Finance Minister Nirmala Sitharaman will present the first Union Budget of 2024 on July 23, following the BJP's third consecutive victory in the general elections. As you tune in to watch the budget announcement on TV, you will encounter numerous unfamiliar terms. Understanding these terms is crucial, as they can often be perplexing. Familiarizing yourself with them will not only aid in grasping the fundamentals of the budget but also make it easier to understand the finance minister's presentation.
What is the Union Budget ?
The Union Budget refers to the annual financial statement of the Government of India, presented by the Finance Minister in Parliament. It outlines the government's revenue and expenditure for the upcoming fiscal year. The budget includes estimates of income and expenditure, fiscal policies, taxation proposals, and allocations for various sectors such as education, healthcare, infrastructure, and defense. It serves as a comprehensive financial plan that guides the country's economic policies and priorities for the year.
Here are key budgeting terms you should know:
1. Gross Domestic Product (GDP): GDP measures the total market value of all finished goods and services produced within a country during a specific time period.
2. Direct and Indirect Taxes: In India, taxes are categorized into direct taxes (paid directly by individuals or corporations, such as income tax) and indirect taxes (collected from consumers through goods and services, like GST).
3. Goods and Services Tax (GST): In India, most goods and services are subject to GST. This type of tax is known as indirect taxation since the business entity sends the money collected from the consumer to the government. GST increases the government's revenue.
4. Customs Duty: This tax is imposed on goods imported into or exported out of India, impacting consumer costs indirectly. Although the importer/exporter has the financial burden of paying this price, it is typically passed on to the customer.
5. Fiscal Deficit: A fiscal deficit is the difference between the government's non-borrowed revenue and its outlays for spending.
6. Fiscal Policy: This governmental strategy influences economic conditions through taxation and spending decisions.
7. Monetary Policy: Controlled by the Reserve Bank of India (RBI), it manages the money supply and interest rates to achieve economic stability. Thus, the government monitors the liquidity of the economy to ensure ideal growth.
8. Revenue Budget: Focuses on the current income and expenses of the government.
9. Finance Bill: As its name suggests, a finance bill deals with financial matters like taxes and government borrowing.
10. Vote on Account: Allows government expenditures before full budget approval.
11. Excess Grants: Additional funding beyond allocated amounts, regulated by parliamentary procedures. The Indian Constitution, in Article 115, allows the government to use excess grants to handle such situations. The process for requesting more funding must follow the same steps as the annual budget, which include presenting grant demands and enacting appropriations bills.
12. Budget Estimates: The Finance Minister allots funding to various projects and departments upon the announcement of the Union Budget. The amounts listed here are budget estimates. Because they are not the government's final commitment, they are dubbed estimates. They indicate the maximum amount of money the government will spend on the specified project, ministry, industry, etc.
13. Revised Estimates: The government expresses its maximum willingness to spend on a specific economic factor when it releases its budget estimates.
14. Re-appropriations: reallocation of funds within a budget from one purpose to another.
15. Outcome Budget: Although a budget allots money for different uses, there needs to be a mechanism to keep track of whether those uses were carried out. The outcome budget evaluates the effectiveness of budget expenditures.
16. Guillotine: The Parliament has a finite amount of time to debate each ministry's proposed expenditures. However, this time can be jeopardized if there are other urgent political issues.
17. Cut Motions: All ministries submit grant requests during the budgetary process, but the parliament has the power to examine government expenditure and decide whether to accept, reject, or modify the requests. If the Parliament decides to reduce the market, a cut motion is started.
18. Contingency Fund: As the name implies, the contingency fund is reserved for unforeseen expenses.
19. Public Account: The government functions as a banker for various transactions, such as provident funds and small savings accounts. This money must be returned to depositors, as it does not belong to the government. The public account overseas fund transfers in these instances.
20. Disinvestment: The sale of government-owned shares in public sector enterprises. These shares can be sold to raise funds to cover expenses.
21. Annual Financial Statement (AF): According to Article 112 of the Constitution, the government is required to submit an estimated statement of income and expenditures to Parliament for each fiscal year, which runs from April 1 to March 31.
22. CapEX: Funds that businesses use to purchase, renovate, and manage tangible assets such as real estate, machinery, buildings, plants, or technology.
23. Revenue Deficit: The excess of expenses over receipts on the revenue account.
24. Divestment: The process by which the government sells its ownership interest in government-owned companies or public sector enterprises to the public or private sector.
25. Inflation: The rate at which prices have increased over a specific period of time.
26. Subvention: A financial grant is typically provided by the government as assistance or support.
27. Cess: Kind of tax or an extra charge imposed by the national government to raise funds for specific purposes.
28. Contingency Fund of India: For disasters and related unanticipated expenses, India has the Contingency Fund.
29. Minimum Alternative Tax (MAT): MAT is a compulsory tax for all Indian and foreign companies, calculated as a fixed percentage of their profits. It ensures a minimum level of income tax payment, preventing companies from reducing tax liabilities using exemptions and deductions under Section 115JB of the Income-tax Act.
30. Long Term Capital Gains: Popularly known as LTCG. Long-term capital gains tax applies to assets held for over a year, with rates ranging from 0 percent to 20% based on your income bracket.
Conclusion
The terms discussed provide essential insights into various aspects of government finance. It will also help you understand the complexities of the budget, the government's fiscal initiatives, and their influence on the economy.
So, are you looking forward to watch the budget presentation this time?
