Union Budget 2026: What is the revenue budget and why it shapes fiscal health

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget for 2026–27 on February 1, one of the most important, and often misunderstood, parts of the Budget comes into focus: the Revenue Budget.

Simply put, the Revenue Budget captures how the government earns its regular income and how it spends that money to keep the system running.

What is the revenue budget?

The Revenue Budget records two key components:

• Revenue receipts: the government’s regular income

• Revenue expenditure: the government’s routine, recurring spending

Unlike capital spending, the Revenue Budget does not deal with building long-term assets. It focuses on day-to-day governance.

What counts as revenue receipts?

Revenue receipts show where the government’s money comes from and are divided into two categories:

Tax revenue, which includes:

• Income tax

• Corporate tax

• Customs duties

• Excise duties and other direct and indirect taxes

Non-tax revenue, which includes:

• Returns on government investments

• Fees and charges for government services

• Interest income from loans and investments

Together, these receipts reflect the government’s regular earning capacity.

What is revenue expenditure?

Revenue expenditure refers to spending that does not create assets or reduce liabilities and is recurring in nature.

This includes:

• Salaries and pensions of government employees

• Administrative and operational costs of ministries

• Day-to-day defence expenditure, such as maintenance

• Spending on health, welfare and public services

These expenses are essential for governance, public services and national security, even though they do not result in new physical assets.

What is a revenue deficit?

A revenue deficit occurs when revenue expenditure exceeds revenue receipts, in other words, when the government spends more on routine functions than it earns through regular income.

Such a gap can arise due to:

• External shocks like geopolitical tensions, wars or high global oil prices

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• Internal pressures such as economic slowdowns or policy constraints

A persistent revenue deficit signals financial stress, as it means the government may need to borrow even to meet everyday expenses.

Why the revenue budget matters

The Revenue Budget offers a clear picture of the government’s fiscal health. Strong revenue receipts indicate stable earnings, while rising revenue expenditure without matching income can strain public finances.

In every Union Budget, how the government manages this balance determines how much room it has for long-term investments, reforms and economic stability.