15 important terms you should know ahead of Union Budget presentation

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2023-2024 in Parliament on February 1; here's a lowdown on vital budget related terms that you should know

According to Article 112 of the Constitution, the government is required to present to Parliament, a statement of estimated income and expenses for each financial year, which runs from April 1 to March 31. This Annual Financial Statement is also known as the Annual Budget or Union Budget. It provides details of the country’s economic goal and gives an account of the amount allocated to each ministry and department to function and carry out its objectives for the upcoming financial year.

Finance Minister Nirmala Sitharaman is set to present the Union Budget 2023-2024 in Parliament on February 1. Here are 15 key budgetary terms you should know ahead of the Union Budget presentation:

Revenue Budget

The Revenue Budget refers to the amount required for the growth, development and infrastructural needs of the country. This component of the Budget includes revenue receipts (such as tax collections, and interest and dividends earned, among other things), and expenses for administrative purposes as part of the Revenue Budget.

Capital Budget

The Capital Budget includes capital receipts and capital payments. Capital receipts refer to the money a government gets through treasury bills, loans from the market, foreign governments, and disinvestment receipts among others. Capital payments refer to the money spent on acquisitions of assets, creation of infrastructure and other such spendings.

Demand for Grants

Once the budget is presented, the government releases the Demand for Grants which refers to the expenditure estimate that includes provisions related to revenue expenditure, capital expenditure, and government grants for the next financial year.

Consolidated Fund

The Consolidated Fund of India is a crucial government account that includes revenues received and expenses incurred during a financial year. All non-exceptional government expenditure is made from this fund with the exception of exceptional expenses such as disaster management.

Outlay

Outlay refers to the division of money or division of resources for different sections, ministries or sectors. It is the basic framework of the Union Budget.

Budget Estimates (BE)

Budget Estimates or BE tells the amount of money allocated in the Budget to a ministry or scheme/programme for the coming financial year.

Revised Estimates (RE)

Mid-year estimates based on six months’ actual trends that take into account likely expenditure and receipts for the balance months are called Revised Expenditure (RE).

Actual Expenditure (AE)

AE is the actual amount spent. Actual expenditure is published after two years and so in the upcoming Budget 2023, AE will be available only until 2021-22.

Fiscal Policy

Fiscal policy refers to the action taken by the government to manage its spending and revenue collection (via taxes) to achieve its economic objectives.

Fiscal Deficit

Fiscal Deficit happens when the government’s total expenditure is higher than its non-borrowed inflows during the financial year. It refers to the difference between the government's total expenditure and its total revenue. This indicates the total amount of borrowing needed by the government.

Revenue Deficit

Revenue Deficit refers to the difference between revenue expenditure (on the government's day-to-day operations) and revenue receipts (or income from taxes and other sources). The revenue deficit shows the shortcoming of the government's current receipts over expenditure. It is an important measure of the government's financial health.

Tax Revenue

Tax revenue is the amount of money collected by the government from taxes on income, profits, and the consumption of goods and services. This includes both direct and indirect taxes. Tax revenue is the primary source of government income.

Direct Tax

Direct tax is the type imposed on the income of individuals and businesses. In this case, the person who pays the tax and the person on whom the tax is imposed is the same. Examples of direct taxes include income tax, corporate tax, property tax, and inheritance tax.

Indirect Tax

Indirect tax is the kind imposed on goods and services. In this case, the person paying the tax and the person on whom the tax is imposed are different. Examples of indirect taxes include Goods and Service Tax (GST), customs duty, and central excise duty.

Gross Domestic Product (GDP)

GDP is a measure of the monetary value of all goods and services that are intended for final consumption and produced within a country's borders in a specific period of time (such as a quarter or a year). It takes into account all the output produced within a country during that period.