Ms Sitharaman will present her sixth Budget on Thursday.
New Delhi:
As Finance Minister Nirmala Sitharaman is all set to present her sixth Budget, here is a comprehensive guide to essential financial terms associated with the Union Budget
The Union Budget is a crucial document that gives an insight into the government's financial plans for the upcoming fiscal year. The Budget documents carry details about government revenue, expenditure, allocations, taxation and key fiscal policies. It's important to understand the key terms to easily navigate the financial intricacies in the Union Budget.
Finance Minister Nirmala Sitharaman will present the Interim Budget 2024 in Parliament on February 1. As the Lok Sabha elections are scheduled to be held in April-May, the government is presenting an Interim Budget this year. The full Budget is expected to be presented by the new government that will come to power after the general elections.
Here is a guide to essential financial terms associated with the Union Budget:
A - Annual Financial Statement
The Annual Financial Statement provides an estimate of receipts and expenditure for the upcoming financial year. As mandated under Article 112 of the Constitution, the government prepares the Annual Financial Statement every year as a part of the Budget presentation. The document contains the details about the government receipts and expenditures in the current year and the upcoming financial year under three sections – the Consolidated Fund of India, Contingency Fund of India, and Public Account of India.
B - Budget Estimates
These are funds allocated for various ministries and departments during the Budget speech, indicating the government's planned expenditures. These estimates, however, are not final commitments but rather projections of intended expenditure.
C - Current Account Deficit
The shortfall between money received from selling products to other countries and money spent on buying goods and services is termed the Current Account Deficit (CAD).
D - Divestment
Divestment refers to selling a stake in a public sector company or state-owned assets. The government takes the divestment route to raise more revenue.
D - Direct Taxes
These are levied directly on taxpayers. Some of the prominent direct taxes are income tax, wealth tax and corporation tax.
E - Economic Survey
The Economic Survey is generally released a day before the Union Budget. The Economic Survey gives a complete picture of the country's economic condition. The document carries sectoral analysis, progress of the government's key developmental schemes and the policy initiatives.
F - Fiscal Deficit
Fiscal Deficit refers to the difference between the government revenue and the expenditures. Fiscal Deficit is the indicator of the shortfall of government revenue compared to the estimated expenditure. This gives an idea of the amount of money the government would borrow in a financial year to meet the expenditures.
G - Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is one of the key Budget terms. The GDP refers to the total market value of the finished goods and services produced within the country in a given period, such as a quarter, or a year. The GDP growth rate is used as a standard for measuring the economic condition in many countries.
I - Indirect Tax
Indirect taxes also constitute a major part of the government revenue. These are the taxes imposed on the consumption of goods and services. They are not directly collected from individuals on their income or wealth. Some of the indirect taxes are Goods and Services Tax (GST), sales tax, excise duty, customs duty and entertainment tax.
L - LTCG (Long Term Capital Gains)
The Long Term Capital Gains (LTCG) tax is levied on the gains on investments in certain assets for a specified period. Generally, LTCG tax is levied on the gains from an asset held for more than three years. Such investments or assets include shares, real estate and bonds.
M - Minimum Alternate Tax (MAT)
Minimum Alternative Tax is a mechanism designed to ensure that companies pay at least a minimum amount of corporate tax to the government. The MAT is basically levied on the companies that avail exemptions and subsidies under various government schemes to reduce their total tax liabilities.
N - Non-plan Expenditure
Non-plan expenditures constitute a major portion of the government expenditure. A significant part of the non-plan expenditure goes towards interest payments, debt servicing, defence spending and subsidies.
O - Outcome Budget
The outcome budget is like a progress report on the funds utilised by different ministries and departments in the given financial year. This gives a clear indication of the progress of the government's key schemes and the utilisation of the funds for the intended purpose as allocated in the previous Budget.
P - Public Account
The funds collected by the government under various savings schemes are held in the Public Account. Article 266 of the Constitution of India lays down the framework for the Public Account. The funds held in Public Account do not belong to the government and they should be finally paid back to the people and the organisations that deposited the money in it. The money collected under small savings schemes and Provident Fund are held in the Public Account.
Q - Quarterly Review of the Economy
A quarterly assessment of India's GDP provides insights into economic progress every three months.
R - Revenue Deficit
The revenue deficit arises when the government's total revenue receipts fall behind the total revenue expenditure. The revenue deficit is an indicator of the shortfall in the actual government receipt and the budgeted revenue estimates.
S - Subsidies
Subsidies are a major component of the government expenditure. These are the financial assistance provided by the government to different sectors. The majority of the government subsidies go towards food, fertilisers and fuel.
T - Treasury Bills
Treasury Bills or T-Bills are short-term debt instruments issued by the government to generate funds for immediate expenses on various schemes. These are used as a temporary measure by the government to generate revenue.
U - Union Budget
As per Article 112 of the Constitution, the Union Budget is presented in Parliament every year. This is the annual financial statement of the government which includes details of income and expenditure.
V - Value-Added Tax (VAT)
This is an indirect tax levied on the added value of goods and services at different stages, from production to consumption by the end user.
W - Wealth Tax
Wealth Tax is a direct tax levied on the total value of wealth owned by a person at the end of a financial year (March 31). The wealth tax is levied at 1% on the net wealth above Rs 30 lakh
X - X-Factors
X-factors in the Union Budget refer to the unexpected events that can impact the budget outcomes. Examples include natural disasters, sudden economic changes or public health emergencies that require adjustments to the budget estimates.
Y - Yield
Refers to the money earned from the government's investments like bonds or other financial tools. A higher yield is good because it means more profit, while a lower yield might require a review of the government's revenue generation strategy.
Z - Zero-based Budget
Involves preparing the Budget from scratch, emphasising task identification and allocations from zero, instead of rollover from the allocations in the previous Budget.
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