Finance Minister Arun Jaitley will announce the Union Budget 2017 on Wednesday, the first time ever on February 1. The decision to advance the dates of the announcement of Budget was taken with an aim to improve the process of implementation of the economic plans.
But do you know what is a Union Budget? Also called the ‘annual financial statement’, the Union Budget is a statement of estimated receipts and expenditure which is placed before the Parliament every year. The Budget allocates individual sanctions for every ministry for the coming year. It also includes the decisions of taxes that individuals and corporates need to pay.
Before Arun Jaitley rolls out the Budget, we bring you 7 words that every youth must know:
Direct Tax: A direct tax is paid by an individual or organisations to the government. Direct taxes can be in the form of property tax, personal property tax, income tax or on other assets. These are based on the ideology that those who earn more are liable to pay more taxes as compared to those who earn less. This non-transferable tax is aimed at redistributing the wealth of a nation.
Indirect Tax: Taxes levied on goods and services come in the purview of indirect taxes. These are collected by the government from an intermediary such as a manufacturer or a retailer. Unlike direct taxes where the individual needs to pay his tax himself, the burden of indirect tax is borne by consumers who buy goods and services. These can be in the form of Value Added Tax (VAT), service tax, sales tax, among others.
Capital Budget: It consists of Capital receipts and expenditure. Capital payments include the expenditure made by the government on the acquisition or maintenance of fixed assets like land, buildings, machinery, and equipment. Investments in shares and loans and advances by the Central government to state and Union Territories are also included in the Capital Budget. Capital receipts are market loans raised by the government, borrowings by the government from RBI and other parties, etc.
Revenue Budget: It consists of the government’s revenue receipts and its expenditure on these revenues. They are divided into tax and non-tax revenues. Tax revenues comprise of taxes such as income tax, excise, corporate tax, levied by the Union. Revenue expenditure is the money spent on the everyday running of government departments. Expenditure which does not result in the creation of assets is treated as revenue expenditure.
Fiscal deficit: It is the difference between the government’s expenditures and its total revenues. This is an indication of the total borrowings needed by the government. Borrowings are not included while calculating the total revenue.
Fiscal policy: The government adjusts its spending levels and tax rates as per the fiscal policy. It is done to find a balance between changing tax rates and public spending. This is done as an increase in the money available in the economy, and an increase in consumer demand together can result in a decrease in the value of money.
Consolidated Fund: All revenues received as well as all loans raised by the Central Government combinedly form a consolidated fund entitled the ‘Consolidated Fund of India’ for the Union Government. They are audited and reported by the Comptroller and Auditor General of India.