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Union Budget

The Union Budget is the blueprint of the Government’s revenue and expenditure for a fiscal year, starting from 1st April of one year to 31st March of the following year. It is presented during the month of February so that it can be materialized before the start of a new financial year. According to Article 112 of the Indian Constitution, it is an extensive financial statement that presents the Government’s estimation of revenue sources and estimated expenses for the year. It is classified into two parts – revenue budget and capital budget. Revenue budget contains the government's revenue receipts and expenditure, while the Capital Budget comprises of the government's capital receipts and payments.

The Union Budget for 2017-18 presented a noticeable shift in more ways than one. The date of its presentation 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 became a fundamental part of the Union Budget, a break from the 92-year old tradition of treating the Railway Budget as a separate entity.

Union Budget of India: A Brief History

The first Union Budget of India, a concept introduced when the country was still under the British colonial rule, was presented on 7th April, 1860, by the then Finance Minister of India, James Wilson. The first Union Budget of Independent India was presented on November 26, 1947, by Sir R.K. Shanmugham Chetty (the first Finance Minister of Independent India).

The first Union Budget was presented amidst widespread riots that followed the partition. This budget was planned for seven and a half months, after which the next budget was expected to be implemented from 1st April, 1948. It was also decided 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 successor, John Mathai, who presented the 1949-50 and 1950-51 Union Budgets. The Union Budget of 1949-50 holds the record of being the first budget for a United India, which included all the princely states.

Types of Union Budgets

As mentioned above, the Union Budget can be classified into two parts – revenue budget and capital budget. Here is a look at what they mean:

  • Revenue Budget: Revenue budget comprises of the government's revenue receipts and revenue expenditure. Revenue receipts can be further classified into tax revenue (income tax, excise duty, corporate tax, etc.) and non-tax revenue (interest, profit, fees, fines, etc.). Revenue expenditure refers to the regular expenses incurred from the daily functioning of the government as well as for the range of services offered to the public. In the event that the revenue expenditure is greater than the revenue receipts, the government is said to incur a revenue deficit.

  • Capital Budget: Capital budget, whose 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, Reserve Bank of India (RBI) and foreign governments. Capital expenditure, on the other hand, comprises of costs incurred on development and maintenance of equipment, machinery, health facilities, building, education, etc. When the government's expenditure is greater than the total revenue collected, a state of fiscal deficit occurs.

An Overview of the Union Budget 2020-21

While presenting the union budget in the parliament on February 1st 2020, Finance Minister Nirmala Sitharaman said, “In May 2019, Prime Minister Narendra Modi received a massive mandate to form the government again. People of India have unequivocally given their janaadesh for not just political stability, but have also reposed their faith in our economic policy. This is a budget to boost their income and enhance their purchasing power.”

The second budget of Modi government’s second term in power is centred on three things - Aspirational India, Economic development, and a Caring Society. Central government is to provide Rs. 99,300 crore for educational sector in FY21. New education policy will be revealed soon, said Sitharaman. The budget focused on boosting the rural income and raising the purchasing power of the people by cutting the income tax rates.

Here are the key highlights of the Full Union Budget 2020 from Finance Minister Nirmala Sitharaman’s speech

DEFENCE

  • The defence budget was increased to Rs. 3.37 lakh crore for 2020-21 against last year’s Rs. 3.18 lakh crore.
  • Rs 1.13 lakh crore has been set aside out of the total allocation for capital outlay 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.

INCOME TAX

  • Upto Rs 5 lakh: No tax

  • Rs 5-7.5 lakh income: reduced to 10 from 20%

  • Rs 7.5 lakh to 10 lakh: reduced to 15 from 20%

  • Rs 10-12.5 lakh: reduced to 20% from 30%

  • Rs 12.5-15 lakh: reduced to 25% from 30%

  • Rs 15 lakh: 30% (No change)

  • Dividend distribution tax abolished.

  • Around 70 of more than 100 income tax deductions and exemptions have been removed, to simplify tax system and lower tax rates

  • To boost start-ups, 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 provided 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, taxpayer to pay only amount of disputed tax, will get complete waiver on interest and penalty, if 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 on the basis of Aadhaar, without the need for filling any application form.

  • Total allocation for Swachh Bharat is around Rs. 12,300 crore for this year.

  • Central government’s debt has come down to 48.7% in March, 2019 from 52.2% in March, 2014.

GDP

  • GDP growth for the year 2020-21 is estimated at nominal 10%

  • Receipts for 2020-21 is estimated at 22.46 lakh crore rupees

  • Expenditure at is 30.42 lakh crore rupees

  • Revised expenditure estimate is at Rs. 26.99 Lakh Cr for FY 21

  • Estimate Fiscal deficit is at 3.8% vs target of 3.3% of GDP

  • Corporate tax is at 15% lowest in the world

  • Turnover threshold for audit is raised to Rs. 5 Crore from Rs. 1 Crore

SPORTS BUDGET

  • The government allocated Rs. 2826.92 crore to the sports budget for the next financial year.
  • The government gave a substantial hike of Rs 291.42 crore to its flagship Khelo India programme for development of sports at the grassroot and youth level.

