Budget, taxation & public finance

Answer: (a) Only one

Only the DRI row is fully right. The Enforcement Directorate does enforce the Fugitive Economic Offenders Act, but it works under the Department of Revenue, not the Home Ministry. Big data analytics to help tax officers is the job of CBIC's Directorate General of Analytics and Risk Management (DGARM), not the DG of Systems and Data Management.

• ✗ I The ED enforces PMLA, FEMA and the Fugitive Economic Offenders Act, but the Department of Revenue (Ministry of Finance) lists it as its attached office; it is not under the Home Ministry.
• ✓ II The DRI is the apex anti-smuggling agency of the Central Board of Indirect Taxes and Customs, enforcing the Customs Act, 1962 under the Department of Revenue.
• ✗ III The data-mining and analytics role described belongs to DGARM, which CBIC created as its apex body for data analytics and risk management in July 2017.

Remember · ED, DRI and CBIC's directorates all sit under the Department of Revenue, Ministry of Finance. Tax data analytics and risk profiling: DGARM (CBIC, 2017).

Question and answer: UPSC's official GS Paper I (2025, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (d) Statement I is not correct but Statement II is correct

Only 'agricultural income', which must come from land used for agriculture, is exempt. Poultry farming or wool rearing does not involve cultivating land, so its income is taxable like business income. Separately, section 2(14) excludes rural agricultural land from 'capital asset', so gains on selling it escape capital gains tax.

• ✗ Statement-I Section 2(1A) ties agricultural income to land in India used for agricultural purposes. Audit has treated even milk sales as dairy income, not income from agricultural land, so allied activities are taxable.
• ✓ Statement-II Section 2(14) excludes agricultural land from 'capital asset', except land within or near municipalities and cantonments of specified population (urban agricultural land).
• • Since then Since 1 April 2026 the Income-tax Act, 2025 has replaced the 1961 Act; PIB says the rewrite does not alter the underlying tax policy (PIB, 1 April 2026).

Remember · Exempt agricultural income must arise from land used for agriculture; poultry, dairy, wool are taxable. Rural agricultural land is not a capital asset, so no capital gains tax on it.

Question and answer: UPSC's official GS Paper I (2025, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (a) I and II only

A capital receipt either creates a liability (borrowing must be repaid) or reduces the government's assets (selling PSU shares). Interest the government earns on loans it has given is non-tax revenue: it creates no claim on the government, so III is wrong.

• ✓ I NCERT defines capital receipts as all receipts that create a liability or reduce the government's financial assets.
• ✓ II Fresh loans create a liability to repay, and disinvestment (sale of PSU shares) reduces financial assets, so both are capital receipts.
• ✗ III Interest receipts on loans given by the government are non-tax revenue, a revenue receipt that does not lead to any claim on the government.

Remember · Capital receipt = creates liability or reduces assets (borrowings, recovery of loans, disinvestment). Revenue receipt = no claim on government (taxes, interest, dividends, fees).

📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)

Question and answer: UPSC's official GS Paper I (2025, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (d) I, II and III

All three are correct. Revenue deficit is revenue expenditure minus revenue receipts, so ₹80,000 crore − ₹60,000 crore = ₹20,000 crore. The fiscal deficit is the government's total borrowing requirement, here ₹10,000 crore, and the primary deficit, which is that figure without the ₹6,000 crore of interest, is ₹4,000 crore.

• ✓ I Spending on the revenue account (₹80,000 crore) overshoots what the government earns on that account (₹60,000 crore) by ₹20,000 crore, and that gap is the revenue deficit.
• ✓ II The fiscal deficit shows how much the government must borrow. The Budget shows borrowings of ₹10,000 crore, so the fiscal deficit is ₹10,000 crore.
• ✓ III Take the ₹10,000 crore fiscal deficit and leave out the ₹6,000 crore that goes to interest; what remains, ₹4,000 crore, is the primary deficit.

Remember · Revenue deficit = revenue expenditure − revenue receipts. Fiscal deficit = borrowing requirement. Primary deficit = fiscal deficit − interest payments.

📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)

Question and answer: UPSC's official GS Paper I (2025, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (a) ₹ 48,500 crores

Gross primary deficit = gross fiscal deficit − net interest liabilities = ₹50,000 crore − ₹1,500 crore = ₹48,500 crore. The ₹10,000 crore of non-debt capital receipts is already counted while working out the fiscal deficit, so it is not adjusted again.

• ✓ (a) 50,000 − 1,500 = ₹48,500 crore, using the primary deficit formula.
• ✗ (b) ₹51,500 crore adds the interest liabilities instead of subtracting them.
• ✗ (c) ₹58,500 crore wrongly brings in the ₹10,000 crore of non-debt receipts, which are already reflected in the fiscal deficit.
• ✗ (d) The correct figure, ₹48,500 crore, is option (a).

Remember · Primary deficit = fiscal deficit − net interest liabilities. Non-debt capital receipts are already netted out inside the fiscal deficit.

📘 Read it in NCERT: Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter) · Class 12 Introductory Macroeconomics, Ch 5 (practise this chapter)

Question and answer: UPSC's official GS Paper I (2025, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error

Answer: (c) I, III and IV

Statements I, III and IV match the Fifteenth Finance Commission's report. Statement II is wrong: the Commission kept the States' share at 41 per cent of the divisible pool, not 45 per cent.

• ✓ I It recommended ₹4,800 crore (₹1,200 crore a year) from 2022-23 to 2025-26 to incentivise States to improve educational outcomes.
• ✗ II Vertical devolution was kept at 41 per cent of the divisible pool: the Fourteenth Commission's 42 per cent, adjusted by about 1 per cent for the change in the status of Jammu and Kashmir.
• ✓ III ₹45,000 crore was set aside as a performance-based incentive for States carrying out agricultural reforms, such as amending land-related laws on the lines of NITI Aayog's model law.
• ✓ IV The Commission re-introduced the tax effort criterion to reward fiscal performance.

Remember · 15th Finance Commission (2021–26): States' share 41% of divisible pool; ₹4,800 crore education incentive; ₹45,000 crore agri-reform incentive; tax-effort criterion re-introduced.

Question and answer: UPSC's official GS Paper I (2025, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). Permalink · Report an error