KALYANSIR.COM
IN BRIEF:
(NOTE: I am giving a brief description here for your clarity.
Read all the points carefully. This is the gist of the whole chapter. The
same is explained in detail).
·
For the development of the nation and for the
implementation of the welfare schemes the government needs to spend money.
·
When the government is spending money, it also collects
money from the people in the form of taxes.
·
Hence the budget includes both income and expenditure.
·
Budget is an anticipated income and expenditure of the
Government.
·
This is calculated for one year.
·
This year is called a financial year.
·
In India the financial year starts on April 1 and ends on
March 31.
·
The budget is prepared for the forthcoming financial year.
·
It means the government plans in advance what will be the
expenditure in the coming financial year.
·
Once the government is clear about the expenditure that
is going to be incurred in the forthcoming financial year the government also
plans from the income.
·
Who prepares the budget?
·
The overall responsibility of the preparation of the
budget lies with the Finance Minister.
·
Once the preparation of the budget is done the budget is
presented.
·
The budget is presented in the Parliament with the prior
permission of the President.
·
The budget is first presented in the Lok Sabha.
·
The budget should not be presented in the Rajya Sabha
first.
·
In general the budget is presented in the Lok Sabha on
the last working day of February.
·
Before the presentation of the general budget, the
Railway budget is presented.
·
The Railway budget is presented 1 or 2 days before the
general budget.
·
After the general discussion on the budget, voting on
demand for grants takes place.
·
26 days are allotted for the voting on demands for grants.
·
The Cut motions take place during these 26 days with the
permission of the Speaker.
·
The Cut motions are moved by the members of opposition
party.
·
The Cut motions are meant for reducing the expenditure by
the government.
·
There are 3 types of cut motions like Policy cut, Economy
cut and token cut.
·
After this all the demands that are voted together will
be put together and presented again in the Lok Sabha, this is called
Appropriation (Expenditure) bill.
·
There is no discussion on Appropriation bill and only
voting takes place.
·
Then the Appropriation bill is forwarded to the Rajya
Sabha.
·
The Rajya Sabha cannot vote on this and only discus and
may give recommendations to the Lok Sabha.
·
The Lok Sabha may or may not accept the recommendations.
·
In any case the Rajya Sabha must return the bill to Lok
Sabha within 14 days.
·
Later the bill is presented to the President for consent.
·
The Appropriation bill becomes Appropriation Act with the
consent of the President.
·
This is the authorization by the Legislature to the
Executive to draw the money from the Consolidated Fund of India.
·
The Finance bill is also presented in the Lok Sabha.
·
The Finance bill contains the tax proposals.
·
The Parliament can reduce or abolish a tax.
·
The Parliament cannot increase a tax.
·
After the Finance bill is passed in the Lok Sabha, it is
forwarded to the Rajya Sabha.
·
The Rajya Sabha has no power with regard to the Finance
bill.
·
The Rajya Sabha must return the bill within 14 days.
·
The Finance bill is presented to the President for the
assent.
·
The Finance bill becomes the Finance Act with the consent
of the President.
·
This is the approval of the Parliament to the Executive
for the imposition and collection of the taxes.
·
The taxes that are collected are credited (deposited) to
the Consolidated Fund of India.
·
The Consolidated Fund of India is mentioned in the
article 266 of the Indian Constitution. (More details are discussed later in
this chapter).
·
After the completion of the financial year the accounts
are submitted to the Comptroller and Auditor General of India (CAG).
·
The CAG audits the accounts.
·
The CAG submits the report to the President of India.
·
The report of CAG is placed in front of the parliament by
the President.
·
The report is verified by the Public Accounts Committee.
·
The Public Accounts Committee submits the recommendations
back to the Parliament.
|
HERE IS THE DETAILED EXPLANATION. GO
AHEAD.
ü Budget
is an anticipated statement of Income and expenditure of the Government in a
financial year.
WHAT IS A FINANCIAL YEAR?
ü
This is a year for which all the income and expenditure
of the government is calculated.
ü
In India the financial begins on April 1 and ends on
March 31.
