Merits
Equity direct taxes are progressive i.e. tax rate varies according to tax base.
Certainty
Income tax payer knows when and at what rate he has to pay income tax.
Elasticity
1. Direct taxes satisfies the canon of elasticity.
2. As income level increases, the tax revenue to the Government also increases.
Economy
The cost of collection of direct taxes relatively low because the tax payers pay the tax directly to the state.
Demerits
Unpopular
Since it is inconvenient and less flexible they are unpopular
Productivity affected
Citizens are not willing to earn more income because then thevy have to pay more taxes.
Inconvenient
Tax payers find it inconvenient to maintain accounts, submit returns and pay tax in lump sum.
Tax Evasion
1. The burden of direct tax is so heavy that tax-payers always try to evade taxes.
2. This leads to black money.

Introduction:
The revenue obtained by the government from sources other than tax is called Non Tax Revenue.
Fees
1. A fee is charged bypublic authorities for rendering a service to the citizens.
2. There is no compulsion involved.
3. (e.g) Fees are charged for issuing of passports, driving licenses. 
Fine
1. A fine is a penalty imposed on an individual for violation of law.
2. E.g. violation of traffic rules 
Earnings from Public Enterprises
Government gets revenue from public enterprises which make a huge profits.
Special assessment of betterment levy
1. It is a special charge levied on certain members of the community who are beneficiaries of certain government activities.
2. For example, due to a road construction, there may appteciator in propery value.
Gifts, Grants and Aids
1. The government at the Centre provides grants to State governments and the State governments to local bodies to carry out their functions.
2. Grants from foreign countries are known as Foreign Aid.
3. Developing countres receive military aid, food aid, technological aid from other countries.
Escheats
It refers to the claim of the state to the property of persons who die without legal heirs or documented will.

1. Income and Expenditure adjustment
The government adjusts the income to the expenditure while individuals adjust their expenditure to the income. Private finance involves stitching coat according to cloth available whereas public finance decides the cloth according to the need for the coat.
2. Borrowing
The government can borrow from internal and external sources; it can borrow from the people by issuing bonds. However, an individual cannot borrow from himself
3. Right to print currency
The government can print currency. This involves the creation, distribution and monitoring of currency. The private sector cannot create currency.
4. Present vs. future decisions
The public finance is more involved with future planning and making long-term decisions. These investments could include building of schools, hospitals and infrastructure. The private finance makes financial decisions on projects with a short term vision
5. Objective
The public sector’s main objective is to provide social benefit in the economy. The private sector aims to maximize personal benefit i.e. Profit.
6. Coercion to get revenue
The sources of income of a private individual is relatively limited while those of the Government is wide. The Government can use its power and authority
7. Ability to make huge and deliberate changes
The public finance has the ability to make big decisions on income. For example, it can effectively and deliberately adjust the revenue. But individuals cannot make such massive decisions.

1. Duties in respect of succession to property other than agricultural land.
2. Estate duty in respect of property other than agricultural land.
3. Taxes on railway fares and freights.
4. Taxes other than stamp duties on transactions in stock exchanges and future markets.
5. Taxes on the sale or purchase of newspapers and on advertisements published therein
6. Terminal taxes on goods or passengers carried by railways, sea or air.
7. Taxes on the sale or purchase of goods other than newspapers where such sale or purchase taxes place in the course of inter-State trade or commerce.

(i) Finance Commission aims to reduce the fiscal imbalances between the centre and the states (Vertical imbalance) and also between the states (horizontal imbalance). It promotes inclusiveness.
(ii) A Finance Commission is set up once in every 5 years. It is normally constituted two years before the period. It is a temporary Body.
(iii) The 14th Finance Commission was set up in 2013. Its recommendations were valid for the period from 1st April 2015 to 31st March 2020.
(iv) The 15th Finance Commission has been set up in November 2017. Its recommendations will be implemented starting 1 April 2020

(i) The macro economic targets to be achieved within a plan period;
(ii) The basic strategy of the budget;
(iii) The financial requirements of different projects;
(iv) Estimates of the revenue expenditures (includes defence expenditure, subsidy, interest payment on debt etc.);
(v) Estimates of the capital expenditures (includes development of railways, roadways, irrigations etc.);
(vi) Estimates of revenue receipts from tax and non-tax revenues;
(vii) Estimates of capital receipts from the recovery of loans, disinvestment of public sector units, market borrowings etc.
(viii) Estimates of the gap between revenue receipts and revenue expenditure; and
(ix) Estimates of fiscal deficit, primary deficit, and revenue deficit.
(x) Finance commission is a quasi-judicial body set up under Article 280 of the Indian Constitution. It was established in the year 1951, to define the fiscal relationship framework between the Centre and the state.

