The Union budget of India, which is offered using the Finance bill and the Appropriation bill has to be passed by Lok Sabha before. It can get into effect on 1st April, the start of India’s financial year. Beginning from 1st April of one year to 31st March of the following year, the Union Budget is the blueprint of the Government’s revenue and expenditure for a financial year. It is offered during the month of February so that it can be formed before the start of a new financial year. According to Article 112 of the Indian Constitution, it is an extended financial statement that presents the Government’s estimation of revenue sources and estimated expenses for the year. It is classified into two parts – the revenue budget and the capital budget. The revenue budget contains the government’s revenue receipts and expenditure, while the Capital Budget comprises the government’s capital receipts and payments.
The Union Budget of India for 2017-18 showed a remarkable shift in more ways than one. The date of its show was moved to the first working day of February from the last working day of the month. In addition to this, the Railway Budget also enhanced a fundamental part of the Union Budget, a break from the 92-year old tradition of managing the Railway Budget as a separate entity.
As of September 2017, Morarji Desai gave Ten budgets that are the highest count followed by P Chidambaram’s 9 and Pranab Mukherjee’s 8. Yashwantrao Chavan, Yashwant Sinha, and C.D. Deshmukh has given 7 budgets each while Manmohan Singh and T.T. Krishnamachari has presented 6 budgets. Until 2018, as a part of the tradition, Finance ministers took the budget in a leather briefcase. The tradition was founded by the first Finance minister of India, Mr. RK Shanmukham Chetty. Nirmala Sitharaman broke this tradition by providing the budget in red cloth, on 5th July 2019.
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Union Budget of India: A Brief History
On 7th April 1860, the first Union Budget of India, a concept that started when the country was still under British colonial rule, was introduced by the then Finance Minister of India, James Wilson. On November 26, 1947, the first Union Budget of Independent India was given by Sir R.K. Shanmugham Chetty (the first Finance Minister of India)
The first Union Budget of India was given amidst public riots that followed the partition. This budget was planned for 7 and a half months, after which the next budget was supposed to be implemented from 1st April 1948. It was also determined that India and Pakistan would both share the same currency till September 1948.
Following the resignation of Sir R.K. Shanmugham Chetty, the baton was passed on to his heir, John Mathai, who gave the 1949-50 and 1950-51 Union Budgets. The Union Budget of 1949-50 carries the record of being the first budget for a United India, which covered all the princely states.
Who prepares the Budget?
The Budget Department formulates and implements the Annual State Budget with a macroeconomics framework under the guidance of the Ministry of Finance and Revenue for a given period.
Behind the scenes of formulating union budget:
- Budget implementation starts with the Budget classification of the Ministry of Economic Affairs in the Ministry of Finance, and Niti Aayog is also invited as a consultant.
- Now in the month of September, the budget division issues a circular proposal to all Ministries, states, and armed forces to determine their fiscal status.
- When the finance ministry gets the status from all the Ministries then the Department of Revenue, Department of Expenditure, and Department of Economics come into action.
- Consultation with Niti Aayog and other Ministries is done to formulate the budget.
- Once the whole picture is formed in the last week of January, the Finance Minister takes the final decision.
- Once the decision is made, the Finance Minister discusses the proposal with the Prime Minister, and the proposal freezes when the Prime Minister confirms.
- Printing of the Budget document starts.
- The day before the Budget presentation Finance minister addressed the cabinet on a summary of the Union Budget and the morning of the budget presentation Govt seeks President’s permission.
- Now, The Finance minister gives the budget in the Lok Sabha.
- The Finance Minister gives the budget into two parts.
- General Economic survey
- Tax proposals
- Once the speech is completed, the Budget proposal is placed on the table.
- After some debates which last for 2–3 days, “Vote an Account” is held.
- Budget proposal is then passed in Lok Sabha and Rajya Sabha as well as approved by the president, all within 75 days.
- Now finally Budget proposal implementation starts.
- The Budget is introduced through the tabling of the Economic Survey in the Budget.
Session of the Parliament by the Finance Minister. This year on 31 January 2020, the Finance Minister Ms.Nirmala Sitharaman presented the Economic Survey 2019-20. The Survey is also given by the Chief Economic Advisor (CEA) during a press meet after it is tabled in the Parliament.
Importance of Union Budget
India has a parliamentary democracy where the govt. cannot arbitrarily spend, tax, or borrow money. Therefore, for the government to function effectively and assist enhance the economic and social framework of the country, budgeting and planning are a necessity.
