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UNION BUDGET

The Union Budget is a document which provides an estimation of the revenue and expenses of a country during the financial year. It draws up a financial plan for the country and decides and allocates a specific sum for various government schemes and departments. The Union budget 2021-22 will be announced on February 01 by India’s first full-time woman finance minister, Nirmala Sitharaman

ANNUAL FINANCIAL STATEMENT

The Annual Financial Statement is a document presented by the government every year in the Parliament showing the estimated receipts and expenditures for the upcoming financial year in relation with the estimates from the previous financial years. Under article 112 of the Constitution, the government has to present an annual financial statement for every fiscal year.

BANKING CASH TRANSACTION TAX (BCTT)

It is a direct tax levied on cash transactions exceeding a specific amount from the bank by a customer. The tax is meant to check the flow of black money as the black money would be forced to switch to electronic mode of communication and to bring more people under the tax ambit.

BUDGET ESTIMATES

It includes the estimate of government spending on different sectors throughout the year. It also includes expected revenue from tax receipts together with the estimated fiscal deficit and revenue deficit for the year.

CAPITAL RECEIPT/EXPENDITURE

It is a receipt that results in either reduction in assets or increases the liability of the government. It includes market loans, small savings, provident fund and depreciation and reserve funds in various government departments. Capital expenditure is the expenditure which increases government assets or reduce liabilities. It includes loan payment, loan disbursal and expenditure on infrastructure or developmental works.

CENTRAL PLAN

It is essentially five year plans broken into annual instalments. Through Central Plan, the government tries to achieve long term objectives. In the central plan the government sets out the agenda to be achieved normally in a course of five years. The central plan could be further divided into plan expenditure and non-plan expenditure.

CESS

Cess is an additional tax levied for a specific purposes. The cess is kept in the Consolidated Fund of India and the amount raised by the tax is kept by the central government. Some of the cess types in the country include Education Cess, Secondary and higher Education Cess, Krishi Kalyan Cess, Swacch Bharat Cess.

CONTINGENCY FUND

Individual and organisation needs to be prepared to face times of crisis and unforeseen emergencies. It is essential for them to have a financial backup to deal with times of crisis. This is applicable even for countries that have to be prepared for the worse. The fund that is set up specifically to meet the challenges at the time of a crisis is known as the contingency fund. It is the money or securities set aside to cover unexpected conditions or losses in business, usually supplementing a contingency reserve.

COUNTERVAILING DUTY

It is an additional import duty imposed on imported products (by the importing country) when such products enjoy benefits like export subsidies and tax concessions in the country of their origin. It is an attempt to ensure fair and market oriented pricing of imported products and thereby protecting domestic industries and firms.

CUT MOTIONS

Each ministry has to make demands for grants before the Parliament. Cut motion gives power to each MP to oppose any demand made by the government and reduce the amount demanded by the ministry. There are three types of cut motions, namely, Disapproval of policy cut, economy cut and token cut.

DIRECT TAX

It is the tax directly paid to the Government by the taxpayers. It is imposed directly by the Centre and cannot be transferred to any other entity for payment. A taxpayer, for example, pays direct taxes to the government for different purposes, including real property tax, personal property tax, income tax or taxes on assets. The direct taxation is overseen by CBDT or Central Board of Direct Taxes in India.

DISINVESTMENT

Disinvestment is the process by which the Union government either sells its stakes in a PSU–fully or partially–or lists it on the stock market. The concept of disinvestment follows the dictum: The government has no business to be in business. Thus, the government continues to disinvest in sectors where private companies are already the dominant players.

EXCESS GRANTS

Excess grant is the extra budget allocated to meet the additional expenditure demands of the government. When the allocated budget falls short of meeting the expenditure demands of the government, an estimate for additional budget is presented before the Parliament. At the end of each financial year, excess grants are passed by the Parliament.

EXCISE DUTY

Excise duty refers to the taxes levied on the manufacture of goods within the country, as opposed to custom duty that is levied on goods coming from outside the country. In July 2017 the Centre introduced GST that subsumed a number of indirect taxes including excise duty. This means excise duty, technically, does not exist in India except on a few items such as liquor and petroleum.

FINANCE BILL

The Finance Bill is introduced in the Lok Sabha, after the presentation of the annual budget, to implement the financial proposals for the following financial year. Finance Bills can be divided into three categories: Finance Bill category I, Finance Bill category II and a Money Bill.