  • The highest reduction was for National Sports Federations with Rs. 245.00 crore being allocated in the Union budget.

  • Incentives for sportsperson has been proposed to be slashed from Rs. 111 crore to Rs. 70 crore. The budget for National Sports Development Fund will also be reduced to Rs. 50.00 from the earlier Rs. 77.15 crore.
  • The government also reduced the allocation to Sports Authority of India from the revised Rs. 615 crore to Rs. 500 crore.
  • National Welfare Fund for Sports persons will continue to get the same amount of Rs. 2 crore as earlier, while, at Rs. 50 crore, there was also no change in the allocation for the enhancement of sports facilities in Jammu and Kashmir.
  • Laxmi Bai National Institute of Physical Education will, however, gets Rs. 55 crore, Rs. 5 crore more than the last budget.

AGRICULTURE

  • Finance Minister listed 16-point action plan for farmers, towards the goal of doubling farmers income by 2022
  • Agricultural credit target has been set at Rs. 15 lakh crore. NABARD Refinancing Scheme to be further expanded.
  • Will encourage state governments who implement following model laws: Model Agricultural Land Leasing Act of 2016; Model Agricultural Produce and Livestock Marketing Act of 2017; Model Agricultural Produce and Livestock Contract Farming and Services Promotion and Facilitation Act of 2018
  • Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) to be expanded to provide 20 lakh farmers in setting up standalone solar pumps
  • 2.83 lakh crore rupees allocated for agriculture and allied activities, irrigation and rural development
  • Encourage balanced use of all fertilizers, a necessary step to change the incentive regime which encourages excessive use of chemical fertilizers
  • Village Storage Scheme run by SHGs, will provide holding capacity for farmers, women in villages can regain their status as Dhaanya Lakshmi
  • Krishi UDAN will be launched by the Ministry of Civil Aviation on international and national routes, improving value realization in North East and tribal districts
  • Milk processing capacity to be doubled by 2025
  • Indian Railways will set up Kisan Rail through PPP arrangement, for transportation of perishable goods
  • Fish production to be raised to 200 lakh tonnes by 2022-23

EDUCATION

  • A medical college to be attached to a district hospital in PPP mode, viability gap funding to be set up for setting up such medical colleges.

  • Rs. 3,000 crore for skill development.

  • IND-SAT exam to be held in African and Asian countries, for bench-marking foreign candidates who wish to study in India.

  • Degree-level full-fledged online education program to be offered by institutes in top 100 in National Institutional Ranking Framework.

  • Government announces Rs 99,300 crore outlay for education sector in 2020-21.

  • New Education Policy to be announced soon.

  • Urban local bodies across the country to provide internships for young engineers for a period of up to one year.

  • 8,000 crore rupees over five years to be provided for quantum technologies and applications.

G-20 PRESIDENCY

  • Finance minister Nirmala Sitharaman on Saturday said India will host the G-20 Presidency in 2022 and Rs. 100 crore has been allocated for this purpose.
  • During this meeting, India would be able to drive the global economic and development agenda, the finance minister said while presenting the Budget for 2020-21 in Parliament.
  • India would be able to drive considerably the global economic and development agenda during this presidency, she said.
  • The G20 (or Group of Twenty) is an international forum for the governments and central bank governors from 19 countries and the European Union.

HEALTH

  • The Budget provides an additional Rs. 69,000 crore for the health sector and proposes to expand Jan Aushadhi Kendras in all districts of the country to provide medicines at affordable rates.
  • Nominal health cess on import of medical equipment to be introduced, to encourage domestic industry and generate resources for health services.

FINANCE

  • Deposit Insurance Coverage to be increased from 1 lakh rupees to 5 lakh rupees.
  • We wish to enshrine in the statute a taxpayers' charter. I would like to reassure taxpayers that we remain committed to taking measures to eliminate tax harassment.
  • To achieve higher export credit, a new scheme being launched which provides higher insurance cover, reduced premium for small exporters and simplified procedure for claim settlements.
  • Rs. 27,300 crore rupees for development of industry and commerce.
  • Investment Clearance Cell to set up through a portal, will provide end-to-end facilitation, support and information on land banks.
  • Amendments to be made to enable NBFCs to extend invoice financing to MSMEs.
  • Government proposes to sell a part of its holding in LIC by initial public offer.

ENERGY

  • Rs. 22,000 crore rupees to be provided to power and renewable energy sector in 2020-21.

INFRASTRUCTURE

  • 100 more airports to be developed by 2024 to support the UDAN scheme.
  • 1.7 lakh crore rupees to be provided for transport infrastructure in the coming financial year.
  • More Tejas-type trains to connect iconic destinations.
  • Accelerated development of highways will be undertaken. Delhi-Mumbai expressway and two other projects to be completed by 2023. Monetization of 12 lots of highway bundles of over 6,000km before 2024
  • National Logistics Policy will soon be released, creating single window e-logistics market.
  • Project Preparation Facility to be set up for preparation of infrastructure projects, actively involving young engineers and management graduates.
  • Fibre to Home connections under Bharat Net will be provided to 1 lakh gram panchayats this year itself, 6,000 crore rupees provided for Bharat Net.
  • National Gas Grid to be expanded from 16,200 km to 27,000 km.