Some of the reasons that explain the importance of union budget are as follows-
As the resources are restricted, it is with the help of a union budget that the government tries to employ them efficiently so that the profits can be maximized.
One of the most significant duties of the union budget is to manage and predict inflation and deflation. Surplus policies and deficit policies are concentrated upon during inflation and deflation, respectively, to keep the economy steady.
Reducing Economic Inequality
No society is free from economic inequalities. It is with the aid of budgetary policies that the government seeks to bridge the gap between the rich and the poor.
Reason Behind the Government Works Out a Budget Every Year
The Government plays two important functions by making a budget every year-
- The Government expects the expected expenditures for developmental works in different sectors of the economy e.g. Industry, Manufacturing, Education, Health, Transport, etc.
- To meet the expenditures for the coming financial year, the Government seeks to work out the sources of revenue. (i.e. by requiring new taxes or raising or reducing the previous rates of taxes, or removing or impose subsidies on any commodity)
In other words, the Governments decide about the expenditure to be provoked on which products primarily and how the money is going to be provided for these expenditures. The aspects of such income and expenditures statements are known as ‘Budget’. Each budget is made for a specified duration.
Types of Union Budgets
The Union Budget can be classified into two parts mention below:
- Revenue budget
- Capital budget
Let’s discuss one by one below.
The revenue budget comprises the government’s revenue receipts and revenue expenditure. Revenue receipts can be further divided into tax revenue (income tax, excise duty, corporate tax, etc.) and non-tax revenue (interest, profit, fees, fines, etc.). Revenue expenditure relates to the regular expenses acquired from the daily functioning of the government as well as for the range of services given to the public. If the revenue expenditure is greater than the revenue receipts, the government is supposed to acquire a revenue deficit.
Capital budget, its components are of a long-term nature, consists of capital expenditure and capital receipts. Some of the primary sources of government receipts include loans from citizens, the Reserve Bank of India (RBI), and foreign governments. Capital expenditure, on the other hand, comprises costs incurred on the development and maintenance of equipment, machinery, health facilities, building, education, etc. When the government’s expenditure is more than the total revenue collected, a state of fiscal deficit happens.
An Overview of Union Budget of India 2020-21
On February 1st, 2020, while giving the union budget in the parliament Finance Minister Nirmala Sitharaman said that In May 2019, Prime Minister Narendra Modi received a massive mandate to form the government again. The people of India have unequivocally provided their Janaadesh for not just political stability, but have also relaxed their trust in our economic policy. This is a budget to expand their income and improve their purchasing power.
The second budget of the Modi government’s second term in power is centered on three things – Aspirational India, Economic development, and a Caring Society. The central government is to provide Rs. 99,300 crores for the educational sector in FY21. New education policy will be revealed soon, said Sitharaman. The budget concentrated on expanding the rural income and raising the purchasing power of the people by decreasing the income tax rates.
Major highlights of the Full Union Budget 2020 from Finance Minister Nirmala Sitharaman’s speech
- The defense budget was raised to Rs. 3.37 lakh crore for 2020-2021 against last year’s Rs. 3.18 lakh crore.
- Rs 1.13 lakh crore has been set down out of the total allocation for capital expenditure to purchase new weapons, aircraft, warships, and other military hardware.
- The revenue expenditure has been pegged at Rs 2.09 lakh crore which includes expenses on payment of salaries and maintenance of establishments.
|Up to Rs 5 lakh||No tax|
|Rs 5-7.5 lakh income||reduced to 10 from 20 percent|
|Rs 7.5 lakh to 10 lakhs||reduced to 15 from 20 percent|
|Rs 10-12.5 lakh||reduced to 20 percent from 30 percent|
|Rs 12.5-15 lakh||reduced to 25 percent from 30 percent|
|Rs 15 lakh||30 percent (No change)|
- Dividend distribution tax abolished.
- Around 70 of more than 100 income tax deductions and exemptions have been removed, to simplify the tax system and lower tax rates
- To boost start-ups, the tax burden on employees due to tax on Employee Stock Options to be deferred by five years or till they leave the company or when they sell, whichever is earliest
- Option to be given to cooperative societies to be taxed at 22% plus 10% surcharge and 4% cess, with no exemptions or deductions. To also be exempted from Minimum Alternative Tax.
- Under Vivad Se Vishwas Scheme, taxpayers who pay the amount of disputed tax will get a total rejection on interest and fine, if the scheme is availed by March 31, 2020.
