Budget 2026: A snapshot of government finances — where the rupee comes from and goes

Finance Minister Nirmala Sitharaman delivered the Union Budget for 2026-27 on Sunday, 1 February. Marking her ninth consecutive budget speech, FM Sitharaman tabled a set of proposals in the Union Budget 2026, covering key sectors such as infrastructure, healthcare, education and various tax reforms.

In the budget documents spanning over 200 pages, the government outlined the details of finances, including sources of revenue and expenditure categories in the Indian economy.

A snapshot of government finances

Here's a look at how the government spends and gets a rupee —

Where does the rupee come from?

The central government's sources of income primarily come from borrowings and liabilities, income tax, corporation tax, goods and services tax (GST), non-tax revenues, excise duties and non-debt capital receipts.

Take a look at the share of each –

Borrowings and liabilities

With a share of 24%, borrowings contribute the highest to the government's finances. Government borrowing is the money a government raises, mainly via bonds and treasury bills. It also includes domestic and foreign loans, as well as obligations like small savings and provident funds.

Income tax

Levied as a direct tax on annual income on individuals, income tax forms 21% of the finances .

Corporation tax

Corporation tax accounts for 18% of the government's revenue and is imposed on the net profits or income generated by businesses and corporations.

GST and other taxes

Contributing 15% to the finances, GST is an indirect tax, which replaced numerous central and state indirect taxes, including VAT, service tax and excise duty.

Non-tax revenue

Income earned through other sources apart from taxes, such as fines, penalties, dividends of PSUs, accounts for 10% of the government's finances.

Union excise duties

Union excise duty is an indirect tax imposed by the government on the manufacture or production of specific goods. It is primarily replaced by GST, but it still applies to items such as petroleum products and tobacco, contributing 6% to revenue.

Customs

Contributing 4%, customs help to regulate the flow of goods in and out of the country.

Non-debt capital receipts

Non-debt capital receipts are government funds that boost assets or reduce liabilities without future repayment obligations. They form 2% of government finances.

Where does rupee go?

The central government's expenses include the state's share of taxes, interest payments, central sector schemes, defence, centrally sponsored schemes, Finance Commission and other transfers, subsidies, civil pension and other expenditures.

Take a look at the share of each –

States' share of taxes

At 22%, states' share of taxes is the government's highest share of expenses. It is the total tax revenue collected by the central government that is transferred to state governments with the aim of boosting their finances.

Interest payments

The interest charged on borrowing and debt constitutes 20% of government expenses.

Central sector schemes

The government allocates 17% of its finances to central sector schemes. Primarily catering to the Union list of the Constitution, these schemes are 100% funded and directly implemented by the central government ministries.

Defence

The defence sector has been a major priority for the government. It spends around 11% of its finances on defence expenditure.

Centrally sponsored schemes

Around 8% of finances go to centrally sponsored schemes, which are funded by both the Centre and the states.

Finance Commission and other transfers

An allocation of 7% is focused on the Finance Commission and other transfers, catering to the distribution of financial resources between the Union and State governments.

Subsidies

As a form of financial aid to certain sectors of the economy, subsidies account for 6% of government expenses.

Civil pension

Civil pensions are provided to government employees, which constitute 2% of total expenses. The rest 6% of the total expenses are towards other costs incurred by the government.