Budget is a key financing instrument of public expenditures, with no unique definition. It is defined depending on the location and the role, with a special emphasis on its legal, financial or another characteristic. Budget is the main instrument of financial management, i.e. a document which outlines the income and expenditure plan for a period of one or more years. Passing of the budget is a prerequisite for successful functioning of self-governance unit. In addition to the state budget, budget of the local and regional self-governance units is a topic of interests. The way in which budgets are filled is defined by the “Budget Act”, Official Gazette 87/08, 15/15. The Act was originally passed in 1994, and the current Budget Act with amendments and supplementations, 'Budget Act', has been in force since 6 February 2015. Another important document for the budget is 'Income Tax Act', Official Gazette 115/16, 106/18, which regulates income tax obligations for physical entities, and also "Act on financing local and regional self-governing units", which allows free managements and financial handling of generated income by local and regional self -governing units. The purpose of this work is to: • Explain the Budget Act • Explain the Income Tax Act • Explain and define revenues of the local budgets and budgets taxable under income tax • Analyze the part of the income tax broken down by counties and cities • Give conclusion and recommendation