What is the Consolidated Fund of India?

In the recently-concluded Winter session of Parliament, the government brought the Appropriations (No. 5) Bill, to give itself the power to withdraw funds from Consolidated Fund of India. It was cleared in the Lok Sabha amid opposition.

The Constitution bars the government from withdrawing money from the Consolidated Fund of India. But the government cited crises caused by the pandemic as the reason behind taking the step.

This fund is defined under Article 266 of the Constitution. It says that, “All revenues received by the Government of India, all loans raised by that Government by the issue of treasury bills, loans or ways and means advances and all moneys received by that Government in repayment of loans shall form one consolidated fund to be entitled the Consolidated Fund of India.”

To put in simple terms, all revenues received, interest earned and money borrowed by the government goes into it Consolidated Fund of India. It is an account of the revenue the government gets via income tax, customs, central excise and the non-tax revenue, and the expenses it makes, excluding exceptional items.

So in every budget, the government lays down a statement of estimated receipts and expenditure before the Parliament pertaining to the next financial year. This statement is titled as 'Annual Financial Statement' is the main Budget document.

The Annual Financial Statement shows the receipts and payments of the government under three parts in which government accounts are kept. Consolidated Fund of India is one of them. The other two categories are Contingency Fund and the Public Account.

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Consolidated Fund of India includes revenue earned from direct taxes like income tax, corporate tax and indirect taxes such as GST, customs and excise duties. Dividends and profits from Public Sector Undertakings, disinvestment receipts, debt repayments and loan recoveries also go to the fund. 

All expenditure of the government is incurred from the Consolidated Fund, with the exception of a few transactions which are carried out through the Contingency Fund and the Public Account. No amount can be withdrawn from this Fund without authorisation from Parliament.

The Fund in turn has the following two divisions - Revenue Account and Capital Account.

Revenue Account 

The Revenue Account deals with the proceeds of taxation and other receipts classified as revenue as well as the expenditure met therefrom. 

Capital Account

The Capital Account deals with expenditure incurred with the purpose of either increasing the concrete assets of durable nature or of reducing recurring liabilities. It also includes various types of Capital Receipts.

The receipts section deals with receipts of a capital nature which cannot be applied as a set off to Capital Expenditure.

The expenditure section deals with expenditure incurred with the object of increasing concrete assets of a material or of reducing recurring liabilities. It also includes receipts of a capital nature intended to be applied as set off to Capital expenditure

The sections ‘Public Debt’ and ‘Loans and Advances’, comprise loans raised and their re-payments such as internal debt, external debt and their recoveries. 

Certain items of expenditure like salaries and allowances of top government officials are also charged on the Consolidated Fund. They include the President, the Chairman and the Deputy Chairman of Rajya Sabha and the Speaker and the Deputy Speaker of Lok Sabha, salaries, allowances and pensions of Judges of the Supreme Court, Comptroller and Auditor-General of India and the Central Vigilance Commission.

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