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When you ask the question, 'where does a government’s money actually come from?' Most people assume it’s “taxes,” but that’s only part of the story.
Governments don’t just spend money. They assemble it.
Governments are often judged by how much they spend. On highways, welfare schemes, defence, healthcare, subsidies. Budget headlines usually revolve around allocations and promises. But spending is only one side of the equation.
Behind every announcement lies a quieter, more important question: how is all of this funded?
In today’s world, that question carries extra weight. Global public debt is near historic highs. Many large economies are running significant fiscal deficits. Borrowing has become more expensive.
That means the way a government earns its money, not just how much it spends determines how stable its finances truly are.
At a broad level, governments rely on three pillars: taxes, non-tax revenues, and borrowing. Taxes are meant to form the foundation.
Non-tax revenues such as dividends, spectrum sales, and fees provide additional support. Borrowing fills the gap when spending exceeds income. The balance between these three streams tells you how sustainable a fiscal system really is.
The big revenue engine
In an ideal setup, tax revenues dominate and borrowing plays a supporting role. But in reality, most governments use a blend.
The mix shifts depending on growth, tax collections, and policy priorities. When revenues slow, borrowing rises. When collections are strong, fiscal pressure eases.
Now zoom into India’s Union Budget 2026–27.
Where the Government’s Rupee comes from
Nearly 24% of every Rupee comes from borrowings and liabilities, meaning about one-fourth of government expenditure is financed through debt.
Income tax contributes 21%, making it the largest tax source. Corporation tax accounts for 18%, while GST and other taxes add 15%. Non-tax revenues bring in 10%. Smaller streams include union excise duties (6%), customs (4%), and non-debt capital receipts (2%).
In short, the story is that taxes fund most operations, but borrowing remains a significant pillar.
