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Non-Tax Revenue, Public Expenditure and Debt, ICSE 10

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EconomicsICSE Class 10 · Public Finance

Non-Tax Revenue, Public Expenditure and Public Debt (ICSE Class 10 Economics)

Updated 17 October 2026 · Fact-checked

Non-tax revenue is government income from sources other than taxes, such as commercial revenue, fees, fines, interest and grants. Public expenditure is government spending, classified as revenue expenditure (running costs that create no asset) and capital expenditure (creates assets or reduces liabilities). Public debt is government borrowing from within the country or abroad when revenue falls short of spending.

Government spending is paid from revenue, and borrowing as public debt fills the gap; notice each type listed under its heading.

Illustration drawn for QuestionBuddy.

Understand Non-Tax Revenue, Public Expenditure and Public Debt

Non-tax revenue.
1. Commercial revenue: prices of goods and services of public enterprises (railway fares, postal charges, electricity charges).
2. Administrative revenue: fees (licence, registration, court), fines and penalties, special assessment, escheat, forfeitures.
3. Interest and dividends from loans and investments.
4. Gifts and grants.

Public expenditure. Spending by the central, state and local governments for collective needs and welfare.

  • Revenue expenditure: neither creates an asset nor reduces a liability. Examples: salaries, pensions, interest payments, subsidies, grants to states, maintenance.
  • Capital expenditure: creates assets or reduces liabilities. Examples: roads, dams, schools, hospitals, machinery, loans to states, loan repayment.

Reasons for growth of public expenditure in India. Rising population; defence needs; welfare (education, health, subsidies, social security); economic development; urbanisation; rising prices; interest on the growing public debt; expanding administration; relief during disasters.

Public debt. Borrowing by the government from within the country or abroad.
Types:

  • Internal and external: internal is borrowed within the country and repaid in domestic currency; external from foreign governments or institutions and usually repaid in foreign currency.
  • Productive and unproductive: productive debt creates income-yielding assets; unproductive is for purposes that do not yield income, such as war or disaster relief.
  • Funded and unfunded: funded is long-term; unfunded short-term (within a year).
  • Redeemable and irredeemable: with or without a fixed repayment date.
  • Voluntary and compulsory.

Link. If expenditure exceeds revenue, the government borrows; the interest is then a revenue expenditure of the future.

Non-Tax Revenue, Public Expenditure and Public Debt: key facts

Non-tax revenue
  • Commercial revenue
  • Fees
  • Fines
  • Special assessment
  • Escheat
  • Interest and dividends
  • Grants
Revenue expenditure
No asset created | Salaries, pensions, subsidies, interest, maintenance
Capital expenditure
Asset created or liability reduced | Roads, dams, machinery, loan repayment
Public debt types
  • Internal or external
  • Productive or unproductive
  • Funded or unfunded
  • Redeemable or irredeemable
  • Voluntary or compulsory

How to answer Non-Tax Revenue, Public Expenditure and Public Debt questions

Classification questions test the rule: does the spending create an asset or reduce a liability?

  1. 1Ask: does the item create an asset or reduce a liability?
  2. 2If yes, capital expenditure; if not, revenue expenditure.
  3. 3For non-tax revenue, decide whether it is commercial or administrative.
  4. 4For debt, state the basis of classification, then the two types.
  5. 5End with a one-line example for each.

Non-Tax Revenue, Public Expenditure and Public Debt in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

A town council budget

Suppose a town council spends ₹40 lakh on staff salaries, ₹60 lakh building a new bridge, ₹10 lakh on repairing old roads and ₹20 lakh on repaying a loan.

Classify each and find total revenue and capital expenditure.

Try it first, then show the solutionSolution
  1. Salaries 40 and repairs 10: revenue expenditure = 50.
  2. Bridge 60 (asset) and loan repayment 20 (reduces liability): capital expenditure = 80.
  3. Total = 130 lakh; check: 40 + 60 + 10 + 20 = 130.

Answer: Revenue expenditure ₹50 lakh; capital expenditure ₹80 lakh; total ₹1.3 crore.

Memory hook: Asset or loan cut means capital.

Tricks to remember Non-Tax Revenue, Public Expenditure and Public Debt

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • Asset test

    Creates an asset or cuts a liability: capital.

    Use it when: Classification.

  • CAIG

    Commercial, Administrative, Interest-dividends, Grants.

    Use it when: Non-tax revenue.

  • Pairs of debt

    Internal-external, productive-unproductive, funded-unfunded.

    Use it when: Types.

Non-Tax Revenue, Public Expenditure and Public Debt: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Classify · 1 mark · MCQBoard level

Construction of a hospital is:
(a) revenue expenditure
(b) capital expenditure
(c) non-tax revenue
(d) direct tax

Try it first, then show the solutionSolution
  1. It creates an asset.

Answer: (b)

Example 2: Non-tax revenue · 2 marks · Short answerBoard level

Name two sources of non-tax revenue with an example each. (2 marks)

Try it first, then show the solutionSolution
  1. Commercial revenue: railway fares.
  2. Administrative revenue: licence fees.

