The Union Budget will be presented by the Finance Minister Smt. Nirmala Sitharaman on 1 February 2022. We are trying to simplify the whole budgetary process and terms used in the Budgetary documents. This is the First part in the series.
The Union Budget or Annual Financial Statement is the statement of government’s finances for the financial year, where the government makes estimates of receipts and expenditure for the upcoming fiscal year that runs from April 1 to March 31. This is an exercise carried out by the central government every year. The exercise is similar to the monthly budget that we make for our household expenditure and earnings.
History of word Budget and Bahi Khata:
The word 'budget' has its origin in the French word Bougette, which means leather briefcase. Traditionally, budget documents which primarily include papers related to receipt and expenditure as well as the speech of the finance minister were carried in a briefcase. This tradition was started in the United Kingdom by William Gladstone in 1860. The legacy was passed on to India and successive finance ministers in India used to carry briefcases.
The tradition was ditched by finance minister Smt. Nirmala Sitharaman in 2019 when she carried a Red packet with the National Emblem wrapped in red ribbon.
called “Bahi Khata” by her. It was a deliberate attempt by her to emphasize the Indianness of the whole process. In 2020 she used a made in India IPad tablet to -present the budget .
Separation of Railway Budget from General Budget
The Union Budget is the most comprehensive report of the Government's finances in which revenues from all sources and outlays for all activities are consolidated.The government of India had two budgets - The Railway budget and the General Budget. The Railway Budget was separated from the General Budget in 1924 on the recommendations of the Acworth Committee set up in 1920-21.
In 2017 the Government of India merged the Railway Budget with the General Budget and since then there is a single Budget of the Government of India .
When is Budget Presented
Budget was always presented by the Finance Minister on the last working day of February at 5 Pm in the evening . There are two theories regarding this British tradition .
One was, when the Budget was presented in India at 5 Pm the British Parliament was in session as the time gap between the two was around 5 hours and the British House of Commons (Its lower House ) was simultaneously informed of the Budget proposals.
The other theory is that earlier the budget was mainly about raising the taxes so that the budget presentation in the evening will give enough time to the tax collectors and the producer the time to work out the prices of the products at night.
Change in Timing and Day
On 27 February 19999, Yashwant Sinha became the first finance minister to present the Budget at 11 am, breaking the tradition of 5 PM. The main reason was that if the budget is presented in the morning hour it will lead to informed debate and discussion on the budget proposals.
In 2017 another change was made when the Finance Minister Arun Jaitley presented the Budget on 1 February. Since then the Union Budget has been presented on 1 February every year.
The main reason for advancing the date to 1 February
The Budgetary process normally takes 10 to 11 weeks from its introduction in the Parliament until its assent by the President . Earlier when the budget was introduced on 28 February the Budgetary process was completed by Mid May . It necessitated a vote on a grant budgetary account by the Parliament to meet the two month expenditure of a new financial year by the Government of India . ,
The Budget authorises the government to spend for a financial year. For example, the 2015-16 budget provided for expenditure for the government from 1April 2015 to 31st March 2016. If the budget is not passed for 2016-17 by 1 April 2016, the government cannot withdraw money to meet its expenditure in 2016-17. This will create a crisis and the Government function will come to a halt .
This necessitated the Vote on Grant where Parliament gave a lump sum amount to the government to meet its expenditure in the new financial year pending the completion of the budgetary process. Changing the Date to 1 february will eliminate this need.
Another aim was to complete the budgetary process before 1 April so that all the constitutional authorities which are financially dependent on the central government will have the resources to plan out their activity for the financial year .
This will lead to a better utilisation of resources and better control on expenditure.
What is Financial Year/Fiscal year / Accounting year
Calendar Year : It starts from 1 January and ends on 31 December .
Financial year is a twelve months accounting period used by the Government or companies for financial reporting and budgeting. In India Financial year starts from 1 April to 31 March next year .
Financial year 2021-22 means that it starts on 1 April 2021 and ends on 31 March 2022
FY 22 means that the financial year starts on 1 April 2021 and ends on 31 March 2022..
Financial Year and Fiscal year are the same in India . Normally fiscal year is used by the Government of India
Accounting Year The accounting period in India is the same as the .Financial/ .Fiscal year..
The Fiscal/Financial/Accounting year was introduced in India by the Britishers in 1867 to align the Indian system with the British Empire . Before this the Indian fiscal system started on 1 May and ended on 30 April.
Assessment Year : It is used in the taxation system in India . Person or company has to pay tax on the Income earned by them in a financial year. Assessment year means the year in which the income earned is taxed. Assessment year is just the succeeding financial year.
For example if the financial year is 2021-22 then the Assessment year will be 2022-23.
Written by Rashmi
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