The correct answer is Budget expenditure- Budget receipts excluding borrowings. Explanation & Key Takeaways: • Fiscal Deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure. While calculating the total revenue, borrowings are not included. Hence, Fiscal Deficit is- Budget expenditure- Budget receipts excluding borrowings. • A fiscal deficit situation occurs when the government’s expenditure exceeds its income. This difference is calculated both in absolute terms and also as a percentage of the Gross Domestic Product (GDP) of the country. A recurring high fiscal deficit means that the government has been spending beyond its means. • The government describes fiscal deficit of India as “the excess of total disbursements from the Consolidated Fund of India, excluding repayment of the debt, over total receipts into the Fund (excluding the debt receipts) during a financial year”. Important Notes: • What constitutes the government’s total income or receipts? • It has two components revenue receipts and non-tax revenues. • Revenue receipts of the government • Corporation Tax • Income Tax • Custom Duties • Union Excise Duties • GST and taxes of Union territories. • Non-tax revenues • Interest Receipts • Dividends and Profits • External Grants • Other non-tax revenues • Receipts of union territories • Expenditures of the government: • Revenue Expenditure • Capital Expenditure • Interest Payments • Grants-in-aid for creation of capital assets Explanation & Key Takeaways: • Fiscal Deficit formula: • Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts) • If the total expenditure of the government exceeds its total revenue and non-revenue receipts in a financial year, then that gap is the fiscal deficit for the financial year. • The government meets fiscal deficit by borrowing money. In a way, the total borrowing requirements of the government in a financial year is equal to the fiscal deficit in that year.