MEANING OF BUDGET

• BUDGET (FROM FRENCH WORD BOUGETTE, PURSE) GENERALLY REFERS TO A LIST OF ALL PLANNED EXPENSES AND REVENUES. ...AN ANNUAL PROPOSAL THAT OUTLINES THE ANTICIPATED FEDERAL REVENUE AND DESIGNATES PROGRAM EXPENDITURES FOR THE UPCOMING FISCAL YEAR.

DEFINITIONS

• TAYLOR – “ A BUDGET IS THE MASTER FINANCIAL PLAN OF THE GOVERNMENT. IT BRINGS TOGETHER ESTIMATES OF ANTICIPATED REVENUE AND PROPOSED EXPENDITURE FOR THE BUDGETED YEARS”.

According to BASTABLE

• THE BUDGET HAS COME TO MEAN THE FINANCIAL ARRANGEMENTS OF A GIVEN PERIOD, WITH THE USUAL IMPLICATIONS THAT THEY HAVE BEEN SUBMITTED TO THE LEGISLATURE FOR APPROVAL

According to FINDLAY SHIRRAS

• THE BUDGET IS AN ANNUAL STATEMENT OF EXPENDITURE AND REVENUE TO MEET THAT EXPENDITURE PREPARED BY PUBLIC AUTHORITIES AND USUALLY COVERS ATLEAST TWO FISCAL PERIODS-THE CLOSING PERIOD AND THE PERIOD TO COME .

IN THE WORDS OF MUNRO

• BUDGET IS A PLAN OF FINANCING FOR THE INCOMING FISCAL YEAR.THIS INVOLVES AN ITEMISED ESTIMATE OF ALL REVENUES ON THE ONE HAND AND ALL EXPENDITURES ON THE OTHER

A SUMMARY OF THE ABOVE DEFINITIONS

• ON THE BASIS OF THE DEFINITIONS WE CAN STATE THAT A BUDGET IS :

1. A statement of expected revenue and proposed expenditure;

2. It has to sanctioned by the authority;

3. It is for a particular period-a year;

4. It puts forth conditions regarding the procedures involved in the collection of revenue and the expenditure to be incurred.

MEANING OF BUDGET

• HENCE A BUDGET IS A STATEMENT OF THE ESTIMATED REVENUE AND EXPENDITURE OF THE GOVERNMENT IN RESPECT TO A PARTICULAR FINANCIAL YEAR.

IMPORTANCE OF BUDGET

1. It sets a frame work for policy formulation

2. Budgeting is a means of policy implementation

3. A budget is a means of legal control

4. It is a tool of accountability

5. It is a tool of management

6. It is an instrument of economic policy

BUDGET IS CONCERNED WITH THREE PERIODS

1. THE ACTUAL REVENUE AND EXPENDITURE OF THE PREVIOUS YEAR [if the current year is 2009-10 then 2008-09 will be the preious year]

2. THE REVISED ESTIMATES OF REVENUE AND EXPENDITURE OF THE CURRENT YEAR.

3. ESTIMATES OF REVENUE AND EXPENDITURE FOR THE NEXT FINANCIAL YEAR.

COMPONENTS OF BUDGET

• Revenue receipts

• Capital receipts

• Revenue expenditure

• Capital expenditure

THUS A BUDGET HAS TWO MAIN COMPONENTS :[A] RECEIPTS ,[B]

EXPENDITURE.

COMPONERNTS OF BUDGET

• RECEIPTS• A. REVENUE RECEIPTS [1+2 ]• 1. TAX REVENUE• 2. NON –TAX REVENUE• B. CAPITAL RECEIPTS [3+5]• 3.RECOVERY LOANS• 4.OTHER RECEIPTS• 5.BORROWING & OTHER LIABILITIES• TOTAL RECEIPTS = A+B

A.REVENUE RECEIPTS D.REVENUE EXPEND.

A.1.TAX REVENUEA.1.TAX REVENUE 6.ON NON PLAN ACC.6.ON NON PLAN ACC.

2.NONTAX REV2.NONTAX REV 7.ON PLAN ACCOUNT7.ON PLAN ACCOUNT

B.CAPITAL RECEIPTS.B.CAPITAL RECEIPTS.

[3+4+5][3+4+5]

E.CAPITAL EXP.[8+9]E.CAPITAL EXP.[8+9]

3.RECOVERY OF LOAN3.RECOVERY OF LOAN 8.ON NON PLAN ACC.8.ON NON PLAN ACC.