Answer: As above.

Example 3: Classify items · 4 marks · Short answerHarder board level

Classify as revenue or capital expenditure: (i) pensions; (ii) building a dam; (iii) repayment of a loan; (iv) subsidies. (4 marks)

Try it first, then show the solutionSolution
  1. Pensions: revenue.
  2. Dam: capital (asset).
  3. Loan repayment: capital (reduces liability).
  4. Subsidies: revenue.

Answer: Revenue: i, iv; Capital: ii, iii.

Example 4: Growth of expenditure · 4 marks · Long answerHarder board level

Explain four reasons for the growth of public expenditure in India. (4 marks)

Try it first, then show the solutionSolution
  1. Rising population needs more services.
  2. Defence needs.
  3. Welfare: education, health and subsidies.
  4. Economic development: infrastructure, industry and agriculture.

Answer: As listed.

Example 5: Borrowing decision · 3 marks · Short answerHOTS / competency

A government plans revenue of ₹5,000 crore and expenditure of ₹5,600 crore. State the gap, how it may be met and whether debt for a power project differs from debt for relief after floods. (3 marks)

Try it first, then show the solutionSolution
  1. Gap = 5,600 − 5,000 = ₹600 crore, met by public debt.
  2. Debt for a power project is productive: the project earns and helps repay.
  3. Debt for flood relief is unproductive: no income is generated, although spending is necessary.

Answer: ₹600 crore by borrowing; power project debt is productive, relief debt unproductive.

Where students lose marks in Non-Tax Revenue, Public Expenditure and Public Debt

The slips examiners see most often, and what to write instead.

  • Mistake: Loan repayment as revenue

    Not seen as liability reduction.

    Wrong working

    Loan repayment is revenue expenditure.

    Right working

    Loan repayment reduces liability: capital expenditure.

    Do this: Use the asset test.

    Usually costs: 1 mark.

  • Mistake: Grants as expenditure

    Direction mixed.

    Wrong working

    Grants are always expenditure.

    Right working

    Grants received are non-tax revenue; grants to states are revenue expenditure.

    Do this: Check direction.

    Usually costs: 1 mark.

  • Mistake: Examples missing

    Bare lists.

    Wrong working

    Revenue: salaries.

    Right working

    Add pensions, subsidies.

    Do this: Two examples each.

    Usually costs: 1 mark.

Exam tips

  • Always apply the asset-or-liability test.
  • Syllabus asks for "meaning and types of public debt": list types in pairs.
  • Use two examples per item.

Practice questions on Non-Tax Revenue, Public Expenditure and Public Debt

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    Fines and penalties are examples of:
    (a) commercial revenue
    (b) administrative revenue
    (c) tax revenue
    (d) capital expenditure

    Hint

    Law breaking.

    Answer

    (b)

  2. Q2 · 1 mark · Very short answerBoard level

    Define public expenditure. (1 mark)

    Hint

    Government spending.

    Answer

    Spending by central, state and local governments to meet collective needs and promote welfare.

  3. Q3 · 3 marks · Short answerHarder board level

    Distinguish between internal and external public debt. (3 marks)

    Hint

    Source and currency.

    Answer

    Internal debt is borrowed within the country and repaid in domestic currency; external debt is from foreign governments or institutions, usually repaid in foreign currency, and reduces national income when repaid.

  4. Q4 · 4 marks · Long answerHarder board level

    Using the test of asset creation, show how revenue expenditure differs from capital expenditure, with two instances of each. (4 marks)

    Hint

    Asset test.

    Answer

    Revenue: no asset or liability change; salaries, subsidies. Capital: asset created or liability reduced; roads, loan repayment.

  5. Q5 · 4 marks · Long answerHOTS / competency

    Suppose a state raises ₹300 crore in a year by borrowing and spends ₹200 crore on building irrigation canals and ₹100 crore on salaries. Classify the spending and comment on the sustainability of using debt for salaries. (4 marks)

    Hint

    Productive and unproductive.

    Answer

    Canals: capital expenditure (asset). Salaries: revenue expenditure. Borrowing for salaries creates no income-yielding asset, so repayment and interest must come from future revenues; this is less sustainable than borrowing for canals.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.Railway fares are?Show answer

    Commercial revenue.

  2. 2.Salaries are?Show answer

    Revenue expenditure.

  3. 3.Dam construction?Show answer

    Capital expenditure.

  4. 4.Debt within country?Show answer

    Internal debt.

  5. 5.Debt used for assets?Show answer

    Productive debt.

Non-Tax Revenue, Public Expenditure and Public Debt: frequently asked questions

What is non-tax revenue?

Government income from sources other than taxes, such as fees, fines, interest and grants.

What is the difference between revenue and capital expenditure?

Capital expenditure creates assets or reduces liabilities; revenue expenditure does not.

What are the types of public debt?

Internal/external, productive/unproductive, funded/unfunded, redeemable/irredeemable, voluntary/compulsory.