WOMEN & NUTRITION

  • Gross Enrolment Ratio is now higher for girls than for boys at all levels under 'Beti Bachao Beti Padhao'.
  • Rs. 28,600 crore rupees provided for programmes which are specific to women.
  • Rs. 35,600 crore rupees for nutrition-related programmes in 2020-21.
  • Over 6 lakh anganwadi workers have been equipped with smartphones to upload the nutrition status of 10 crore households.

OTHER SECTORS

  • 85,000 crore rupees for Scheduled Castes and Other Backward Classes in 2020-21.
  • 53,700 crore rupees for Scheduled Tribes.
  • Enhanced allocation of 9,500 crore rupees for Senior citizens and Divyangs.
  • Five archaeological sites to be developed as iconic sites.
  • Rs. 2,500 crore rupees to be allocated for tourism promotion, in 2020-21.
  • Rs. 3,150 crore rupees to be provided for culture ministry in 2020-21.
  • Parameters and incentives to be provided to states who take measures for cleaner air in cities above 1 million population - 4,400 crore rupees allocated for this.

  • India will host G20 Presidency in 2022, 100 crore rupees to be allocated for making preparations for this historic occasion, where India will drive global economic agenda.

Note: Page created with inputs from Times of India and Economic Times

FAQs Union Budget

What is Fiscal Policy?

Fiscal policy is an amendment in government taxing or spending designed to boost economic activity. It is a step towards controlling the aggregate demand in the economy by keeping a watch on the size of the budget deficit or surplus, and volume of spending. Governments introduce and implement changes in taxation, volume of spending, and size of the budget deficit or surplus to affect public expenditure.

What is Monetary Policy?

The decision to amend the supply of money and the interest rate, introduced by the Reserve Bank of India (RBI), which initiates a change in the economic activity is called the Monetary Policy. By regulating the level of money or liquidity in the economy, the Government aims to meet the desired policy objectives like improving the balance of payments, controlling inflation, price stability, etc.

What is Balance of Payments?

The gap between the demand and supply of the currency of a country in the foreign exchange market is called the Balance of Payments.

What is Fiscal Consolidation?

It is the policy that focuses on controlling government deficits and debt accumulation.

What is the Finance Bill?

A Finance Bill is a roadmap for new taxes, amendments in the existing tax structure or continuation of the current tax structure beyond the approved timeline, introduced by the Government. These financial proposals are laid down before the Parliament in the form of a bill. Once the Finance Bill is approved by the Parliament for a period of 1 year, it becomes a Finance Act.

What is the Central Plan Outlay?

It refers to the division of monetary resources across different sectors in the economy and the government ministries.

What are direct and indirect taxes?

Taxes levied directly on the income of business organisations and individuals. For example, Corporate Tax, Income Tax, Inheritance Tax, etc. Corporate Tax refers to the tax that enterprises pay on their earned income, while Income Tax is the tax that individuals pay on their income from sources like salary, investments, interest, etc. are called as direct taxes.

Indirect taxes are those taxes that customers pay while purchasing goods and services. Goods and Services Tax (GST), Excise and customs duties are examples of Indirect Taxes. A Customs Duty is the fee levied on imported goods, which is paid either by the importer or the exporter. GST, Excise duty, on the other hand, is a fee paid by customers on the purchase of goods that are manufactured within the country.

What is Gross Domestic Product (GDP)?

It is the market value of all goods and services, produced in a country within a certain period of time, that have been officially recognised as the final product. GDP per capita is usually considered as the measurement of the standard of living of a country.

What is an economic survey?

The Economic Survey, which is presented just before the Union Budget, provides policy perspective for the Budget.

How much is the budget of India?

The 2017 Union Budget of India has a budget size of Rs. 21.47 lakh crore rupees.

What do you mean by Union budget?

The Union Budget is a yearly report containing the government’s revenue and expenditure for a fiscal year, which starts from 1st April of one year to 31st March of the following year.

What is central budget?

Central Budget is another term for the Union Budget. It is an annual report that lists down the government’s revenue and expenditure for a fiscal year.

What is consolidated fund in India?

The consolidated fund comprises of revenues that the government has received, receipts from loan recoveries given by the government and the whole sum of new loans that have been raised by the government.

What is meant by government budget?

A government budget is a yearly financial statement that mentions the revenues and spending for a financial year.

What is the budget for?

The Union Budget maintains the account of the government's finances for the fiscal year, starting from 1st April to 31st March.

What is the meaning of fiscal deficit?

A fiscal deficit takes place when a government's total expenditures is greater than the revenue generated. A state of high fiscal deficit would mean that government has been unable to earn as much as it is spending.

Who prepares Union budget?

The Union Budget is prepared by the Budget Division of Department of Economic Affairs (DEA).

Who presented the first budget in India 1860?

The first Budget was presented by James Wilson of the East India Company.

Who presents the general budget in the parliament?

The Finance Minister presents the budget in the parliament.

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