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Mahesh

01/02/24 09:03 AM IST

How is the interim Budget different from Annual Budget?

In News
  • Ahead of the 2024 general elections, the Modi government is preparing to present its second interim budget on February 1.
Interim Budget
  • As per Article 112 of the Indian Constitution, a statement of the estimated receipts and expenditure of the Government of India for a specific financial year— referred to as ‘annual financial statement’ — is laid before both Houses of Parliament.
  • The Centre seeks both Houses’ approval to withdraw the necessary funds from the Consolidated Fund of India; this statement has to be passed by both Houses.
  • However, in an election year, the incumbent Government cannot present a full Budget as there may be a change in the executive after the polls. Hence, the need for an interim budget.
  • As there is no constitutional provision for an interim budget, the Centre can choose to seek the Lower House’s approval for the funds required for the transition period (April - July) till the new government presents a full Budget— via the votes on account provision.
  • Article 116 of the Constitution allows the Lower House to make any grant in advance for the estimated expenditure for part of any financial year by voting and passing such a legislation, i.e. vote on account. The Lok Sabha is empowered to authorise withdrawal of required funds from the Consolidated Fund of India for such expenditure.
  • A simple vote on account includes presenting the Centre’s fund requirements for salaries, ongoing projects and other expenditure for the transitional period, and is then passed via the Lok Sabha sans debate.
  • It cannot make any changes to tax rates. It is also valid only for two months and can be extended up to four months.
Components of Interim budget
  • In an interim budget, the Finance Minister will present the current state of the Indian economy, its fiscal status including India’s revised estimated growth in the next year (here FY 25 from April 2024-March 2025).
  • She will also detail the government’s planned and non-planned expenditure and receipts.
  • While the Centre has to desist from announcing any major scheme which could influence voters or present an Economic Survey, the government is allowed to revise tax rates via an interim budget.
  • The Budget that the government presents would just be to meet with the expenditure of the government till a new government comes to play. So no spectacular announcements are made that time.
Union budge v/s Interim Budget
  • In the case of the Union Budget, the Finance Minister presents the annual financial statement to both Houses on February 1, at the beginning of Parliament’s Budget session.
  • The document, which is now paperless, is circulated to all members as the Minister summarises key points in the Budget speech.
  • The Minister lists the work completed in various sectors via central schemes, explains the need for proposed schemes, enumerates funds allocated for the same, and details the aims of the various departments for the next fiscal year.
  • The Minister also briefs the Houses on the state of the nation’s economy, its growth projections, fiscal deficit and the government’s source of income via taxes and cess.
  • The document is then presented to both Houses, which will vote to pass it before it is sent to the President for approval. If the Budget is not passed by the Lok Sabha, the Prime Minister and his Cabinet will have to resign.
  • Similarly, the interim budget too will be presented to both Houses on February 1 by the Finance Minister, put to vote and then sent for Presidential approval.
  • It will list the current status of the Indian economy, its projections and the government’s projected expenditure till June/July 2024, when the new government will present a full budget.
  • Like the Union budget, the interim budget too is debated in the Lok Sabha before passage and is valid for the entire year though it is merely a transition arrangement.
Source- The Hindu

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