India Budget: What is union budget and how it is prepared?
What is union budget and how it is prepared? According to Article 112 of the Indian Constitution, the Union Budget, which is also known as the annual financial statement, is a statement that estimates the receipts and expenditure of the government for that particular year.
The Government presents the budget on the first day of February so that it could be finalized before the beginning of April, a new financial year. Till September 2017, Morarji Desai set a record of presenting 10 budgets. P. Chidambaram is second to present eight budgets. During the election year, the budget is presented twice; first for the interim period before the elections and second time after the formation of the new government.
Union Budget keeps account of the government’s finances from 1st April to 31st March. Union Budget is classified into two budgets, Revenue Budget and the Capital Budget.
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Revenue budget is a budget that includes the government’s revenue and expenditure. Revenue expenditure is the expenditure that is made during day to day functioning of the government and also for offering various services to the citizens. Revenue receipts are further divided into tax and non-tax revenues. Tax revenues include taxes like corporate tax, income tax, and duties like excise and customs that the government levies. While non-tax revenues include interest on loans and dividend on investments like PSUs, and also fees and other receipts for services rendered by the government.
Capital Budget comprises of capital receipts and payments of the government. Public loans, loans from foreign governments and bodies, borrowings from RBI, treasury bills, divestment of equity holding in PSUs, state provident funds, etc. form a major part of the government’s capital receipts. Capital expenditure is the expenditure that is made on acquisition of machinery, equipment, building, health facilities, education etc. Investments by the central government in shares, loans and advances given to state and UT governments, corporations and other such bodies also form part of capital payments.
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What is union budget and how it is prepared?
- The Budget is prepared by a calculative process that is held between the Finance Ministry and the spending ministries. The Finance Minister issues guidelines to present requests for Budget allocation.
- Budget Circular is issued in the month of September which guides ministries and departments for preparing revised estimates of the past year and the coming year.
- A special ‘halwa ceremony’ is held before the start of printing documents for the budget in which the finance minister and other related government officials take part. A large number of officials who are directly related to budget-preparation and printing have to stay disconnected from the outside world including their families until the presentation of the Budget by the finance minister in Parliament is finished.
- The entire Budget-making process begins months ago when the finance ministry asks for estimates from various ministries. After ministries and departments submit their demands, it is consulted with Union ministries and the Finance Ministry’s Department of Expenditure.
- Before presenting the Budget, the President’s recommendation is acquired under Article 117(1) and 117(3) for consideration in the lower house of Parliament. After the President’s recommendation, the Budget is then presented in the Lok Sabha by the finance minister with the “Budget speech”.
- The Finance Bill is then introduced immediately after the presentation of Budget, which cannot be opposed.
- The budget is not discussed in the Lok Sabha on the day of presentation.
- This completes the budget process.