Finances of Panchayati Raj Upsc

Finances of Panchayati Raj

The finances of Panchayati Raj were summarized in the Second Administrative Reforms of 2005-2009. In this the financial problems and the sources of revenue of PRI (Panchayati Raj institutions) with summarized.

Panchayat receives funds in the following ways:

  • Based on Finance commission by Article 280, gets grants from Union Government.
  • Based on the State finance commission Article 243-I, gets devolution from the state government. Also, get grants from the State government.
  • Get finances from Centrally sponsored schemes for Programme Specific Allocation. Example: Rashtriya Gram SWARAJ Abhiyaan (RGSA)
  • Tax and Non-Tax by Internal Resource Generation.

The Panchayat raj was not given enough fiscal empowerment by the state government. The states like Tamil Nadu, Kerala, Karnataka etc were progressive in Panchayati Raj Institution. But even in these states, the Panchayat were dependent on government grants.

Financial Situation of Panchayati Raj

  • Panchayati Raj has very weak internal revenue generation. This is because of the thin tax domain and reluctance in collecting revenue.
  • Panchayats have a high dependence on grants from state and union governments.
  • A major part of grants is Programme Specific, from Union and state governments. Panchayat has limited discretion in incurring expenditures.
  • State governments do give enough funds to panchayat, due to their own financial position.

In terms of resource collection, the gram panchayat is in a better position as they have its tax domain. The state panchayat acts gave most taxation powers to village panchayats.

On the other hand, intermediate and district panchayats ie tax and non-tax have been kept much small, confined to ferry services, markets, water, and conservancy services, registration of vehicles, cess on stamp duty etc.

List of Panchayat Taxes

  • Octroi
  • Property/house tax
  • profession tax
  • land tax/cess
  • taxes/tolls
  • entertainment tax/fees
  • non-agriculture land tax
  • fee on registration of cattle
  • sanitation/drainage/conservancy tax
  • water tax
  • lighting rate/tax
  • education cess
  • Fairs and Festival Tax
* * All the Notes in this blog, are referred from Tamil Nadu State Board Books and Samacheer Kalvi Books. Kindly check with the original Tamil Nadu state board books and Ncert Books.