The Union Budget is the Annual Financial Statement of the Government of India. It outlines the government’s estimated revenue and proposed expenditure for the upcoming financial year, which runs from April 1st to March 31st.

Under Article 112 of the Indian Constitution, it is a constitutional requirement for the government to present this statement to both houses of Parliament. Think of it as the annual report card and financial plan of the country.

Key Components of the Budget

The Union Budget is primarily divided into two main parts: the Revenue Budget and the Capital Budget.

1. Revenue Budget

This part deals with the government’s day-to-day income and expenses. These are recurring in nature and do not create any assets or reduce liabilities.

Revenue Receipts (Income): This is the government’s income.
- Tax Revenue: Money collected from direct taxes (like Income Tax, Corporate Tax) and indirect taxes (like GST, Customs Duty).
- Non-Tax Revenue: Income from sources other than taxes, such as interest received on loans, dividends from Public Sector Undertakings (PSUs), and fees for government services.
Revenue Expenditure (Spending): This is the government’s operational or running expenditure.
- Examples: Payment of salaries and pensions, interest payments on government loans, subsidies (like for food and fertilizer), and defense services’ expenses.

2. Capital Budget

This part deals with the government’s long-term investments and transactions. These are non-recurring and either create assets or reduce liabilities.

Capital Receipts (Income): This is the government’s income that either creates a liability or reduces its assets.
- Examples: Money received from borrowings (loans from the public, RBI, or foreign countries), proceeds from disinvestment (selling shares of PSUs), and recovery of loans given to states.
Capital Expenditure (Spending): This is the government’s development expenditure.
- Examples: Spending on creating assets like building roads, ports, hospitals, schools, and buying machinery. It also includes giving loans to states.

Understanding Budget Deficits

A deficit occurs when expenditure is greater than receipts. The budget details several types of deficits, which are important indicators of the government’s financial health.

Type of Deficit	Simple Meaning & Formula	What it indicates
Revenue Deficit	The government’s revenue spending is more than its revenue income. `Rev. Deficit = Revenue Expenditure - Revenue Receipts`	Shows the government is borrowing to finance its day-to-day operational expenses, which is not sustainable.
Fiscal Deficit	The government’s total spending is more than its total income (excluding borrowings). `Fiscal Deficit = Total Expenditure - Total Receipts (excluding borrowings)`	This is the most important indicator. It shows the total amount the government needs to borrow in a year.
Primary Deficit	The fiscal deficit of the current year minus the interest payments on previous borrowings. `Primary Deficit = Fiscal Deficit - Interest Payments`	Shows the borrowing requirement of the government, excluding the interest burden from past loans.

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Stages of the Budget in Parliament

Presentation: The Finance Minister presents the Budget in the Lok Sabha.
General Discussion: A general discussion on the budget proposals happens in both houses.
Scrutiny by Committees: Departmental committees examine the demands for grants of various ministries in detail.
Voting on Demands for Grants: The Lok Sabha votes on the demands for grants.
Passing of Appropriation Bill: This bill gives the government the legal authority to spend money from the Consolidated Fund of India.
Passing of Finance Bill: This bill contains the government’s taxation proposals.

Once both bills are passed and receive the President’s assent, the budget process is complete.