FINANCIAL INCLUSION

It is a process to provide financial services and timely and adequate credit where needed to vulnerable groups such as weaker sections and low income groups at an affordable cost. It could also be seen as reaching out to the common and the poor through the banking system of the country. Several schemes of the country like Jan Dhan and Direct Benefit Transfer have been implemented to ensure that these financial services reach everyone.

FISCAL DEFICIT

The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. While calculating the total revenue, borrowings are not included.

FISCAL POLICY

It is the way in which a government plans to adjust its spending and tax rates to improve and shape the country’s economy. Deciding the fiscal policy also includes deciding whether the government wants a fiscal deficit or a balance between revenue and expenditure. Just the like central bank decides a monetary police to influence the money supply, the fiscal policy shapes the economy.

FRBM ACT

FRBM or Fiscal Responsibility and Budget Management Act was enacted in 2003 to specify annual reduction targets for fiscal indicators. Since it is mandatory for the the central government to take measures to reduce fiscal deficit and to generate revenue surplus, therefore FRBM provides a legal institutional framework for fiscal consolidation.

GST

Fringe Benefits means ‘any consideration for employment provided by way of any privilege, service, facility or amenity provided by the employer to the employees’. Fringe Benefits Tax is paid by employers for benefits paid to an employee in place of salary or wages. The tax is different from income tax and it is calculated on the taxable value of the fringe benefits provided.

GUILLOTINE

Every year after the Union Budget is presented, there are numerous deliberations and debates in the Parliament on various demands for grants by the government and there is voting on each grant before it is passed. Guillotine is the exercise with which the Speaker of the House puts to vote all the remaining demands for grants on the last day of the time allocated for debate on grants. Once the Speaker invokes Guillotine, the House has to vote on all outstanding demands for grants without any discussion.

INDIRECT TAX

As the name suggests, indirect tax is not directly levied on the taxpayers. This tax is often levied on goods and services which results in their higher prices. This tax is basically levied on the seller of goods or the provider of service but in most cases, it gets passed on to the end consumer and therefore, it is generally the consumer paying the tax, indirectly. Examples of indirect taxes in India include service tax, central excise and customs duty, value added tax (VAT) and most importantly goods and services Tax (GST).

INFLATION

Inflation can be defined as the rate at which the general prices of goods and services in the country are rising. It is usually expressed in percentage points and when inflation increases, the purchasing power of citizens goes down. When purchasing power decreases, it affects the general cost of living of citizens and ultimately leads to deceleration of country’s economy.

MINIMUM ALTERNATIVE TAX (MAT)

MAT was introduced to reduce tax avoidance by taxing those companies which showed zero or negligible income to avoid tax. Under MAT, these ‘zero-tax companies’ have to pay 18.5% of their book profit as income tax. The Alternate Minimum Tax (ATM), also levied at 18.5%, is a tax similar to MAT but it is imposed on individual taxpayers rather than companies.

NON-TAX REVENUE

It is the revenue of the government from sources other than taxes. Some of the sources of non-tax revenue of the government include interest receipts on loans given to states, public departments or other public sectors. Non-tax revenue also comes from profits of the Public-sector undertakings and economic services like power and railways.

OUTCOME BUDGET

Outcome Budget is like a performance measurement tool which presents a progress card on what the various ministries have done with the money allocated to them in the previous budget. Outcome based budgeting also involves suggesting and listing the estimated outcomes of various government schemes and projects. In a bid to make budgets more result oriented, the idea of outcome budget was first introduced by former Finance Minister P. Chidambaram while presenting the Union budget for 2006-07.

PASS-THROUGH STATUS

A 'pass-through' status means that the investor has to pay a tax on the income generated, and tax is not paid on the firm. The tax is levied on small businesses, partnerships and corporations.

PLAN AND NON-PLAN EXPENDITURE

There are two components of expenditure - plan and non-plan. Of these, plan expenditures are estimated after discussions between each of the ministries concerned and the Planning Commission. Non-plan revenue expenditure is accounted for by interest payments, subsidies, wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments.

PRIMARY DEFICIT

A fiscal deficit occurs when the government’s spending is more than their earning excluding the money they get from borrowing. Primary deficit is the difference between the fiscal deficit and interest payment on loans from previous year. While fiscal deficit shows the borrowing requirement of the government, including interest payments, primary deficit shows the borrowing requirement excluding interest payment.