i) Revenue Budget:
It consists of revenue receipts and revenue expenditure. Moreover, the revenue receipts can be categorised into tax revenue and non-tax revenue. Revenue expenditure can also be categorised into plan revenue expenditure and non-plan revenue expenditure
ii) Capital Budget:
It consists of capital receipts and capital expenditure. In this case, the main sources of capital receipts are loans, advances etc. On the other side capital expenditure can be categorised into plan capital expenditure and non-plan capital expenditure.
iii) Supplementary Budget:
During the time of war emergencies and natural calamities like tsunami, flood etc, the expenditures allotted in the budget provisions are not always enough. Under these circumstances, a supplementary budget can be presented by the Government to tackle these unforeseen events.
iv) Vote - on - Account:
Under Article 116 of the Indian Constitution, the budget can be presented in the middle of the year. The reason may be political in nature. The existing Government may or may not continue for the year, on account of the fact that elections are due, then the Government places a ‘lame duck budget’. This is also called ‘Vote-on-account Budget
v) Zero Base Budget:
The Government of India presented Zero-Base-Budgeting (ZBB first) in 1987-88. It involves fresh evaluation of expenditure in the Government budget, assuming it as a new item.
vi) Performance Budget:
When the outcome of any activity is taken as the base of any budget, such budget is known as ‘Performance Budget’. For the first time in the world, the performance budget was made in USA

Balanced Budget	Unbalanced Budget
1. In case of balanced budget, the proposed govt. expenditure is equal to the estimated govt. receipts in the budget year.	1. In case of unbalanced budget, the proposed expenditure and the estimated receipt are unequal during the budget year.
2. Balanced budget reduces unproductive and extravagant expenditure of the govt	2. Unbalanced (deficit) budget helps the govt. to incur unproductive and extravagant expenditure.
3. It is ineffective during economic instability.	3. It is effective during economic instability (surplus during inflation and deficit during deflation).
4. It fails to achieve full employment from under-employment equilibrium	4. Unbalanced (deficit) budget is a powerful instrument to achieve full employment
5. It cannot solve the problems of underdeveloped countries (UDCs).	5. Unbalanced (deficit) budget is a powerful instrument of resource mobilisation for economic development of UDCs.

1. Capitation tax
2. Duties in respect of succession to agricultural land.
3. Duties of excise on certain goods produced or manufactured in the State, such as alcoholic liquids, opium, etc.
4. Estate duty in respect of agricultural land.
5. Fees in respect of any of the matters in the State List, but not including fees taken in any Court.
6. Land Revenue.
7. Rates of stamp duty in respect of documents other than those specified in the Union List.
8. Taxes on agricultural income.
9. Taxes on land and buildings.
10. Taxes on mineral rights, subject to limitations impose by Parliament relating to mineral development.
11. Taxes on the consumption or sale of electricity.
12. Taxes on the entry of goods into a local area for consumption, use or sale therein.
13. Taxes on the sale and purchase of goods other than newspapers.
14. Taxes on the advertisements other than those published in newspapers.
15. Taxes on goods and passengers carried by road or on inland waterways.
16. Taxes on vehicles.
17. Taxes on animals and boats.
18. Taxes on professions, trades, callings and employments.
19. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
20. Tolls.

1. Corporation tax.
2. Currency, coinage and legal tender, foreign exchange.
3. Duties of customs including export duties.
4. Duties of excise on tobacco and certain goods manufactured or produced in India.
5. Estate duty in respect of property other than agricultural land.
6. Fees in respect of any of the matters in the Union List, but not including any fees taken in any Court.
7. Foreign Loans.
8. Lotteries organized by the Government of India or the Government of a State.
9. Post Office Savings Bank.
10. Posts and Telegraphs, telephones, wireless, Broadcasting and other forms of communication.
11. Property of the Union.
12. Public Debt of the Union.
13. Railways.
14. Rates of stamp duty in respect of Bills of Exchange, Cheques, Promissory Notes, etc.
15. Reserve Bank of India.
16. Taxes on income other than agricultural income.
17. Taxes on the capital value of the assets, exclusive of agricultural land of individuals and companies.
18. Taxes other than stamp duties on transactions in stock exchanges and future markets.
19. Taxes on the sale or purchase of newspapers and on advertisements published therein.
20. Terminal taxes on goods or passengers, carried by railways, sea or air.

