1. Fundamentals of Union Budget
-B.V.Raghunandan
AJ Institute of Management,
August 21, 2014

2. Meaning of Union Budget
• Financial Statement containing the
estimated revenue and proposed
expenditure of the Union Government of
India
• According to the Constitution, the
Government has to prepare a Budget
annually
• The Union Finance Minister presents it in the
Lok Sabha
• on the last working day of February
• Conventionally called Government Budget

3. Objectives of a
Government Budget
• Accelerating Economic Growth
• Alleviating Poverty and
Unemployment
• Reduction of Inequalities in income
and wealth
• Redistribution of Income
• Investment in Socially Productive
Sectors
• Maintaining Price and Economic
Stability
• Financing and Management of PSUs

4. Coverage of the Budget
• Revenue and expenditure of three consecutive
years
• In the Budget presented in 2014, revenue and
expenditure for three consecutive years
1. Actual Figures for 2012-13
2. Revised Estimates for the year 2013-14
3. Budget Estimates for the year 2014-15

6. Receipts
• Capital Receipts
• Revenue Receipts

7. Capital Receipts
Capital Receipts:
1. LT Borrowings: Creating a long-term liability
like issue of Government Bonds
2. Provident Funds: LT Liability
3. Reduction of LT Assets: Receiving repayment
of loan given to State Governments
4. Disinvestment: Sale of shares of PSUs held by
Union Government to the public or
institutions (offer for sale)

8. Revenue Receipts: Tax Revenue
• Revenue Receipts:
A] Tax Revenue:
(1) Direct Taxes: Income Tax, Corporate Tax,
Dividend Distribution Tax, Wealth Tax, Gift Tax,
Estate Duty, Expenditure Tax, STT and CTT
(2) Indirect Taxes: Excise Duty, Customs Duty,
Sales Tax, Service Tax, Entertainment Tax
B] Non-Tax Revenue: Interest Receipts,
Receipt of Dividend, Fees & Fines, External
Grants and Special Assessment

9. Revenue Receipts: Non-Tax Revenues
B] Non-Tax Revenues
1) Receipt of Interest on Loans advanced to
state governments and others
2) Dividend on Investment (From PSUs)
3) Fees and Fines Collected
4) External Grants received from International
Bodies and Others
5) Special Assessments

10. Principles of Taxation
• Efforts to increase direct taxes rather than indirect
taxes
• IT Rates at a higher rate than wealth tax, wealth tax
rate is higher than estate duty
• Taxes are for redistribution of income and wealth
• Earlier, high tax regime and now, low tax rates,
better compliance and wider tax base (Kelkar
Committee)

11. Expenditure
• Expenditure is divided into:
A] Plan Expenditure and
B] Non-Plan Expenditure

12. Plan Expenditure
• Expenditure provided for the achieving the Five
Year Plan objectives are called Plan Expenditure
• They include both capital expenditure and
revenue expenditure
• Plan Expenditure includes expenditure on
1. Electricity generation
2. Irrigation and Rural Development
3. Construction of roads, bridges and canals
4. science, technology, environment
5. Assistance given to State Governments and
Union Territories for funding their Plans

13. Non-Plan Expenditure
• Non-Plan Expenditure is expenditure incurred other than
plan expenditure
• Government spends mainly on
1. Providing goods and services to citizens
2. Subsidies (Food and Oil)
3. Maintaining law and order through police force, judiciary
etc
4. Internal Security like intelligence agencies
5. External Security like Defence
6. Administrative Expenses
7. Staff Salary
8. Pension for the Retired Staff

14. THANK YOU