How does the Government spend tax money?


The Union government gets Rs.17,83,172 Crore to spend! Looks like a lot of money, isn’t it? Even with so much money, why don’t we get electricity 24/7, good roads and public utilities? A natural question that any citizen of this country will have. Agree?


Income Tax and Corporate Tax – The total income tax collected from companies ranging from Infosys, Wipro, Tata to a small company and total income tax collected from salaries, rental income, capital gain and interest income from Individuals is estimated at Rs.7,97,995 Crores.


The entire amount so collected is spent on Interest payment, subsidies, to meet the loss of post office and Public Sector Undertakings. Not even a single rupee is used for the development of this country. No tax money will go for roads, ports, bridges, water, etc. So, friends, from now on, don’t ask where your tax money is going!


For the benefit of all, here is the breakup of expenditure: (Note: There is no one-to-one correlation between income and expenditure, but for the benefit of readers I have matched certain income to certain expenses)

  • Interest on loan – The estimated Interest payable on the Loan borrowed by the government is Rs.456145 Crores.
  • Subsidies – This includes Fertilizer Subsidy of Rs.72,969 Crore, Food Subsidy of Rs.1,24,419 Crore and interest subsidy of Rs.14,903 Crore ; Diesel and other petroleum subsidy Rs.30,000 Crore; totaling to Rs. 2,42,291 Crores
  • To meet the loss of Post Office – Rs.6,665 Crores
  • To meet the loss of Public Sector Undertakings (PSU) – Rs.1,003 Crore
  • Subsidy to Railways – Rs.4,729 Crores
  • Pension payment to retired employees – Rs.88,521 Crores.


Service Tax Collection – The service tax collection is estimated at Rs.209774 Crore. Where this money is going? This amount is spent towards salaries and maintenance of defence Rs.1,52,139 Crore and for Police department Rs.51791, National Calamity Fund Rs.5690 Crore. (I concede that defence, Law and Order spending is quite necessary) So, friends, out of service tax collection not even a single rupee is going towards developmental activities. Even in defence, the money allocated above is towards maintenance, salary of existing facilities and people (not for modernization)


Excise Duty collection – The total excise duty collection is estimated at Rs.229808 Crores. This amount is spent towards grants to states and union territories (Rs.108552 Cr), General Services of the government like salaries, travelling, maintenance, etc (Rs. 94061). Thus, friends, the entire excise duty collection are not spent on developmental activities.


Customs Duty collection – The total customs duty collection is estimated at Rs.208336 Crores. This amount is spent towards capital / modernization of defence (Rs.94588), loan to foreign governments, loan to Public Enterprises, etc.


So, almost the entire tax collection (Rs.1449490 Crores) is being used to meet some or the other expenditure, but not used for any infrastructure or developmental work of this country.


Resource of development work – Out of Rs.17.77 lakh Crores, a meager sum of Rs.1.35 Lakh Crores is spent towards new infrastructure, upgradation of existing facilities, etc. This translates to 7.5% of the total estimated revenue.


Summary – Now we know why our country is like this! Why we are not having public utilities and facilities like the development countries. What happens if your income is spent on food, clothing and shelter? Will you ever buy a car, house or land? Similarly, the government is spending the entire resources on salaries, maintenance, subsidy, schemes (and scams), travelling, pension, etc. Now you tell me, will they ever build roads, bridges, canals, ports, plants?


Thought for the day

The most delicious of all privileges is spending other people’s money!


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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 28+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional, Registered Valuer (F&SA) and Social Auditor.Prasad welcomes your comments and questions. Please email him at

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2024 years ago

Seems that no recovery plans available. Every penny spent is hard earned hence should be accountable . The question arises is that do the people paying tax has to suffer for facilities or they should have the transparency where there money is being spent . The conventional reply is known to everyone . Waiting for a day when tax paying people directly play role for recovery of such economical disaster management rather relying on lame theories

Jyotsna Mohan Singh
Jyotsna Mohan Singh
2024 years ago

Such a pity….only 7.5% of the total revenue goes on developmental work in India……!! Is the data true?? can anyone comment??

2024 years ago

Very informative article….!

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