ü
The financial year may vary from one country to another.
|
ü The
word ‘budget’ is not mentioned in the Constitution.
ü The
word ‘budget’ is referred to as ‘Annual Financial Statement’ in the
Constitution.
ü The
words ‘Annual Financial Statement” is mentioned under article 112 of the Indian
Constitution.
HOW MANY TYPES
OF BUDGETS ARE PRESENT IN INDIA?
ü As
India is a federal country the financial aspect is also divided between the
Union and the states.
ü Hence
the state budgets are separate from that of the central budget.
ü The
central budget itself is of 2 types.
·
Railway budget
·
General budget
ü The
Railway budget consists of the estimates of revenue (income) and expenditures
of Ministry of Railways.
ü The
General budget consists of estimates of revenue and expenditure of all the
ministries of the government of India except Railways.
WHEN THE RAILWAY
BUDGET WAS SEPARATED FROM THE GENERAL BUDGET?
ü The
Railway budget was separated from the General Budget in the year 1921.
ü This
was separated on the recommendations of the Acworth committee report.
ü This
was also to enable the railways to keep their profits for their own development
after paying a fixed annual contribution to the general revenues.
PLEASE NOTE:
ü
The budget is presented in the form of a bill.
ü
The budget is presented first in Lok Sabha only.
ü
The budget is presented only with the prior
permission of the President.
ü
The Railway budget is presented first.
ü
The General budget follows the railway budget.
ü
In general the Railway budget is presented by the Railway
Minister.
ü
The general budget is presented by the Finance Minister.
ü
The Railway budget contains 32 demands.
ü
The General budget contains 109 demands.
ü
Out of 109 demands in the General budget
v
103 are civil demands
v
6 are defense demands
ü
The Rajya Sabha has no powers regarding the budget.
ü
The Rajya Sabha should return the money bill within 14 days.
ü
The budget cannot be sent back by the President for the
reconsideration.
|
WHAT ARE THE
CONSTITUTIONAL PROVISIONS OF THE BUDGET?
ü The
President shall in respect of every financial year cause to be laid before both
the houses of the Parliament a statement of estimated receipts and expenditure
of the government of India for that financial year. (This means that the
responsibility of presentation of budget lies with the President of India).
ü No
demand for a grant shall be made except on the recommendation of the President.
ü No
money shall be withdrawn from the consolidated fund of India except under appropriation
made by law.
ü No
money bill imposing tax shall be introduced in the Parliament except on the
recommendation of the President and such a bill shall not be introduced in the
Rajya Sabha.
ü Article 265: No
tax shall be levied or collected except by the authority of law.
ü Parliament
can reduce or abolish a tax but cannot increase it.
ü The
Constitution also provides the relative positions of both the houses of the
Parliament with regard to the enactment of the budget.
ü A
money bill or finance bill dealing with taxation cannot be introduced in the
Rajya Sabha.
ü A
money bill or finance bill must be introduced only in the Lok Sabha.
ü The
Rajya Sabha has no power to vote on the demand for grants and it is the
exclusive power of the Lok Sabha.
ü The
Rajya Sabha should return the money bill or finance bill within 14 days.
ü The
Lok Sabha can either accept or reject the recommendations made by the Rajya
Sabha.
ü The
estimates of expenditure embodied in the budget shall show separately the expenditure
charged on the Consolidated Fund of India and the expenditure
made from the Consolidated Fund of India.
ü The
budget shall distinguish expenditure on revenue account from the other
expenditure.
THE
EXPENDITURE IS OF TWO TYPES.
·
Expenditure charged.
·
Expenditure Made.
IN SIMPLE TERMS the charged expenditure includes
ü Emoluments
and allowances of the President and other expenditure related his office.
ü The
Salaries and allowances of
·
Chairman of Rajya Sabha
·
Deputy Chairman of Rajya Sabha
·
Speaker of Lok Sabha
·
Deputy Speaker of Lok Sabha
ü Salaries,
allowances and pensions of
·
Judges of Supreme Court
·
Comptroller and Auditor General
·
Chairman and members of Union
Public Service Commission
ü Pensions
of judges of High Courts
ü The
debt charges for which the government of India is liable, including interest,
sinking fund charges and other expenditure relating to the raising of the
loans and the service and redemption of debt.
