Key Terminologies under Indian budget notes-CSEET
Key Terminologies under Indian budget:
ICSI CSEET: The Council of the ICSI has released a notice regarding CSEET on the day of the inauguration of ICSI Golden Jubilee Celebrations on 4th Oct 2017.
The Gazette Notification on the Company Secretaries (Amendment) Regulations, 2020 has been published on 3rd February 2020 in the Official Gazette of India and the same shall be applicable from the said date of publication.
Now ICSI Published a notice regarding CSEET Test which going to start from 2020 May.
We are now going to discuss the details of CSEET Paper-3 Economics and Business Environment notes – Key Terminologies under Indian budget.
Key Terminologies under Indian budget notes:
OVERVIEW OF INDIAN UNION BUDGET
- The first Indian Budget was presented by Mr James Wilson on February 18, 1869 after Indian Budget was introduced on April 7, 1860 by the East India Company.
- The first Budget of Independent India was presented by the then Finance Minister, Mr RK Shanmukham Chetty on November 26, 1947.
- Till 1955, Budget was only printed in English language. However, from 1955-56, budget started getting printed in both languages, Hindi and English.
- In the British Era, the Budget used to be presented at 5 PM. This practice was discontinued in the year 2001 by presenting the Budget at 11 AM.
- Until 2017, the ritual was to present the Budget on the last working day of the February. From last 2 years, Budget is now presented on the first working day of the February.
- Mr KC Neogy and Mr HN Bahuguna were the only two Finance Ministers who did not present any Indian Budget.
- The record of presenting maximum number of Budgets is held by Shri Morarji Desai for presenting 10 Budgets.
- For the first time in 92 years, Union Budget of 2017 merged the Union Budget with the Rail Budget, which was usually presented separately.
KEY TERMINOLOGIES / HEADS COVERED UNDER THE BUDGET
- Annual Financial Statement
Article 112 of the Constitution requires the government to present to Parliament a statement of estimated receipts and expenditure in respect of every financial year – April 1 to March 31. This statement is the annual financial statement.
The annual financial statement is usually a white 10-page document. It is divided into three parts, consolidated fund, contingency fund and public account. For each of these funds, the government has to present a statement of receipts and expenditure.
- Consolidated Fund
This is the most important of all government funds. All revenues raised by the government, money borrowed and receipts from loans given by the government flow into the consolidated fund of India. All government expenditure is made from this fund, except for exceptional items met from the Contingency Fund or the Public Account. Importantly, no money can be withdrawn from this fund without the Parliament’s approval.
- Demand For Grants
Demand for Grants is the form in which estimates of expenditure from the Consolidated Fund, included in the annual financial statement and required to be voted upon in the Lok Sabha, are submitted in pursuance of Article 113 of the Constitution.
The demand for grants includes provisions with respect to revenue expenditure, capital expenditure, grants to State and Union Territory governments together with loans and advances. Generally, one demand for grant is presented in respect of each ministry or department. However, for large ministries and departments, more than one demand is presented.
- Appropriation Bill
Appropriation Bill gives power to the government to withdraw funds from the Consolidated Fund of India for meeting the expenditure during the financial year. Post the discussions on Budget proposals and the Voting on Demand for Grants, the government introduces the Appropriation Bill in the Lok Sabha. It is intended to give authority to the government to withdraw from the Consolidated Fund, the amounts so voted for meeting the expenditure during the financial year.
- Finance Bill
A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. The proposals of the government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill.
The Finance Bill is accompanied by a Memorandum containing explanations of the provisions included in it. The Finance Bill can be introduced only in Lok Sabha. However, the Rajya Sabha can recommend amendments in the Bill. The bill has to be passed by the Parliament within 75 days of its introduction.
- Contingency Fund
As the name suggests, any urgent or unforeseen expenditure is met from this fund. The Rs 500-crore fund is at the disposal of the President. Any expenditure incurred from this fund requires a subsequent approval from Parliament and the amount withdrawn is returned to the fund from the consolidated fund.
- Public Account
This fund is to account for flows for those transactions where the government is merely acting as a banker. For instance, provident funds, small savings and so on. These funds do not belong to the government. They have to be paid back at some time to their rightful owners. Because of this nature of the fund, expenditure from it are not required to be approved by the Parliament.
For each of these funds the government has to present a statement of receipts and expenditure. It is important to note that all money flowing into these funds is called receipts, the funds received, and not revenue. Revenue in budget context has a specific meaning.
The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. So all receipts in, say consolidated fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account), which includes non-revenue receipts and expenditure. For understanding these budgets – Revenue and Capital – it is important to understand revenue receipts, revenue expenditure, capital receipts and capital expenditure.
- Revenue receipt/Expenditure
All receipts and expenditure that in general do not entail sale or creation of assets are included under the revenue account. On the receipts side, taxes would be the most important revenue receipt. On the expenditure side, anything that does not result in creation of assets is treated as revenue expenditure . Salaries, subsidies and interest payments are good examples of revenue expenditure.
- Capital receipt/Expenditure
All receipts and expenditure that liquidate or create an asset would in general be under capital account. For instance, if the government sells shares (disinvests) in public sector companies, like it did in the case of Maruti, it is in effect selling an asset. The receipts from the sale would go under capital account. On the other hand, if the government gives someone a loan from which it expects to receive interest, that expenditure would go under capital account. On the other hand, if the government gives someone a loan from which it expects to receive interest, that expenditure would go under the capital account.
In respect of all the funds the government has to prepare a revenue budget (detailing revenue receipts and revenue expenditure) and a capital budget (capital receipts and capital expenditure). Contingency fund is clearly not that important. Public account is important in that it gives a view of select savings and how they are being used, but not that relevant from a budget perspective. The consolidated fund is the key to the budget.
As mentioned in the first part, the government has to present a revenue budget (revenue account) and capital budget (capital account) for all the three funds. The revenue account of the consolidated fund is split into two parts, receipts and disbursements – simply, income and expenditure. Receipts are broadly tax revenue, non-tax revenue and grants-in-aid and contributions.
Preparing a Budget is extremely tedious and a lengthy process. It begins with the Budget Division issuing circular to all ministries, states, UTs, autonomous bodies, deparments and the defence forces, who are asked to submit expenditure estimates for the upcoming year. Extensive consultations are held between Union ministries and the Department of Expenditure of the finance ministry once the estimates have been submitted.
In the meantime, the Department of Economic Affairs (DEA) and Department of Revenue meet stakeholders such as farmers, businessmen, FIIs, economists and civil society groups to take their views. Once the pre-Budget meetings are over, a final call on the tax proposals is taken by the finance minister. The proposals are discussed with the Prime Minister before the Budget is finally prepared.