We often budget our earnings and expenditure – that’ how we get our dream car and dream house. It’s a tough task to calculate, estimate, save and plan the whole thing and gets even more complicated when the family expands. India is a country with over 125 crore people – imagine how complicated the budgeting might be. It’s nearly impossible to ever achieve a perfect budget – it’s imperfect and will stay so forever. What we need in a budget is the right direction, as we need with our own dreams. While many people ignore budget – to remind them, the money being talked about here, doesn’t belong to the Government, it belongs to you, the citizens. It’s your money that elected representatives are managing and caretaking. There are various details and documents presented and spoken about in the budget, which most citizens are not able to understand. We intend to help a few by utilising our knowledge to present the budget in simpler terms. Rome wasn’t built in a day, and you too won’t understand the budget in a year – keep reading and experience will reach out to your knowledge one day!
What is Annual Budget?
Every year the finance minister presents the budget of the country in the Lok Sabha. Budget explains how the government is planning to collect taxes or earn through other sources and how the government is going to spend the same. Governments in developing countries, usually spend more than the earnings by borrowing funds from market or other countries, as higher spending means better public infrastructure and other schemes for developments in the country. The budget papers contain details about how the government performed in past years, its estimate for ongoing year and budgets for next year. During budget speech, the finance minister talks about the highlights of his budget explaining the key developments that the Government intends to bring, the expected deficit as a result of spending and sources of borrowing and the changes in the tax structures and legal provisions to implement the budget.
What are the Annual Financial Statements?
The Annual Financial Statements (AFS) shows the estimated receipts and expenditure of the Government of India for FY 2022 commonly called as ‘Budget’. The statements depict where the Government of India would receive funds from and where the same shall be disbursed. Comparison is drawn with budget estimates (BE) for FY 2021 (as announced last year), revised estimates (RE) for FY 2021 (as expected today after 10 months) and the actual expenditure (AE) for FY 2020 (completed year). These are estimates while the actual expenditure of FY 2022 shall be presented in the budget 2023, two years later. There are three accounts which the Government maintains – 1) Consolidated Fund of India (CFI) where all Government receipts and expenditure are recorded, 2) Contingency Fund which is reserved fund maintained at the disposal of President of India for contingencies, 3) Public Accounts where all funds held in trust by the Government of India on behalf of the public are recorded.
What is Finance Bill?
At the time of presentation of the Budget before the Parliament, a Finance Bill is also presented detailing the imposition, abolition, remission, alteration or regulation of taxes proposed in the budgeted estimates. The Finance bill is introduced every year to give effect to the financial proposals of the Government for the subsequent financial year and any supplementary financial proposals for any period. In simple terms, Government presents its budget estimates in Annual Financial Statements, however, to achieve those estimates various laws may be required to be amended. A gist of all such amendments and other provisions is presented as a Finance bill. The finance bill can only be introduced in Lok Sabha and also requires prior recommendation of the President. Thus, before presenting budget in Lok Sabha, the salient features of the budget are first presented to President of India, then to the cabinet ministry and finally in the Lok Sabha.