PUBLIC ACCOUNT

Public Account of India accounts for flows for those transactions where the government is merely acting as a banker. Examples of those are 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.

RE-APPROPRIATIONS

The government is allowed to re-appropriate provisions from one sub-head to another within the same grant, thus altering the destination of an original provision for one purpose to another, subject to some limits and restrictions. Appropriation of funds means setting aside money for a specific purpose. A government usually appropriates funds for meeting the cash demands of its business operations or meeting an unexpected need for cash. Appropriations have to be passed by the Parliament and are set for one year at a time.

REVENUE BUDGET

A revenue budget consists of the government’s revenue receipts and the expenditure they cover through these receipts. Revenue receipts include money collected through various taxes, interest on loans and dividend on investment like PSUs etc. Revenue expenditure is the money spent on the day to day functioning of the government. The money that is earned through revenue receipts is spent on revenue expenditure.

REVENUE DEFICIT

A revenue deficit is when the actual net income is less than the expected or projected income. A revenue deficit is not good for the country as it suggests that the government does not have enough money to cover its basic operations. A revenue deficit does not imply that the government has incurred a loss, it simply means that the government did not earn as much as they were expecting to earn.

REVENUE RECEIPT/EXPENDITURE

Revenue receipts are of two types- tax and non-tax. Tax revenue receipts include money earned through collection of various taxes like income tax, corporate tax etc. Non-tax revenue receipts include money from investments, interest received on loans etc. The money earned through revenue receipts is spent on day-to-day functioning of the government and it is called revenue expenditure. The difference between revenue receipts and expenditure is called revenue deficit, which is usually negative

SECURITIES TRANSACTION TAX (STT)

Securities transaction tax is a direct tax levied on sale and purchase of securities recognized by the stock exchanges in India. The tax was introduced in the 2004 Union Budget and came into effect from October 2004. The tax is meant to curb tax evasion on capital gains tax on profits earned by transacting securities.

SERVICE TAX

It is a type of indirect tax that one is liable to pay to the government once you consume the taxable services offered by different service providers such as restaurants, cab services, hotels, travel agents, cable providers etc. The consumer pays the service tax to the service provider while paying the bill (for example, your restaurant bill has a component of service tax). The government in turn collects the tax from the service providers.

SUBVENTION

It refers to a grant of money in aid by the government. In every budget, the government makes a mention of subvention. In the Indian context, for instance, the government sometimes asks financial institutions to provide loans to farmers at below market rates. The loss is usually made good through subventions. The government offers subvention on home, crop and education loans.

SURCHARGE

A surcharge is an additional fee, charge, or tax that is added to the cost of a good or service beyond the marked price. It is generally charged to the richest so that there is equity in the society. The richer have to pay surcharges while the welfare policies are made for the poor with the rich contributing to these policies. Currently, people earning between Rs 50 lakh and Rs 1 crore in India have to pay a surcharge of 10%, while those earning above Rs 1 crore have to pay a surcharge of 15%.

VALUE-ADDED TAX (VAT)

Treasury bills are government bonds or debt securities with maturity of less than a year. It is issued to meet short term differences in government receipts and expenditures. In simpler terms, it is issued when the government needs money for a short period. The bonds of longer maturity are called dated securities.

VOTE ON ACCOUNT

Every government presents a budget before the Parliament on how they are going to spend money for the next one financial year. The financial year begins from April 1 but if the government’s term is supposed to end soon, an interim budget is presented for the government to function for the next few months before the new government is elected. Other than presenting an interim budget, the government can also seek a vote on account. A vote on account is basically the permission granted by the parliament to the government to spend money for a few extra months before the elections are conducted and a fresh government comes to power, who then present their full union budget for the year.

WAYS AND MEANS ADVANCE (WMA)

Ways and means advance is a type of temporary loan facility that Reserve Bank of India gives to the centre or state governments. The current limit set up by the RBI for 2019 is at Rs 75,000 crore. It was introduced in 1997 after putting an end to ad-hoc Treasury Bills to finance the central government deficit.

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Budget timeline

Manmohan Singh
1991 Manmohan Singh

1991 ushered the era of economic liberalisation for India. Import-export policy was revamped and import duties slashed to introduce the Indian industry to competition from abroad. The government also reduced the peak customs duty from 220 percent to 150 percent.

