A tax revenue of Rs 5,07,150 crore (Rs 5071.50 billion) is expected next fiscal and will account for 82 per cent share of the total revenue of Rs 6,17,597 crore (Rs 6175.97 billion), according to Budget proposals announced by Finance Minister P Chidambaram said on Friday.

The increased tax-compliance would result in the UPA government raising tax-GDP ratio to 12.5 per cent at the end of 2007-08 as against 9.2 per cent when the Congress-led regime took over from the NDA.

Even though the government looks to contain rise in overall expenditure to just 5.85 per cent, an outlay of Rs 7,50,884 crore (Rs 7508.84 billion) would surpass total revenue by Rs 1,33,287 crore (Rs 1332.87 billion), which technically is called fiscal deficit.

As such, fiscal deficit would be cut to 2.5 per cent of GDP despite ambitious social outlays announced in the Budget.

The total revenue receipts is pegged at Rs 6,02,935 crore (Rs 6029.35 billion), while revenue expenditure is projected at Rs 6,58,119 crore (Rs 6581.19 billion), leaving a deficit of Rs 55,184 crore (Rs 551.84 billion). Thus, excess outlay on government's day-to-day operating expenses, technically called revenue deficit, would be one per cent of the GDP next fiscal.

Revenue deficit would be cut by 0.5 per cent from 1.5 per cent of GDP this fiscal and is in line with the Fiscal Responsibility and Budget Management (FRBM) Act, but the legislation also binds the government to eliminate it by 2008-09. This means revenue deficit target would not be met as per the FRBM Act.

"...Because of the conscious shift in expenditure in favour of health, education and the social sector, we may need one more year to eliminate the revenue deficit. In my view, this is an entirely acceptable deferment," Chidambaram said.

The Finance Minister also kept service tax unchanged at 12 per cent, but widened its scope by including some new areas like asset management services for unit-linked products, collections through which are expected to rise by 27.38 per cent to Rs 64,460 crore (Rs 644.60 billion) from Rs 50,603 crore (Rs 506.03 billion) in the revised estimates for this fiscal.

Among outlays, interest payments at Rs 1,90,807 crore (Rs 1908.07 billion) would comprise an overwhelming portion of 42.55 per cent of total non-plan revenue expenditure, while subsidy burden at Rs 71,431 crore (Rs 714.31 billion) would take away another 16 per cent.

Defence expenditure at Rs 48,007 crore (Rs 480.07 billion) would comprise most of capital non-plan outlay of Rs 59,146 crore (Rs 591.46 billion) next fiscal.

Plan expenditure is pegged at Rs 2,43,386 crore (Rs 2433.86 billion), comprising Rs 2,09,767 crore (Rs 2097.67 billion) revenue plan expenditure and Rs 33,619 crore (Rs 336.19 billion) as capital plan expenditure.