Tax revenue collected from individuals and corporations
Explanation
Government receipts are broadly classified into Revenue Receipts (Tax and Non-Tax) and Capital Receipts (Borrowings and Disinvestment). For a sovereign government, tax revenue serves as the primary, non-repayable source of funds used to finance public goods, administration, and welfare schemes.
Option Analysis:
- Profits generated by Public Sector Undertakings (PSUs) Profits generated by Public Sector Undertakings (PSUs): This falls under Non-Tax Revenue. While significant, the dividends and profits from PSUs constitute a much smaller portion of the total receipts compared to tax revenues.
- Tax revenue collected from individuals and corporations Tax revenue collected from individuals and corporations: Correct. Tax revenue (comprising direct taxes like Corporate Tax and Income Tax, and indirect taxes like GST) is the largest source of non-debt receipts for the Government of India. It provides the fiscal space necessary to finance public goods (defence, infrastructure) and merit goods (health, education) without creating future liabilities.
- External Commercial Borrowings (ECB) External Commercial Borrowings (ECB): These are Capital Receipts that create a liability (debt) and interest obligations. While borrowings are used to bridge the fiscal deficit, they are not considered a sustainable "primary source" for financing recurrent public goods due to the debt servicing burden.
- Grants-in-aid from international financial institutions Grants-in-aid from international financial institutions: These are a minor component of the central government's receipts and are often tied to specific projects rather than being a general source for financing public goods.
Key Takeaway:
Tax Revenue (Direct and Indirect) is the most substantial and sustainable source of income for the government, whereas borrowings create liabilities and non-tax revenues are supplementary.