ü Any
sum required to satisfy any judgment, decree, award of any court or tribunal.
ü Any
other expenditure declared by the Parliament to be so charged.
|
WHAT IS
EXPENDITURE MADE?
ü This
part of the expenditure is discussed and voted by the Parliament.
|
STAGES IN THE
ENACTMENT OF THE BUDGET:
ü There
are few steps or stages that the budget should go through before it becomes an
act.
·
Presentation of the Budget
·
General discussion on the budget (3 to 4
days)
·
Voting on demand for grants (26 days)
·
Consideration and Passing the
appropriation bill (expenditure bill)
·
Consideration and Passing the finance
Bill (Tax proposals or income bill)
ü Let
us discuss all these steps in detail.
PRESENTATION
OF THE BUDGET:
ü This
is the 1st
step in the process of budget.
ü The
Railway budget is presented 1 or 2 days before the General Budget is presented.
ü It
means the Railway budget precedes the general Budget.
ü Normally,
the General Budget is presented on the last working day of February.
ü Both
Railway and General budgets are presented in the Lok Sabha first with the prior
permission of the President.
ü Budget
Speech: The finance minister presents the
general budget with a speech called Budget Speech.
ü Later
the budget is presented to the Rajya Sabha.
ü The
Rajya Sabha has no power to vote but it can discuss the
budget.
GENERAL DISCUSSION:
ü This
is the 2nd
step in the enactment of the budget.
ü In
general 3 to
4 days are allotted to the general discussion.
ü The
general discussion takes place in both the houses of the Parliament.
ü During
this stage the budget is discussed as a whole or any part of it.
ü At
the end of the discussion the Finance Minister gives the reply.
NOTE:
After the general discussion the house is adjourned for 3 to 4 weeks. During
this time the budget is examined by the 24 standing committees of the Parliament. And
the committees submit the report to the Parliament.
VOTING ON
DEMAND FOR GRANTS:
ü This
is the third
step in the enactment of the budget.
WHAT IS A DEMAND?
·
Demand is a proposal.
·
As we already discussed there are 109 demands in the
general budget and 32 demands in the railway budget.
·
A demand becomes a grant after it is duly voted.
·
Hence each demand is presented, discussed and voted to
make it a grant.
|
ü The
voting on demand for grants takes place only in the Lok Sabha.
ü 26 days
are allotted for the voting on demand for grants.
ü The
voting is confined only to the ‘Expenditure Made” part of the budget.
ü NOTE:
In the previous page it is explained what is ‘Expenditure made’ and ‘Charged
expenditure’.
ü EXPENDITURE
MADE: This is discussed and voted.
ü The
“expenditure charged” on the consolidated fund of India is only discussed and
this is not subject to vote.
ü All
the 141 demands (General budget 109 + Railway Budget 32) are presented.
ü All
the 141 demands are voted separately by the Lok Sabha.
ü This
is the statge the Lok Sabha discuss the details of the budget.
ü The
Speaker allots the time for each demand.
ü Within
the time specified by the Speaker the discussion on the demand must be
completed and the demand is put to vote.
ü Once
the allotted time is over the speaker announces the closure.
ü Closure means
the demand must be put to vote as the allotted time is over.
ü In general all the demands are not discussed
and voted within the allotted 26 days.
ü Guillotine: This is voting group of demands together that
are not discussed.
ü At the end of the 26th day all the
demands that are not discussed are put to vote together by the Speaker.
ü During
voting on demand for grants ‘Cut Motions” are introduced.
ü Generally
the cut motions are introduced by the opposition party members.
ü The
Cut motions are meant to reduce any demand for grant.
CUT MOTIONS:
ü There
are three kinds of cut motions.
·
Policy Cut
·
Economy Cut
·
Token Cut
ü All
cut motions are introduced only during the voting on demand for grants.
