Meaning:

Budget is a financial statement incorporating the income and expenditure of a public authority for one financial year. In India the central government, state government, local self governments and even autonomous institutions like universities prepare and present their own budgets.

Budget is prepared by the finance department and is presented to the legislature by the finance minister. It is discussed and passed by the legislature.

The budget contains two parts:

Part A – Speech of the finance minister giving economic survey of the country, which serves as a background against which the budget is presented.

Part B – Tax proposals. The taxes are of two types; Direct & Indirect taxes.

The finance bill which is attached to the budget contains tax proposals. Government is empowered to impose and collect a tax only after the finance bill is passed by the parliament, but that does not allow the government to use that money. The money collected through taxed is credited in to the Consolidated Fund of India. The government has to introduce another bill called the appropriation bill in parliament. Government is authorised to withdraw money from the consolidated fund of India and use it only when the appropriation bill is passed by Parliament.

Importance of the budget

Though budget is a financial statement incorporating the income and expenditure of the government, it has wide effects on the economy of the country. The budget is an instrument which can be used for controlling production of goods and services, distribution of income and wealth amongst different sections of the community, controlling internal and foreign trade, giving protection to the domestic industries and accelerating the rate of economic development. The budget is like a weapon which can be used for removing the obstacles in the path of economic development and expediting the pace of economic development.  Hence a modern budget is regarded as reflection of the mind of the government in respect of the economic and social problems confronting the country and the possible solutions to them.

Parts of the Budget

A budget is divided in to two parts namely income and expenditure. Both of them are further classified into two categories: Read more…