Manmohan Singh
1992 Manmohan Singh

The Budget aimed at near full employment in a span of ten years. The ’92 Budget called for reduction in fiscal deficits. The government aimed at increasing tax and non-tax revenues. The finance minister also hiked the defence budget from Rs 16,350 crores to Rs 17,500 — a steep rise of 7%.

Manmohan Singh
1993 Manmohan Singh

The Budget extensively discussed agricultural credit with an aim to promote rural development. "Our strategy will gradually reduce high levels of protection to the Indian industry. It will moderate the high industrial prices which the farmer has to pay," said the finance minister in his Budget speech.

Manmohan Singh
1994 Manmohan Singh

The 1994-95 budget witnessed service tax being introduced at the rate of 5 percent as the sector was contributing 40 percent to the national GDP. The primary aim was to widen the indirect tax base. The tax was initially levied on telephones, non-life insurance and stockbrokers.

Manmohan Singh
1995 Manmohan Singh

Incentives for software exporters was slowly done away with. This was brought about to improve the ratio of taxes to GDP and promote India as a major software development center globally.

Manmohan Singh
1996 Manmohan Singh

The Budget revolved around 100 percent coverage of provisions for safe drinking water, 100 percent coverage of primary health centers, universalisation of primary education, public housing assistance to all shelter-less poor families, extension of mid-day meal schemes, road connectivity to all villages and habitations and streamlining the Public Distribution System meant for families below the poverty line.

P Chidambaram
1997 P Chidambaram

The 1997 Budget made tax rates moderate for individuals as well as companies. It allowed companies to adjust MAT paid in earlier years against tax liability of subsequent years. The government also launched the Voluntary Disclosure of Income Scheme (VDIS), to uncover black money.

P Chidambaram
1998 P Chidambaram

Personal income tax collections increased many folds and VDIS garnered about Rs 10,000 crore. Higher disposable income in the hands of taxpayers helped generate demand. The incremental tax revenues were leveraged to increase public expenditure on social welfare and infrastructure.

Yashwant Sinha
1999 Yashwant Sinha

Process to restore fiscal health of nation by reducing revenue and fiscal deficits was initiated. Several programmes were taken up by the human resource development ministry to empower the poor.

Yashwant Sinha
2000 Yashwant Sinha

Incentives for software exporters slowly done away with. Transfer pricing regulations also introduced, which required transactions between associated enterprises to be transparent.

Yashwant Sinha
2001 Yashwant Sinha

Intensification of infrastructure investment, continued reforms in the financial sector and capital markets, deepening of structural reforms were some of the key aspects. Reduction in non-productive expenditure and rationalisation of subsidies was undertaken. The government also aimed at acceleration of the privatisation process and restructuring of public enterprises along with widening of the tax base.

Yashwant Sinha
2002 Yashwant Sinha

Two percent earthquake tax abolished. A fine of Rs 10,000 announced on detection of false PAN. Multiplex theatres in non-metro cities were given a tax relief. This was also the year when cell phones and cordless phones got cheaper.

Yashwant Sinha
2003 Yashwant Sinha

The government introduced a new health insurance scheme in which an individual could get insurance with a premium of only Re 1/day for 365 days. A family of five could get insured for Rs 1.50/day and Rs 2/day for a family of seven, including dependants and could be eligible for a benefit of Rs 30,000 in case of hospitalisation. In the event of death, the family would get Rs 25,000.

Yashwant Sinha
2004 Yashwant Sinha

Amid rising concerns over poverty in India, 2 crore families below the poverty line were planned to be covered under subsidised PDS. Long term capital gains tax was abolished and short term capital gains tax reduced to 10%. The government also allocated Rs 259 crore on AIDS control programmes.

P Chidambaram
2005 P Chidambaram

Direct taxation was the major highlight of this Budget. Income up to Rs 1,00,000 per annum was exempted from tax. Income between Rs 1-1.5 lakh was taxed at 10%, Rs 1.5-2.5 lakh income at 20% and income above Rs 2.5 lakh was taxed at 30%. The government also proposed 50 paise per litre cess on petrol and diesel to fund highways.

P Chidambaram
2006 P Chidambaram

P Chidambaram, Minister of Finance of the UPA II, for the first time set out with implementation of Goods and Services Tax (GST) by April 1, 2010.

P Chidambaram
2007 P Chidambaram

Exemption limit for women for personal tax was increased to Rs 1,45,000 and for senior citizens to Rs 1,95,000. Dividend distribution tax rose from 12.5 percent to 15 percent.

