GOVERNMENT BUDGET AND BUDGET PROCEDURE

Government budget and budget procedure is an important are to be studied in detail . This topic has immense potential in terms of various exams . Let us discuss in detail .

• What is budget ? – Budget is an annual statement of estimated receipt and estimated expenditure , which government plans to receive and spend for the upcoming fiscal year .
• In simple words , under budget , Government of India , plans every year regarding what amount of money it is going to receive and what amount it is going to spend over one financial or fiscal year .
• The financial year starts from 1st of April and ends at 31st of March of next year .

 

Constitutional provisions of Government budget

• Article 265 – This article reads as” No tax shall be levied or collected except by authority of law” .
• Meaning – It means that if government wants to impose any new tax or collect the existing tax , then it can be done only after incorporating (passing of a law in parliament ) a law .
• Article 266 – This article reads as “No expenditure can be incurred except with the authorization of legislature” .
• Meaning – It simply means that if government wants to spend , then before spending government needs the approval of legislature ( Parliament ) .
• An important note – Every year the citizens pay taxes , fees , fines , duties etc.. All these money are deposited in an account . This account is known as CONSOLIDATED FUND OF INDIA ( CFOI ) . So, whenever , government wants to spend out of this account , it has to get prior approval from parliament . Why ? – Because of Article 266 .

So , now we know that in order to levy or impose tax , a law is needed ( Article 265 ) and in order to do expenditure , authorization of legislature is needed ( Article 266 ) .

• How government seeks approval ? – Government takes the approval of parliament to levy taxes through Finance bill . The finance bill is mentioned under Article 110 . On the other hand , for the approval of expenditure , government uses Appropriation bill . Appropriation bill is mentioned under Article 114 .
• Crux – Every year government takes permission by presenting and getting passed the Finance bill and the Appropriation bill .

Types of Budget

• There can be 3 kinds of Budget presented by the government :

1. Full budget – The full budget contains the governments estimate for expenditure and revenue for the entire financial year .
2. Interim Budget – The interim budget also accounts for complete set of accounts , including both expenditure and receipts , but only for a part of the year . But the interim budget is presented not for the entire year , rather it is presented for a part of the year . The Interim budget is generally presented in the election year . However , there is no constitutional provision of presenting an Interim budget . It is just an unwritten convention ( a practice ) which political parties have developed .
3. Vote-on-account – Suppose Budget (appropriation bill ) has not been passed and government needs money for its activities , then to deal with this kind of circumstance , the constitution of India has provided a mechanism called Vote-on-account . Here , government can prepare a demand for grant and if parliament passes the demand majority , then government can extract and use the funds to perform it’s activities . Vote on account is not for whole year , rather it is used for a part of the year and that too when government faces financial crisis in order to perform it’s normal activities .

 

Budget Procedure

• The budget is presented in the parliament on the first working day of February at 11.00am . It is presented firstly in Lok Sabha by the Finance minister . The Finance minister presents the budget and gives a speech , introducing the budget . After the speech of Finance minister , the budget is also presented in Rajya Sabha . On the day of introduction of budget , no discussion takes place in the house .
• The budget contains following documents –

1. Annual Financial statement .
2. Demand for grants .
3. Appropriation Bill .
4. Finance bill .

• The actual sequence of budget is –
  1. Budget presentation
  2. General discussion
  3. House adjourned
  4. Voting on demand for grants
  5. Appropriation bill .
  6. Finance bill .
• After the budget presentation by Finance minister , General discussion on budget takes place from the subsequent day .

General discussion –

At this stage , general examination of the presented budget takes place . Various Parliamentarians present their views on the budget w.r.t. taxation and expenditure policies of the government . The General discussion on budget happens in both the houses of parliament I.e. Lok Sabha and Rajya Sabha .

 

Houses adjourned

After general discussion , the houses are adjourned for a fixed number of days .

Detailed discussion on budget

• During the adjourned period , demand for grants of various ministries are considered by the Departmentally related standing committees ( DRSC ) . There are 24 DRSCs and approximately 100 ministries .
• Every ministry has its own demand for grant ( i.e. what amount the ministry is planning to spend in the upcoming year ) . These DRSCs prepare a report during this adjourned period regarding the demand for grants by all ministries . The report has to be prepared within the specified period and DRSCs cannot demand for extra time .
• Once the reports are prepared , they are presented in the Lok Sabha . Thereafter , the house goes for discussion and voting on demand for grants , ministry wise . The time during which discussion and voting on demand for grant has to be completed , is decided by Speaker of the house in consultation of the leader of house .
• On the last day of the allocated days , the speaker puts all the outstanding demands to the vote , without providing more time for discussion . This phenomena is called Guillotine . So , Guillotine concludes discussion on all the outstanding demand for grants .
• Note – In Rajya Sabha , there happens only general discussion . Rajya Sabha has no power to discuss and vote on demand for grants .

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Appropriation bill

• When the voting on demand for grants is over , government introduces the appropriation bill as per article 114 of the constitution . The appropriation bill gives authority to the government to extract money and incur expenditure out of Consolidated fund of India .

Finance Bill

• Article 110 of the constitution talks about Finance bill . This bill provides detailed information regarding the taxation proposal of the government . How much would be the tax slabs for income tax and corporate tax , what would be the tax rate ; all these stuffs are provided in this bill .
• It should be noted here that Finance bill is introduced in the Lok Sabha on the same day when finance minister had presented the budget . But , the finance bill is considered for voting only after the passing of appropriation bill .
• The parliament has to pass the finance bill within 75 days of its introduction .

Money bill

• Appropriation bill and money bill , put together are called as money bill. These bills are sent to Rajya Sabha also and Rajya Sabha has power to amend and suggest changes in both the bill .
• However , whether to accept or reject the amendments done by Rajya Sabha , completely depends upon Lok Sabha . It can accept or reject . Here , Rajya Sabha cannot do anything .
• When Lok Sabha passes the money bill ( with or without amendment ) , it is deemed to be passed by both the houses