4.OTHERB RECEIPTS4.OTHERB RECEIPTS 9.ON PLAN ACCOUNT9.ON PLAN ACCOUNT

5.BORROWINGS AND5.BORROWINGS AND

OTHER LIABILITIESOTHER LIABILITIES

F.TOTAL EXP.[D+E]F.TOTAL EXP.[D+E]

G.BUDGE.DEFI-F-CG.BUDGE.DEFI-F-C

H.REV. DEFI D-AH.REV. DEFI D-A

C.TOTAL RECEIPTS-A+BC.TOTAL RECEIPTS-A+B I.FISCAL DEFICIT[F_(A+3+4)]I.FISCAL DEFICIT[F_(A+3+4)]

EXPENDITURE

• EXPENDITUREEXPENDITURE

• A. REVENUE EXPENDITURE [1+2]A. REVENUE EXPENDITURE [1+2]

• 1 ON PLAN ACCOUNT1 ON PLAN ACCOUNT

• 2 ON NON PLAN ACCOUNT2 ON NON PLAN ACCOUNT

• B.CAPITAL EXPENDITUREB.CAPITAL EXPENDITURE

RECEIPT ITEMS OF THE BUDGET

RECEIPT ITEMS OF BUDGET

REVENUE RECEIPTS

CAPITAL RECEIPTS

REVENUE RECEIPTS

TAX REVENUE

• TAX REVENUE INCLUDES ALL THE REVENUES EARNED THROUGH VARIOUS KINDS OF TAXES.TAXES ARE BROADLY DIVIDED INTO DIRECT & INDIRECT TAXES.

DIRECT TAXES

1. CORPORATION TAX

2. INCOME TAX

3. INTEREST TAX

4. WEALTH TAX

5. GIFT TAX

6. EXPENDITURE TAX

INDIRECT TAX

1. CUSTOM DUTIES

2. EXCISE DUTIES

3. SALES TAX

4. SERVICE TAX

NON TAX REVENUE

• IT INCLUDES THE REVENUE ACCRUING TO THE GOVERNMENT FROM SOURCES OTHER THAN TAX.THESE ARE ;

1. INTEREST RECEIPTS

2. DIVIDENDS

3. GRANTS

4. FINES

CAPITAL RECEIPTS

• THESE INCLUDE BORROWING OF THE GOVERNMENT.SINCE THESE RECEIPTS HAVE TO BE REPAID BY THE GOVERNMENT ,THE CAPITAL RECEIPTS ARE LIABILITIES.CAPITAL RECEIPTS INCLUDE PUBLIC BORROWING ,RECIVERY OF LOANS AND RESALE OF SHARES AND BONDS HELD BY THE GOVERNMENT.

EXPENDITURE ITEMS

EXPENDITURE

REVENUE EXPENDITURE

CAPITALEXPENDITURE

REVENUE EXPENDITURE

• IT IS THE EXPENDITURE INCURRED FOR THE DAY-TO-DAY FUNCTIONONG OF THE GOVERNMENT DEPARTMENTS AND VARIOUS SERVICES OFFERED TO THE PEOPLE, PAYMENT OF INTEREST ON BORROWINGS,SUBSIDIES ETC.

• REVENUE EXPENDITURE WILL NOT RESULT IN THE CREATION OF ASSETS

REVENUE EXPENDITURE

• IT IS THE EXPENDITURE INCURRED FOR THE DAY-TO-DAY FUNCTIONONG OF THE GOVERNMENT DEPARTMENTS AND VARIOUS SERVICES OFFERED TO THE PEOPLE, PAYMENT OF INTEREST ON BORROWINGS,SUBSIDIES ETC.

• REVENUE EXPENDITURE WILL NOT RESULT IN THE CREATION OF ASSETS

CAPITAL EXPENDITURE

• CAPITAL EXPENDITURE IS THE EXPENDITURE INCURRED ON CREATING PERMANENT ASSETS.SUCH EXPENDITURE IS INCURRED ON ITEMS LIKE CONSTRUCTION OF BUILDINGS,ROADS,BRIDGES,CANALS,POWER PLANTS,CAPITAL EQUIPMENTS

REVENUE RECEIPTS

• THE REVENUE RECEIPTS REFER TO ALL RECEIPTS RECEIVED DURING BY THE GOVERNMENT FRM

Taxation

• Meaning : Non quid pro quo transfer of private income to public coffers by means of taxes.

• Classified into

1. Direct taxes- Corporate tax, Div. Distribution Tax, Personal Income Tax, Fringe Benefit taxes, Banking Cash Transaction Tax

2. Indirect taxes- Central Sales Tax, Customs, Service Tax, excise duty.

Government Expenditure

It includes :

• Government spending on the purchase of goods & services.

• Payment of wages and salaries of government servants

• Public investment

• Transfer payments

EXPENDITURE HEADS- 2009-10 BUDGETRUPEE GOES TO

18%

20%

13%9%

14%

15%

4% 7% CENTRAL PLAN

INTEREST PAYMENTS

DEFENCE

SUBSIDIES

OTHER NON-PLAN EXPEN

STATES' SHARE OF TAXES

NON-PLAN ASSIST. TO STA

PLAN ASSISTANCE TO STA

RECEIPTS OF 2009-10 BUDGET

Where does the Rupee come from

29%

22%12%

10%

10%

6%10% 1%

BORROWINGS &OTHER LIABILITIESCORPORATION TAX

INCOME TAX

CUSTOMS

EXCISE

OTHER TAXES

NON-TAX REVENUE

NON-DEBT CAPITAL

RUPEE COMES FROM2009-10

RUPEE GOES TO

TOTAL RECEIPTS

TOTAL EXPENDITURE

BUDGET OF 2011-12

CUSTOMS DUTY

DIRECT TAXES

FISCAL DEFICIT