The Union Budget will be presented by Finance Minister Nirmala Sitharaman for the third time on 1st February, 2021. The budget this year will be paperless due to the extreme circumstances of COVID-19. The Union Budget is an annual financial statement for the Union of India includes the government’s revenue and expenditure for the given fiscal year. In its entirely it is a massive and complex document.
The list below will simplify terms that seem difficult to understand and analyse the budget for yourself –
- Union Budget
The Union Budget is also referred to the Annual Financial Statement in Article 112 of the Constitution of India. It is an all-inclusive, extensive report of the Government’s finances in which revenues from all sources and outlays for all activities are consolidated. The Budget also consists of estimates of the Government’s accounts for the next fiscal year called Budgeted Estimates.
- Direct and Indirect Taxes
Direct taxes are the taxes that an individual and corporations pays directly to government such as income tax, corporate tax etc. Indirect taxes are imposed on goods and services in the form of excise duty, customs duty, sales tax etc. They are paid by consumers when they purchase goods and services.
- Customs Duty
These are levies charges when goods are imported into, or exported from, the country, and they are paid by the importer or exporter. Usually, these are also passed on to the consumer.
- Fiscal Deficit
When the government’s non-borrowed receipts fall short its entire expenditure, it has to borrow money from the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit.
- Revenue Deficit
The difference between revenue expenditure and revenue receipt is known as revenue deficit. It shows the shortfall of the government’s current receipts over current expenditure.
- Primary Deficit
The primary deficit is the fiscal deficit minus interest payments. It tells how much of the Government’s borrowings are going towards meeting expenses other than interest payments.
- Fiscal Policy
It is the government actions with respect to aggregate levels of revenue and spending. Fiscal policy is implemented through the budget and is the primary means by which the government can influence the economy.
- Monetary Policy
This comprises actions taken by the central bank that is, RBI to regulate the level of money or liquidity in the economy or change the interest rates.
A sustained increase in the general price level. The inflation rate is the percentage rate of change in the price level. It is the decrease in the purchasing power of a given currency over time.
- Capital Budget
The Capital Budget consists of capital receipts and payments. It includes investments in shares, loans and advances granted by the central Government to State Governments, Government companies, corporations and other parties.
- Revenue Budget
The revenue budget consists of revenue receipts of the Government and its expenditure. Revenue receipts are divided into tax and non-tax revenue. Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the Government levies. The non-tax revenue sources include interest on loans, dividend on investments.
- Finance Bill
The Bill produced immediately after the presentation of the Union Budget detailing the Imposition, abolition, alteration or regulation of taxes proposed in the Budge.
- Vote on Account
The Vote on Account is a grant made in advance by the parliament, in relation to the estimated expenditure for a part of the new financial year, pending the completion of procedure relating to the voting on the Demand for Grants and the passing of the Appropriation Act.
- Excess Grants
If the total expenditure under a Grant exceeds the provision allowed through its original Grant and Supplementary Grant, then, the excess requires regularisation by obtaining the Excess Grant from the Parliament under Article 115 of the Constitution of India. It will have to go through the whole the process as in the case of the Annual Budget, i.e. through the presentation of Demands for Grants and passing of Appropriation Bills.
- Budget Estimates
Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.
- Revised Estimates
Revised Estimates are a mid-year review of possible expenditure, taking into account the rest of expenditure, New Services and New instrument of Services etc. Revised Estimates are not voted by the Parliament, and hence by itself do not provide any authority for expenditure. Any additional projections made in the Revised Estimates need to be authorised for expenditure through the Parliament’s approval or by Re-appropriation order.
Re-appropriations allow the Government to re-appropriate provisions from one sub-head to another within the same Grant. Re-appropriation provisions may be sanctioned by a competent authority at any time before the close of the financial year to which such grant or appropriation relates. The Comptroller & Auditor General and the Public Accounts Committee reviews these re-appropriations and comments on them for taking corrective actions
- Outcome Budget
From the fiscal year 2006-07, every Ministry presents a preliminary Outcome Budget to the Ministry of Finance, which is responsible for compiling them. The Outcome Budget is a progress card on what various Ministries and Departments have done with the outlays in the previous annual budget. It measures the development outcomes of all Government programs and whether the money has been spent for the purpose it was sanctioned including the outcome of the fund usage.
Parliament, sadly, has very limited time for analyzing the expenditure demands of all the Ministries. So, once the prescribed period for the discussion on Demands for Grants is over, the Speaker of Lok Sabha puts all the outstanding Demands for Grants, Whether discussed or not, to the vote of the House. This process is popularly known as ‘Guillotine’.
- Cut Motions
Motions for reduction to various Demands for Grants are made in the Form of Cut Motions seeking to reduce the sums sought by Government on grounds of economy or difference of opinion on matters of policy or just in order to voice a grievance.
- Consolidated Fund of India
All revenues raised by the Government, money borrowed and receipts from loans given by the Government ow into it. All Government expenditure other than certain exceptional items met from Contingency Fund and Public Account are made from this account. No money can be appropriated from the Fund except in accordance with the law.
- Contingency Fund of India
A fund placed at the disposal of the President to enable him/her to make advances to the executive/Government to meet urgent unforeseen expenditure.
- Public Account
Under provisions of Article 266(1) of the Constitution of India, the Public Account is used in relation to all the fund flows where Government is acting as a banker. Examples include Provident Funds and Small Savings. This money does not belong to the government but is to be returned to the depositors. The expenditure from this fund need not be approved by the Parliament.
- Corporate Tax
This is the tax paid by corporations or firms on the incomes they earn.
- Minimum Alternative Tax (MAT)
The Minimum Alternative Tax is a minimum tax that a company must pay, even if it is under zero tax limits.
Disinvestment means the sale of shares of public sector undertakings by the Government. The shares of government companies held by the government are earning assets at the disposal of the Government. These shares are sold to receive cash, then earning assets are converted into cash, So it is referred to as disinvestment.