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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.
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.
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.
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
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 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
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.
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.
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
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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