The Government of India presents the Union Budget of India, on the first day of February so that it could be materialised before the beginning of the new financial year in April. However, until 2016 the Finance minister presented the budget on the last working day of February. The Union Budget of India is highly imperative for all the residents of the country regardless of their profession. It is important to have some knowledge on this topic. We don’t need to study the budget very deeply. However, we must be able to understand the various components of the budget because fluctuations in the Union Budget of India can affect our lives in several ways.
What is the Union Budget of India?
Union budget is the annual financial statement prepared using estimated figures (revenue and expenditure) for the coming year. Preparing a budget in advance helps the government in the proper management of finances along with paying attention to the economic growth of the country. It also helps in taking care of the people living below the poverty line.
The Union Budget of India is also called the Annual Financial Statement in Article 112 of the Constitution of India.
Did you know that the first Union Budget of Independent India was presented on 26 November,1947 by RK Shanmukham Chetty?
How is the Union Budget of India prepared?
The preparation of the budget is a very complex and hectic process.
All the Union Ministers, State Ministers, defence and other departments submit an estimate of the money budget they require for the coming year and also provide the revised details of the past year. Besides, the Finance department approaches many businessmen, farmers and economists to get an idea to decide on the tax rates and policies; what the people want from the government. Then the economic policies and the amount allocation is decided for the coming year and presented to the Prime Minister. After the Legislature and Prime Minister approve it, the budget goes for printing.
The printing process of the budget is marked by the “halwa ceremony” ritual. In this ceremony, halwa is prepared in a big vessel and served to all the members of the Ministry. The ceremony is a symbol to appreciate the efforts of all the people who were a part of the budget-making process.
Components of the Union Budget of India
The Union Budget consists of two parts – Revenue Budget and Capital Budget.
Revenue Budget –
It consists of revenue receipts and expenditure. Revenue receipts can either be in the form of taxes like income tax, corporation tax, service tax, estate duty taxes from states and union territories or in non-tax form like dividends, profits, fines etc.
Then there is revenue expenditure i.e. how the money is spent on payment of debt, pensions, subsidies, salaries of government employees etc.
Capital receipts include loans from RBI and foreign institutions. The capital expenditure includes the amount spent on building long term assets like the development of the education sector, health sector etc.
What should you look for in the Union Budget of India?
The budget is quite difficult to decipher for a common man. Still, here are some things you should look for in the budget.
- First of all, look at the theme of the Union Budget for the year. It helps to understand what will be the main focus of the government for the year.
- Analyze if the budget is balanced or unbalanced. If the budget is unbalanced, i.e. total receipt is not equal to the total expenditure then find if it is a surplus (receipt > expenditure) or deficit (expenditure > receipt). The Union Budget of India is mainly the deficit budget. A high deficit means less spending by the government in some sectors to lessen the amount of deficit in the coming financial year
- Check for the various tax rates. Calculate the amount of taxable money. Also, have a look in the tax exemption schemes.
- If you are a government employee, you could check the budget for your sector. Also, implementation of what new policies in the coming year should be checked.
- Sound knowledge about the people welfare schemes will also prove beneficial.
- You can easily check the analysis of budget by some reliable sources like The Economist, Live Mint etc.
We hope that this blog about the Union Budget of India was useful for you. You would definitely benefit with it on and after 1st Feb 2021! Also, visit our blog 10 MAJOR Personal Finance Mistakes to Avoid!