- Aadhaar based verification of taxpayers is being introduced. A system to be launched soon, for instant online allotment of PAN-based on Aadhaar, without the need for filing an application form.
- Total allocation for Swachh Bharat is around Rs. 12,300 crores for this year.
- Central government’s debt fell to 48.7% in March 2019 from 52.2% in March 2014.
- For the year 2020-21 GDP is estimated at a nominal 10%.
- Receipts For 2020-21 the government receipts are estimated at Rs 22.46 lakh crores.
- Expenditure is Rs. 30.42 lakh crores.
- For Financial Year 2021 revised expenditure estimates at Rs. 26.99 lakh crores.
- Approximate Fiscal deficit is at 3.8% vs target of 3.3% of GDP
- In the world corporate tax is lowest at 15%.
- Increment to Rs. 5 crores from Rs. 1 crore in the Turnover threshold for audit.
- Rs. 2826.92 crores to be allocated by the government for the sports budget for the next financial year to the sports budget for the next financial year.
- For the development of sports at the grassroots and youth level the government has given a substantial hike of Rs. 291.42 crores to its flagship Khelo India Programme.
- Rs. 245 crores to be allocated for National Sports Federation (highest reduction has been made under it).
- Incentives for sportspeople have been suggested to be cut from Rs. 111 crores to Rs. 70 crores. And the budget for the National Sports Development Fund will also be decreased to Rs. 50.00 from the earlier Rs. 77.15 crore.
- There has been a reduction in the allocation to the sports authority from the revised Rs. 615 crores to Rs. 500 crores.
- No changes were made in the allocation for the improvement of sports facilities in Jammu & Kashmir and sportspeople will continue to get the same amount of Rs. 2 crores as earlier under the National Welfare Fund.
- Rs. 55 crores (5 crores more than the last budget) will be granted to Laxmi Bai National Institute of Physical Education.
- 16-point action plan has been listed by the Finance Minister for farmers, towards the goal of multiplying farmers income by 2022
- Rs. 15 lakh crores have been fixed as a target for Agricultural credit. Further NABARD Refinancing Scheme to be expanded.
- Installing of standalone solar pumps for 20 lakh farmers under Pradhan Mantri Kisan Urja Suraksha Evam Utthan Mahabhiyan (PM KUSUM).
- For agriculture and allied activities, irrigation, and rural development 2.83 lakh crores rupees have been granted.
- SHGs will provide holding capacity for farmers under the Village Storage scheme and women in villages can retrieve their status as Dhaanya Lakshmi.
- The Ministry of Civil Aviation on international and national routes will launch Krishi Udan, which will help in improving the value realization in North East and tribal districts
- By 2025 milk processing capacity will be multiplied.
- For transportation of perishable goods, Indian railways will set up Kisan Rail through PPP arrangement.
- By 2022-23, fish production will be increased to 200 lakh tonnes.
- A medical college to be connected to a district hospital in PPP mode, for setting up such medical colleges viability gap funding to be structured.
- Rs. 3,000 crores allocated for skill development in the budget 2020-21.
- For bench-marking foreign candidates who wish to study in India IND-SAT exam to be held in Asian and African countries.
- Full-fledged degree-level online education program to be offered by institutes in the top 100 in the National Institutional Ranking Framework.
- For the education sector in 2020-21, the government announces Rs. 99,300 crores expenditures.
- New Education Policy to be announced soon. (which now has been announced)
- Across the country, urban local bodies give internships for young engineers for a period of up to 1 year.
- Over five years 8,000 crores rupees will be provided for quantum technologies and applications.
- In 2021, Rs. 99,300 crores have been granted for the education sector and about Rs. 3,000 crores for skill development.
A national forensic science university and a national police university is suggested to be set up.
- Rs. 100 crores will be granted for making preparations for the G-20 presidency as India will be the host for the G-20 summit in 2022. As during this summit, India would be prepared to drive the global economic and development agenda.
- An additional Rs. 69,000 crores have been granted for the health sector which intends to expand Jan Aushadhi Kendras in all districts of the country to provide medicines at reasonable rates.
- To promote domestic industry and generate resources for health services nominal health cess to be introduced on the import of medical equipment.
- Deposit Insurance Coverage to be increased from 1 lakh to 5 lakh rupees.
- To obtain higher export credit which gives higher insurance cover, a reduced premium for small exporters, and a simplified procedure for claim settlements a new scheme will be launched for it.
