Public Finance is a science that deals with the income and expenditure of public bodies and the Government of a nation. The Government of every country has to perform two types of functions namely obligatory functions and optional functions. Obligatory functions include defense of the country and the maintenance of law and order situation in different parts of the country in order to ensure peace to its citizens.
All other functions such as providing various facilities to its citizens like building of roads, parks. bridges etc, providing educational and health facilities, developing basic infrastructure to promote business and industrial environment etc. are included in optional functions. To perform all these functions adequately and efficiently, Government requires funds from the public which is the real beneficiary of the public expenditure.
Government raises funds from the public in the form of taxes, fees, penalties, Sale of goods and services. It also raises loans from the public and sometimes from outside the country. How and in what form the Government should collect revenue and how it should spend it for the maximum benefit of the society is a matter to be decided by the Government concerned taking the various political and economic considerations and the principles and theories of political science and Economics into account.
The science that deals with the income and expenditure of the Government and the principles, problems and policies relating to these matters is known as public finance. A few definitions will support the view-
(1) “Public finance is the study of the principles underlying the spending and raising of funds by public authorities.”– Findlay Shiras
(2) “Public finance, is one of those subjects which lie on the border-line between economics and politics. It is concerned with the income and the expenditure of public authorities and with the adjustment of the one to the other.” – Hugh Dalton
(3) “Public finance deals with the provisions. custody and disbursement of resources needed for the conduct of public or Governmental functions.” -H. L. Lutz.
There is hardly any fundamental difference in the central idea of the above definitions i.e., public finance relates to the income and expenditure of a Government.