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- Budget Glossary: Important terms you should know - The Economic Times
- Budgeting Formula, Fund Balances, Revenues and Expenditures | e-Li
Comment Synopsis On the Budget day, the finance minister tables documents. Of these, the main and most important document is the Annual Financial Statement.
Budget Glossary: Important terms you should know
We have, however, departed from the usual way glossaries are presented, in alphabetical order, to a flow-type format wherein terms are explained as the reader would encounter them in the budget. Read on On the Budget day, the finance minister tables documents.
Main article: United States federal budget The federal budget is prepared by the Office of Management and Budgetand submitted to Congress for consideration. Invariably, Congress makes many and substantial changes.
Annual Financial Statement Article of the Constitution requires the government to present to Parliament a statement of estimated receipts and expenditure in respect of every financial year - April 1 to March This statement is the annual financial statement.
The annual financial statement is usually a white page document. It is divided into three parts, consolidated fund, contingency fund and public account. For each of these funds, the government has to present a statement of receipts and expenditure.
Consolidated Fund This is the most important of all government funds.
The relationship between tax rates and revenues
All revenues raised by the government, money borrowed and receipts from loans given by the government flow into the consolidated fund of India. All government expenditure is made from this fund, except for exceptional items met from the Contingency Fund or the Public Account.
Comment Synopsis To revive the sagging demand without allowing fiscal deficit to go off-track would be a tough nut to crack when the growth is continually decelerating. Before setting eyes on the Budget for this year, let's take note of the two most important components -Expenditure Budget and Revenue Budget. Agencies When the difference between revenue receipts and revenue expenditure is negative, we have revenue deficit. It means that the government spends more than it earns. The second Budget of the second term of Narendra Modi government will be presented on February 1.
Importantly, no money can be withdrawn from this fund without the Parliament's approval. Contingency Fund As the name suggests, any urgent or unforeseen expenditure is met from this fund. The Rs crore fund is at the disposal of the President. Any expenditure incurred from this fund requires use of additional budget revenues subsequent approval from Parliament and the amount withdrawn is returned to the fund from the consolidated fund.
Public Account This fund is to account for flows for those transactions where the government is merely acting as a banker. For instance, provident funds, small savings and so on. These funds do not belong to the government.
They have to be paid back at some time to their rightful owners. Because of this nature of the fund, expenditure from it are not required to be approved by the Parliament. For each of these funds the government has to present a statement of receipts and expenditure.
It is important to note that all money flowing into these funds is called receipts, the funds received, and not revenue. Revenue in budget context has a specific meaning.
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- Government budget - Revenue | Britannica
- Budget - Wikipedia
The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. So all receipts in, say consolidated fund, are split into Revenue Budget revenue account and Capital Budget capital accountwhich includes non-revenue receipts and expenditure.
For understanding these budgets - Revenue and Capital - it is important to understand revenue receipts, revenue expenditure, capital receipts and capital expenditure. On the receipts side, taxes would be the most important revenue receipt.
On the expenditure side, anything that does not result in creation of assets is treated as revenue expenditure. Salaries, subsidies and interest payments are good examples of revenue expenditure. For instance, if the government sells shares disinvests in public sector companies, like it did in the case of Maruti, it is in effect selling an asset.
The composition of tax revenues
The receipts from the sale would go under capital account. On the other hand, if the government gives someone a loan from which it expects to receive interest, that expenditure would go under the capital account.
In respect of all the funds the government has to prepare a revenue budget detailing revenue receipts and revenue expenditure and a capital budget capital receipts and capital expenditure.
Contingency fund is clearly not that important. Public account is important in that it gives a view of select savings and how they are being used, but not that relevant from a budget perspective.
The consolidated fund is the key to the budget. We will take that up in the next part. As mentioned in the first part, the government has to present a revenue budget revenue account and capital budget capital account for all the three funds.
The revenue account of the consolidated fund is split into two parts, receipts and disbursements - simply, income and expenditure.
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Receipts are broadly tax revenue, non-tax revenue and grants-in-aid and contributions. The important tax revenue items are listed below. Corporation Tax: Tax on profits of companies. Taxes on Income other than corporation tax: Income tax paid by non-corporate assesses, individuals, for instance.
Fringe benefit tax FBT : The taxation of perquisites - or fringe benefits - provided by an employer to his employees, in use of additional budget revenues to the cash salary or wages paid, is fringe benefit tax.
It was introduced in Budget The government felt many companies were disguising perquisites such as club facilities as ordinary business expenses, which escaped taxation altogether. Employers have to now pay FBT on a percentage of the expense incurred on such perquisites.