ü The
cut motions are introduced, if the Speaker accepts them.
ü The
cut motions are generally introduced by the members of the opposition parties.
ü Since
the government enjoys the majority in Lok Sabha the cut motions are not passed.
ü If
the cut motions are passed in the Lok Sabha that is an expression of no confidence
on the government.
ü If
a cut motion is passes the government must resign.
POLICY CUT:
ü This
is the disapproval of the policy underlying the demand.
ü If
the policy cut is passed the total amount of the demand is reduced to Rs. 1/-
(One Rupee).
ECONOMY CUT:
ü The
economy cut is not against the policy but against the amount.
ü If
the economy cut is passed the total amount of the demand is reduced by specified amount.
TOKEN CUT:
ü The
token cut is also called nominal cut.
ü This
is just to express the grievance of the members against a demand.
ü If
the token cut is passed the amount of the demand is reduced by Rs. 100/- (hundred only).
QUICK REVIEW:
ü
POLICY CUT: The total amount is reduced to
Rs. 1/-
ü
ECONOMY CUT: The total amount is reduced by
specified amount.
ü
TOKEN CUT: The total amount is reduced by
Rs. 100/-
|
Note:
As we know the budget contains two parts Income and expenditure. The income and
expenditure are presented, discussed and passed separately in the form of 2
different bills, Appropriation (expenditure) bill and finance (Income) bill. These
two bills form 4th and 5th steps in the enactment of the
budget.
CONSIDERATION
AND PASSING THE APPROPRIATION (EXPENDITURE) BILL:
ü This
is the 4th
stage of the budget.
ü The
appropriation bill meant for the getting the approval for the expenditure out
of the consolidated fund of India.
ü All
the demands that are discussed and voted during the voting on demand for grants
are put together in the form of a bill and is called the appropriation bill.
ü The
appropriation bill contains
·
The grants voted by the Lok Sabha
·
The expenditure charged on the
consolidated fund of India.
ü No
changes can be proposed to the appropriation bill.
ü The
appropriation bill is not discussed as the discussion is already completed
during voting on demand for grants.
ü The
Appropriation is bill is voted.
ü Please read
this point with more focus to get clarity:
During the voting on demand for grants all the demands are voted separately and
not in the form of a bill. Hence all the demands put together and is called the
appropriation bill. This is presented and is voted in Lok Sabha.
ü After
the appropriation bill is passed in the Lok sabha, the bill is forwarded to the
Rajya Sabha.
ü The
Rajya Sabha has no power to vote the appropriation bill.
ü The
Rajya Sabha
can discuss the appropriation bill and send recommendations if any
to the Lok sabha.
ü The
Lok Sabha may
or may not accept the recommendations.
ü The
Rajya Sabha must return the appropriation bill to the Lok Sabha within 14 days.
ü The
Appropriation bill is then forwarded to the President.
ü The
President cannot
send back the appropriation bill for reconsideration.
ü The
President must give the assent.
ü The
appropriation bill becomes appropriation act.
CONSIDERATION
AND PASSING THE FINANCE BILL:
ü This
is the 5th
and final stage in the enactment of the budget.
ü Tax
proposals are mentioned in the Finance bill.
ü The
Finance bill is subjected to all the conditions applicable to Appropriation
bill.
ü The
Finance bill must be enacted within 75 days.
ü The
Finance bill is also introduced first in the Lok Sabha.
ü The
changes are permitted in the Finance bill.
ü The
Parliament can demand for the reduction or abolition of a tax.
ü The
Parliament cannot
demand for the increase of a tax.
ü After
it is passed in Lok Sabha the finance bill is forwarded to the Rajya Sabha.
ü The
Rajya Sabha must return the bill within 14 days.
ü The
Finance Bill is forwarded to the president.
ü The
President cannot send back the Finance bill for reconsideration.
ü With
the assent of the President the Finance Bill becomes the Finance Act.
ü
This gives the effect to the financial
proposals of the government of India.
