The following are the sources of revenue of village panchayats.
(i) general property tax,
(ii) taxes on land,
(iii) profession tax, and
(iv) tax on animals and vehicles.

A. Balanced Budget
Balanced budget is a situation, in which estimated revenue of the government during the year is equal to its anticipated expenditure.
B. Unbalanced Budget
The budget in which Revenue & Expenditure are not equal to each other is known as Unbalanced Budget

Unbalanced budget is of two types:
1. Surplus Budget
2. Deficit Budget
1. Surplus Budget
(i) The budget is a surplus budget when the estimated revenues of the year are greater than anticipated expenditures.
(ii) Government Estimated revenue > Estimated Government Expenditure.
2. Deficit Budget
(i) Deficit budget is one where the estimated government expenditure is more than expected revenue.
(ii) Government’s estimated Revenue < Government’s proposed Expenditure.

Introduction:
(i) The process of repaying a public debt is called redemption.
(a) Sinking Fund
(i) The Government establishes a separate fund into which every year a fixed amount of money is credited.
(ii) By the time the debt matures, the fund accumulates enough amount to pay off the principal along with interest.
(a) Conversion
(i) An old loan is converted into a new loan.
(ii) A high interest public debt is converted into a low interest public debt.
(c) Budgetary Surplus
(i) When the Government has a surplus budget, it can be used for repaying the debt.

(i) Primary deficit is equal to fiscal deficit minus interest payments. PD = Fiscal deficit (FD) - Interest Payment (IP)
(ii) It shows the real burden of the government and it does not include the interest burden on loans taken in the past.
(iii) It shows the borrowing requirement of the government exclusive of interest payments.

(i) A tax is a compulsory payment made to the government. Refusal to pay the tax is punishable.
(ii) There is no quid pro quo between a taxpayer and public authorities.
(iii) Tax payer cannot claim any specific benefit against the payment of a tax.
(iv) Every tax involves some sacrifice on the part of the tax payer.
(v)  A tax is not levied as a fine or penalty for breaking law.

Defence
1. The Government protects the people from external aggression and internal disorder.
2. Through police and military forces it renders protective services.
Judiciary:
1. It provides adequate judicial structure to render justice to all citizens.
Enterprises
1. The regulation and control of private enterprise comes under the government.
Social Welfare:
1. The state provides education, social security, social insurance, health and sanitation for the people.
Infrastructure
1. Modern States build the base for the economic development of the country by creating social and economic infrastructure.
Macro-economic policy
1. The Government follows fiscal policy and monetary policy to achieve macro economic goals.
Social Justice
1. During the process of growth certain sections of the economy gain at the cost of others.
2. Government intervenes with fiscal measures to redistribute income.
Control of Monopoly
1. State intervenes through control of monopolies and restrictive trade practices to curb concentration of economic power.

Rationality
1. Both public finance and private finance are based on rationality.
2. Maximization of welfare and least cost factor combination underlie both.
Limit to borrowing
1. Both have to be restrained with borrowing.
2. Government cannot live beyond its means.
3. There is a limit to deficit financing by the state.
Resource utilisation
1. Both have to make optimum use of their limited resources.
Administration
1. If the administrative machinery is inefficient and corrupt it will result in wastages and losses.

Canon of Ability
1. The Government should impose tax in such a way that the people have to pay taxes according to their ability.
2. Rich person should pay more tax.
Canon of Certainty
1. There is no uncertainty regarding the rate of tax or the time of payment.
Canon of Convenience
1. The method of tax collection and the timing of the tax payment should be convenient to the people.
Canon of Economy
1. The Government should impose only those taxes whose collection costs are very less and cheap.