P Chidambaram
2008 P Chidambaram

Total plan spending in 2008 was pegged at Rs 2.4 trillion, while non-plan spending was at Rs 5.07 trillion. The government waived debts of small farmers and the total cost of the farm debt waiver was Rs 600 billion.

Pranab Mukherjee
2009 Pranab Mukherjee

Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) was stepped up by 87 percent to Rs 12,887 crore. Allocation for housing and provision of basic amenities to urban poor was enhanced, this included provisions for Rajiv Awas Yojana (RAY), a new scheme.

Pranab Mukherjee
2010 Pranab Mukherjee

The Budget for financial year 2010-11 aimed to revive the agriculture sector but mentioned no incentives for organic fertilizers and sustainable farming. Monetary policy measures were expected to further moderate inflation in the coming months.

Pranab Mukherjee
2011 Pranab Mukherjee

Monetary allocation for the social sector was raised by 17 percent to Rs 1,60,887 crore along with allocation for Bharat Nirman programme increased by Rs 10,000 crore. Plan allocation for education was hiked by 24 percent and health by 20 percent. Eligibility for old age pension scheme was reduced from 65 years to 60 years.

Pranab Mukherjee
2012 Pranab Mukherjee

Pranab Mukherjee increased and facilitated poor people’s access to credit. The aimed monetary target for agricultural credit was raised from Rs 1,00,000 crore to Rs 5,75,000 crore. The Budget brought about private sector reforms through various fiscal initiatives like amending the Fiscal Responsibility and Budget Management Act of 2003 (FRBM Act).

P Chidambaram
2013 P Chidambaram

Rs 1,000 crore was allocated for skill development of the youth. Food subsidies found an allocation of Rs 10,000 in anticipation of the passing of National Food Security Bill. The 2013 Budget announced a "Nirbhaya" fund of Rs 1,000 crore in memory of the December 16, 2012 gang rape-and-murder victim.

Arun Jaitley
2014 Arun Jaitley

While several announcements were made pertaining to the health sector, most of them were focussed on medical education and establishment of institutions. The finance minister also looked at big solar power projects. The 2014 Budget planned to set up an integrated Ganga conservation mission, the Namami Gange project and allocated Rs 2,037 crore for it.

Arun Jaitley
2015 Arun Jaitley

This was the first full-fledged Budget by the National Democratic Alliance government. However, the social sector was left wanting. Experts pointed out that the Union Budget 2015-16 fell short of making investments for transmission infrastructure. This was not in line with the government’s intention of producing 175 GW renewable energy by 2020.

Arun Jaitley
2016 Arun Jaitley

The Centre granted Rs 9,000 crore to the Swachh Bharat Abhiyan (SBA) for rural sanitation. One of the far-fetched and ambitious promises made by the Finance Minster was to double the income of farmers by 2022.

Arun Jaitley
2017 Arun Jaitley

With demonetisation hitting the country three months prior to the Budget, Jaitley’s 2017 Budget was being watched by the country very closely. Additionally, 2017 also witnessed the merger of the Railway Budget with the General Budget. Income Tax rate was cut to 5 percent for individuals with an income between Rs 2.5 lakh to Rs 5 lakh.

Arun Jaitley
2018 Arun Jaitley

Budget 2018 was a step towards India's road to a high growth of over 8% with manufacturing, services and exports back on good growth path. Then Finance Minister, Arun Jaitley while presenting the General Budget 2018-19 in Parliament said that Indian society, polity and economy had shown remarkable resilience in adjusting with the structural reforms like GST and demonetisation. The Budget also worked towards doubling of farmer's income by 2022.

Piyush Goyal
2019 Piyush Goyal

(Interim Budget) The Interim Budget 2019-20 presented in Parliament on 1 February 2019 had a major scheme for farmers and provided for income tax sops. The then Finance Minister Piyush Goyal said the government brought down average inflation to 4.6%, lower than the tenure of any other previous government.

Nirmala Sitharaman
2020 Nirmala Sitharaman

Finance minister Nirmala Sitharaman hiked tax on petrol and diesel, raised import duty on gold, levied additional surcharge on super rich and brought a tax on high value cash withdrawals as she sought to spur growth with reduction in corporate tax and sops to housing sector, startups and electric vehicles.

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Sectoral Report

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