- For the progress of industry and commerce Rs. 27,300 crores will be granted.
- To decriminalize civil offenses the government plans to revise the companies act.
- Investment Clearance Cell to set up through a portal that will provide end-to-end facilitation, assistance, and information on land banks.
- Amendments to be prepared to allow NBFCs to increase invoice financing to MSMEs.
- The government intends to sell a part of its holding in LIC by the initial public offer.
- To decriminalize civil offenses the government plans to amend the companies act.
- Rs. 22,000 crores to be granted to the power and renewable energy sector according to the current budget.
- Budget 2020 aims to provide Rs. 1.7 lakh crores for the infrastructure of transport in 2021.
- Plan to reach electrification of 27,000 km of lines.
- ₹18,600 crores proposed by the government for the Bengaluru Suburban rail project.
- 12 lots of national highways to be monetized by the Government by 2024.
- By 2024, to support UDAN 100 more airports will be developed.
- Iconic destinations to be connected through more Tejas-types trains.
- Stimulated development of highways will be initiated. As of 2023 Delhi-Mumbai expressway and two other projects are to be finished. And before 2024, monetization of 12 lots of highway bundles of over 6,000 km.
- For creating a single-window e-logistics market, a national logistics policy will be released soon.
- Project Preparation Facility to be set up For development of infrastructure projects, Project preparation facility to be set up for actively involving young engineers and management graduates.
- Fibre to Home connections Under Bharat Net Fibre to home connections will be provided to 1 lakh gram panchayats and 6,000 crore rupees have been granted for Bharat Net.
- National Gas Grid to be expanded from 16,200 km to 27,000 km under the union budget 2020-21.
WOMEN & NUTRITION
- Under the ‘Beti Bachao Beti Padhao’ scheme, the Gross Enrolment Ratio is now higher for girls than for boys at all levels.
- Rs. 28,600 crores have been granted for the particular programs for women·
- For 2020-21, Rs. 35,600 crores for nutrition-related programs have been granted.
- To upload the nutrition status of 10 crore households over 6 lakh Anganwadi workers have been provided with smartphones.
- For Scheduled Castes and Other Backward Classes 85,000 crores rupees have been allotted in the budget 2020-21.
- For Scheduled Tribes 53,700 crore rupees.
- For Senior citizens and Divyangs there would be an enhanced allocation of 9,500 crores.
- As an iconic site five archaeological sites are to be developed.
- In 2020-21 budget Rs. 2,500 crores to be granted for tourism promotion.
- Rs. In 2020-21 for the culture ministry Rs. 3,150 crore rupees to be granted.
- Rs. 4,400 crores to be granted for the parameters and incentives to the states who take measures for cleaner air in cities above 1 million populations.
A union budget of India reflects all the different sectors of the Indian society which is considered an important part of economic growth as it aims to become a $ 5 trillion economy in the coming years. We hope that after the pandemic phase the continued momentum for Indian reality to attract new investments into different sectors and wish that the steps were taken by the government for reducing tax exemptions and National Infrastructure Pipeline (NIP) brings positive changes for the holistic growth of the Indian real estate sector. In simple terms, it can also be said that the budget 2020 initiated a stage for the betterment of the economy.
Frequently Asked Question
Q1. What is the Union Budget?
A1. The union budget is a country’s annual financial statement. As per Article 112 of the Indian Constitution, the budget display is necessary before a new fiscal year begins.
Q2. Who presents the budget in Lok Sabha?
A2. The Finance minister of India presents the Union Budget in Lok Sabha.
Q3. What is Direct Tax?
A3. Direct taxes are those taxes which an individual or organization pays directly to the imposing entities as it cannot be passed onto a different person or organization. A taxpayer, for example, pays these direct taxes to the government for different purposes such as income tax, property tax, corporation tax, gift tax, etc.
Q4. What is Indirect Tax?
A4. Indirect taxes are those taxes which are collected by one entity in a supply chain and are paid to the government but it is passed on to the consumer as a part of a good or services purchase price. Hence, the consumer is ultimately paying the tax by paying more for the product. Examples of indirect taxes are central excise tax, customs duty, service tax, etc.
Q5. Why the Appropriation Bill?
A5. The appropriation bill is presented in the parliament to get the grants offered through the budget withdrawn from the CFI. This bill has to be passed to get Parliament’s authorization to withdraw money from the Consolidated Fund of India (CFI).