The Indian government has explained the unit economics of how its revenue is sourced and where it is spent in its Union Budget 2025–26 detailed release.
The document sheds light on how resources are allocated to vital sectors like defence, and development, with borrowings accounting for almost a quarter of revenue.
Where The Rupee Comes From: Sources Of Revenue
On the revenue side, the government's income is primarily sourced from a mix of taxation and borrowings. The largest chunk— 24% — comes from borrowings and other liabilities.
Income tax contributes a substantial 22% to the coffers, while Goods and Services Tax and other taxes bring in 18%. Corporate tax makes up another 17%.
Other smaller but significant sources of revenue include non-tax receipts at 9%, union excise duties at 5%, and customs duties at 4%. A marginal 1% is sourced from non-debt capital receipts, rounding out the government's revenue sources.
Where The Rupee Goes: A Breakdown Of Government Spending
The budget distribution paints a clear picture of the government’s expenditure priorities. A significant 22% of every rupee is earmarked for the states' share of taxes and duties. Following closely, 20% of the rupee is dedicated to interest payments.
Another notable allocation is 16% for Central Sector Schemes (excluding capital outlay on defence and major subsidies). This is followed by 8% for defence, finance commission, other transfers, and centrally sponsored schemes.
Major subsidies also claim a significant share, absorbing 6% of the rupee, while 4% is spent on pensions.
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