Panchayats in India earn only one per cent of their revenue through taxes: Data

Most of their revenue comes from the Centre and the States as grants

Only 1% of the revenue of panchayats was earned by them, with the rest being raised as grants from the State and the Centre, show data. Specifically, 80% of the revenue was from Central government grants; only 15% was from State government grants. Consequently, the revenue raised by panchayats formed a minuscule share of the States’ own revenue.

Panchayats act on three levels — gram sabhas, panchayat samithis, and zila parishads. They are responsible for a variety of tasks including agriculture, rural housing, water management, rural electrification, healthcare, and sanitation. In some cases, zila parishads are also responsible for maintaining schools, hospitals, dispensaries, and minor irrigation projects.

However, due to dependence on the Centre and the State for their funds, most panchayats suffer from interference from the top two tiers of the system, according to news reports. In August last year, several panchayat heads protested in Chennai asking for the independence of the Panchayati Raj. A news report from Telangana last year stated that the failure of the State government to release funds on time forced sarpanches to use private funds. The Standing Committee on Rural Development and Panchayati Raj said in March last year that 19 out of 34 State/Union Territories did not receive any funds under the Rashtriya Gram Swaraj Abhiyan scheme in FY23. The programme was started to build capacity and train elected representatives.

Also read |Data | Municipal corporations are gasping for funds, depend on State, Centre for grants 

The recently released report by the Reserve Bank of India on the finances of Panchayati Raj Institutions for 2022-23 argues that one of the ways forward is to promote greater decentralisation and empower local leaders and officials. According to the report, panchayats had recorded a total revenue of ₹35,354 crore in 2022-23 (Chart 1). Of this, just ₹737 crore was earned by their own tax revenue. Panchayats can earn this through taxes on profession and trades, land revenue, stamps and registration fees, taxes on property, and service tax.

Chart 1| The chart shows the revenue receipts of panchayats in 2022-23. Figures in %

Chart appears incomplete? Click to remove AMP mode