The revenue obtained by the government from sources other than tax is called Non-Tax Revenue. The sources of non-tax revenue are
1. Fees
Fees are another important source of revenue for the government. A fee is charged by public authorities for rendering a service to the citizens. Unlike tax, there is no compulsion involved in case of fees.
2. Fine
A fine is a penalty imposed on an individual for violation of law. For example, violation of traffic rules, payment of income tax after the stipulated time etc.
3. Earnings from Public Enterprises
The Government also gets revenue by way of surplus from public enterprises. Some of the public sector enterprises do make a good amount of profits. The profits or dividends which the government gets can be utilized for public expenditure.
4. Special assessment of betterment levy
It is a kind of special charge levied on certain members of the community who are beneficiaries of certain government activities or public projects. For example, due to a public park or due to the construction of a road, people in that locality may experience an appreciation in the value of their property or land.
5. Gifts, Grants and Aids
A grant from one government to another is an important source of revenue in the modern days. The government at the Centre provides grants to State governments and the State governments provide grants to the local government to carry out their functions.
6. Escheats
It refers to the claim of the state to the property of persons who die without legal heirs or documented will.

Classification of public expenditure are as follows:
1. Classification on the Basis of Benefit:
(a) Public expenditure benefiting the entire society, e.g., the expenditure on general administration, defense, education, public health, transport.
(b) Public expenditure conferring a special benefit on certain people and at the same time common benefit on the entire community, e.g, administration of justice etc.
(c) Public expenditure directly benefiting particular group of persons and indirectly the entire society, e.g. social security, public welfare, pension, unemployment relief etc. (d) Public expenditure conferring a special benefit on some individuals, e.g., subsidy granted to a particular industry.
2. Classification on the Basis of Function:
(a) Protection Functions: This group includes public expenditure incurred on the security of the citizens, to protect from external invasion and internal disorder, e.g., defence, police, courts etc.
(b) Commercial Functions: This group includes public expenditure incurred on the development of trade and commerce, e.g., development of means of transport and communication etc.

(i) War and preparation for war:
Waging war has become one of the important causes for incurring debts by the governments.
(ii) Social obligation:
Modern states are considered to be 'welfare states' and they have to undertake many social obligations like public health, sanitation, education, insurance, transport and communications etc.
(iii) Economic development deficit:
(1) The government has to undertake many projects for economic development of the country.
(2) Construction of railways, power projects, irrigation projects, heavy industries etc. Employment: Most of the governments of modern days face the problem of unemployment and has become the duty to solve this by making huge public expenditure.
(v) Controlling inflation:
The government can withdraw excess money from circulation, by raising public debt and thus prevent prices from rising.
(vi) Fighting depression:
During the depression phase, private investment is lacking.

(i) GST will mainly remove the cascading effect on the sale of goods and services.
(ii) Removal of cascading effect will directly impact of the cost of goods.
(iii) Tax is eliminated in this regime, the cost of goods decreases.
(iv) GST is also mainly technologically driven.
(v) All activities like registration, return filing, application for refund and response to notice need to be done online on the GST portal. This will speed up the processes.

Budget deficit is a situation where budget receipts are less than budget expenditures. This situation is also known as government deficit. The Indian Government budget refers. The Budget deficit is of four major types.
(1) Revenue Deficit
(2) Budget Deficit
(3) Fiscal Deficit and
(4) Primary Deficit
(1) Revenue Deficit:
(i) It refers to the excess of the government revenue, expenditure over revenue receipt.
(ii) It doesn't consider capital receipts and capital expenditure.
Revenue Deficit (RD) = Total Revenue Expenditure (RE) - Total Revenue Receipts
(2) Budget Deficit:
(i) Budget deficit is the difference between total receipts and total expenditure.
Budget deficit = Total Expenditure - Total Revenue
(3) Fiscal Deficit:
Fiscal Deficit (FD) = Budget deficit + Government's market borrowings and liabilities.
(4) Primary Deficit:
(i) It is equal to fiscal deficit minus interest payments.
(ii) It reflects the borrowing requirement of the government exclusive of interest payments.
Primary Deficit (PO) = Fiscal Deficit (PO) - Interest Payments (IP)