Deficit: Budgetary deficit is the excess of total expenditure of the government over its total receipts. Total expenditure includes both revenue expenditure and capital disbursements. Total receipts similarly include both revenue and capital receipts.
Budgetary Deficit = Total Expenditure - Total Receipts
= (Revenue Expenditure + Capital Expenditure) - (Revenue Receipts + Capital Receipts)
It was this concept of budgetary deficit that was understood as deficit financing in India
Fiscal Deficit: Fiscal deficit is the difference between total expenditure of the government and its total revenue receipts and capital receipts excluding the borrowings and other liabilities of the government. Altematively, fiscal deficit is the aggregate of budgetary deficit plus borrowings and other liabilities. Fiscal Deficit can be calculated as below:
Fiscal Deficit = Total Expenditure - Total Revenue Receipts - Capital Receipts excluding borrowings.
Primary Deficit: Primary deficit is the difference between fiscal deficit and interest payments. It is the aggregate of budgetary deficit plus borrowings and other liabilities minus interest payments.
It can be calculated as:
Primary Deficit = Fiscal Deficit - Interest Payments
Alternatively primary deficit can be evaluated as:
Primary Deficit = Budgetary Deficit + Borrowings and Other Liabilities - Interest Payments.
The primary deficit in the central government budget in India was of the magnitude of RS. 19,502 crore in 2000-0 1, which has increased to RS. 31,317 crore in 2001-2002.

A tax is a compulsory payment to the government by the public. A tax payer does not get any direct service in return for the payment.
Types of Taxes
Taxes imposed by the government are of the following types:
(i) Single and Multiple Tax
(ii) Progressive and Regressive
(iii) Value Added and Specific Tax
(iv) Direct and Indirect Tax
Single and Multiple Tax
(a) Single Tax: It refers to a system in which the taxes are levied only on one item. It implies a tax on one commodity, i.e., one class of goods or one class of people.
(b) Multiple Tax: It implies that there should be many types of taxes so that every citizen can contribute to government revenue. Multiple tax system is generally preferred to the other tax system.
Progressive and Regressive Tax
(a) Progressive Tax: A progressive tax is the one in which tax increases with an increase in the level of income of the tax payer. Higher the income higher will be the rate of taxation and vice-versa.
(b) Regressive Tax: Regressive tax system is the one in which the tax rate decreases with an increase in the level of income of tax payer. Higher the level of income lower will be the rate of tax and vice-versa.
Value Added and Specific Tax
(a) Value Added Tax or Ad valorem Tax: The tax which is imposed on price of the commodity is known as Value Added Tax (VAT) or Ad valorem Tax.
(b) Specific Tax: The tax which is imposed on the commodity according to its weight, size or volume is known as specific tax.
Direct and Indirect Tax
(a) Direct Tax: Direct tax is a tax levied on the property and the income of persons. These are paid directly to the state by the consumers. Its burden cannot be shifted by the tax payer on someone else. For example: Income tax.
(b) Indirect Tax: Indirect tax is a tax collected by an intermediary (seller) from the person who bears the ultimate economic burden of the tax (buyer). For example: Excise duty.