VOTE ON
ACCOUNT:
ü This
is mentioned under Article 116 of the Indian Constitution
ü Vote
on Account is
an advance granted in respect to the estimated expenditure for a
part of the financial year, pending the completion of the voting of the demands
for grants and enactment of the appropriation bill.
ü As
we know that the financial year in India begins on April 1 and ends on March
31.
ü The
expenditure and tax collection of a particular financial year must take place
during this period only.
ü But,
starting from the day of introduction of the budget in the Parliament (last
working day of February) by the time it becomes Act, it goes on till the end of
the April.
ü Note:
The Financial year begins on April 1.
ü The
government needs money to carry on its activities after March 31.
ü Please Note:
The previous year money if it is available also it cannot be used because of
the Rule of Lapse.
WHAT IS RULE OF LAPSE?
The money which is allotted for a particular financial
year should used only during that financial year only.
|
ü The
Vote on account is passed by the Lok Sabha after the completion of general
discussion.
ü The
vote on account is granted for 2 months.
ü The
vote on account is equivalent to 1/6th of the total estimation.
Note: There are various other grants made by the
parliament from time to time. This also may not be the part of budget.
ü
Vote of Credit
ü
Supplementary grant
ü
Additional grant
ü
Excess grant
ü
Exceptional grant
ü
Token grant
|
VOTE OF
CREDIT:
ü This
is mentioned under Article 116 of the Indian Constitution
ü The
vote of credit is like a blank cheque.
ü The
vote of credit is granted for meeting the unforeseen demand.
ü This
is related to the service of an indefinite character.
SUPPLEMENTARY
GRANT:
ü This
is mentioned under Article 115 of the Indian Constitution.
ü This
is granted when the amount authorized by the Parliament through the
appropriation act for a particular service for the current financial year is
found to be insufficient for that year.
ADDITIONAL
GRANT:
ü This
is mentioned under Article 115 of the Indian Constitution
ü This
is granted for the new service during the current financial year.
ü This
new service is not a part of the budget of that financial
year.
EXCESS GRANT:
ü This
is mentioned under Article 115 of the Indian Constitution.
ü The
excess grant is made when the money has been spent on any service during a
financial year in excess of the amount granted for that service in the budget
for that year.
ü The
excess grant is voted by the Lok Sabha after the financial year.
ü The
excess grant must be approved by the Public Accounts Committee.
EXCEPTIONAL
GRANT:
ü This
is mentioned under Article 116 of the Indian Constitution
ü The
exceptional grant is not a part of the current financial year service.
ü The
exceptional grant is for a special purpose.
TOKEN GRANT:
ü The
token grant is meant for transfer of funds from one head to the other.
ü This
is called re-appropriation.
ü The
token grant involves no additional expenditure.
VARIOUS TYPE
OF FUNDS UNDER THE CONSTITUTION OF INDIA
ü
The Constitution of India provides for the three kinds of
funds.
ü
They are
·
Consolidated Fund of India -
Article 266
·
Public Accounts of India - Article 266
·
Contingency Fund of India -
Article 267
|
CONSOLIDATED
FUND OF INDIA:
ü No
money out of the Consolidated Fund of India can be appropriated except in
accordance with a Parliamentary law.
ü The
Consolidated fund of India is mentioned under Article 266 of the Indian
Constitution.
ü All
receipts are credited to the Consolidated Fund of India.
ü All
the payments are debited from the Consolidated Fund of India.
ü Note: All expenditure is drawn and Income is
deposited to the Consolidated Fund of India.
ü What forms
the Consolidated Fund?
·
All revenues received by the government
of India.
·
All loans raised by the government of
India by the issue of treasury bills, loans or ways means of advances.
·
All money received by the government of
India in repayment of loans.
CONTINGENCY
FUND OF INDIA:
ü Note:
Contingency means emergency.
ü The
Contingency of India is mentioned under Article 267 of the Indian Constitution.
ü The
amounts determined by the Parliament by law paid from time to time.
ü The
Contingency fund of India is placed at the disposal of the President.
ü The
President of India can make advances out of Contingency Fund of India to meet
unforeseen expenditure pending its authorization by the Parliament.