- By James Kuanal
- Fri, 31 Jan 2020 10:05 AM (IST)
- Source:JND
New Delhi | Jagran Business Desk: Finance Minister Nirmala Sirtharaman is all set to unveil the second full-time budget under the second term of Prime Minister Narendra Modi led-BJP government on February 1 (Saturday). In the budget, Minister of State for Finance and Corporate Affairs Anurag Thakur will accompany her during the allocation of budget for various sectors, which will be presented before the parliament. The upcoming budget is highly anticipated among people of all sectors such as railways, defense, agriculture, aviation, government jobs, including students and job seekers.
What is a Budget?
The word budget is derived from the old French word meaning purse. A budget is a financial plan for a definite period, often one year. It is the sum of money allocated for a particular purpose and summary of intended expenditure supported with proposals on how to meet them.
A budget may include surplus, providing money for future use or a deficit in which expenses exceed income. In India, the budget is prepared by the concerned department of the finance ministry. The Finance Minister is head of the budget making committee.
Annual Financial Statement
It is usually a 10-page document divided into three parts-- consolidated fund, contingency fund and public fund. For each of these funds, the government has to present a statement of receipts and expenditures.
Consolidated Fund
This is the Government of India fund that includes all the revenue receipts of the government, treasury bills issued by the government and recovered debt.
Contingency Fund
In this fund, an amount is kept to meet the contingency expenditure. Any urgent or unforseen expenditure is met from Contingency fund. Any expenditure incurred from this fund requires approval from the parliament. The amount withdrawn is returned to the fund.
Revenue Receipts
Receipts, which are not the responsibility of the government or receipts that does not include sale of any property, are called revenue receipts. These receipts prevents liability by the government. It can be divided into tax revenue (income tax, corporation tax, sales tax etc.) and non-tax revenue (interest, fees, profits).
Capital Receipts
Public receipts are called capital income which increases the responsibility of the government and decreases the assets of the government. Examples: Loans taken from abroad or the Reserve Bank.
Revenue Expenditure
Those expenses which neither increases the production capacity of the government nor generates additional income for the future are revenue expenditures. Examples: Government subsidies, interest payments on loans, grants to state governments, etc.
Capital Expenditure
Expenses by the government that increases the assets of the government, such as roads, schools, hospitals, repairs to an old building, etc.
Fiscal Year
It is the government's 12-month accounting period that may or may not coincide with the calendar year.
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period. Strictly defined, GDP is the sum of the market values, or prices, of all final goods and services produced in an economy during a period of time.
Inflation
Inflation is an economic term that refers to an environment of generally rising prices of goods and services within a particular economy.
Planned Expenditure
In planned expenditure, production assets are produced. This expenditure is related to various economic welfare schemes. Examples: construction of school, bridge, hospital etc.
Non-Planned Expenditure
A public expenditure that does include any development work. Example: Pension, dearness allowance, flood, drought, hailstorm etc. Funds are allocated from the Consolidated Fund of India.
Export Duty
Tax levied on exports. For instance, in the last budget, the government imposed an export duty of Rs 300 per metric tonne on export of iron ores and concentrates and Rs 2,000 per metric on export of chrome ores.
Finance Bill
The bill includes proposals of government for levying new taxes, alteration of existing tax structure or continung same tax structure beyond period approved by the parliament.
Tax
Compulsory payment which the taxpayer gives to the government without any consideration.
Cess
Additional levy on the basic tax liability. As of now, all tax payers have to pay clean India cess, agricultural welfare cess, clean environment cess, the rate of which is 0.5 per cent.
Surcharge
Additional charge or tax, Surcharge is calculated on the basis of tax liability. It is generally levied on the income tax.Companies with revenue less than Rs 1 crore do not need to pay this surcharge.
Public Debt
There are three types of liabilities under Public Debt:
Internal Debt: Treasury Bills and Securities issued by the Government.
Foreign Loans: Loans from overseas governments and international institutions like World Bank.
Other Loans: Interested Liabilities, post office savings deposit, provident fund deposits and certificates of small savings schemes.
Revenue Deficit
When the total revenue receipts of the government are less than the total revenue expenditure.
Revenue deficit = Total revenue income - Total revenue expenditure
Budgetary Deficit
If the total receipts exceed the total expenditure, there will be a situation of budgetary excess, else there will be a budgetary deficit.
Budgetary deficit = (Total revenue receipts + total capital receipts) - (Total revenue expenditure + Total capital expenditure)
Fiscal Deficit
Fiscal deficit is the overall deficit which actually shows the total budgetary income of the government and the total liability arising from overall budgetary behavior.
Fiscal deficit = (Total expenditure - Total receipts) + government liability
If the government spends more than its revenue receipts, excess expenditure is be called fiscal deficit.
Primary Deficit
When we remove the interest payment from the fiscal deficit, only primary deficit remains.
Primary deficit = Gross fiscal deficit - Interest liability
Union Excise Duty
Duties imposed on goods made in India.
Treasury Bills
These are government bonds of less than one year maturity period which are issued by the government. They are issued to meet the financial requirements of a short period like 80 days ad hoc treasury bill.
Securities Transaction Tax-STT:
Transaction tax that you have to pay while buying or selling shares in the securities market or investing in mutual funds.
Minimum Alternate Tax
Minimum Alternate Tax is a tax that a company has to pay on its profit.
External Commercial Borrowing
External commercial borrowing (ECB) is a loan that can be taken from abroad at lower interest rates than India. It has a maturity period of at least 3 years.
Current Account Deficit
Difference in the value of goods and services exported from a country to the import value of that country. The current account of the country whose income from exports is less than the import bill is considered opposite.
Subvention
It is found in usually every budget. Subvention refers to grant of money in aid or support, mostly by the government. Example: Granting farm loans below market rates.
Disinvestment
Disinvestment is the action of government selling or liquidating an asset or subsidiary.