ICAI Notes- Unit 3: The Process of Budget Making: Sources of Revenue, Expenditure & Public Debt | Business Economics for CA Foundation PDF Download

 Page 1


 1.51 
 
 
 7.51 
PUBLIC FINANCE 
LEARNING OUTCOMES 
UNIT – 3: THE PROCESS OF BUDGET 
MAKING: SOURCES OF REVENUE, 
EXPENDITURE MANAGEMENT AND 
MANAGEMENT OF PUBLIC DEBT 
 
 
 
 
After studying this Chapter, you will be able to – 
? Define government budget and explain the need and objectives of 
budget   
? Describe the budget concepts and terminologies  
? Illustrate the process of budget making 
? Detail the different sources of government revenue and expenditure  
?
Elucidate the process of management of public debt
 
 
 
 
3.1 INTRODUCTION  
Governments all over the world have to perform manifold functions from protecting their 
territories, maintaining law and order, provision of public goods and   implementation of 
comprehensive plans for economic and social welfare of its citizens. To execute these 
functions efficiently, the government requires adequate financial resources.  Budget   is a 
powerful policy instrument in the hands of government to regulate and to restructure a 
country's economic priorities. 
 
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
Page 2


 1.51 
 
 
 7.51 
PUBLIC FINANCE 
LEARNING OUTCOMES 
UNIT – 3: THE PROCESS OF BUDGET 
MAKING: SOURCES OF REVENUE, 
EXPENDITURE MANAGEMENT AND 
MANAGEMENT OF PUBLIC DEBT 
 
 
 
 
After studying this Chapter, you will be able to – 
? Define government budget and explain the need and objectives of 
budget   
? Describe the budget concepts and terminologies  
? Illustrate the process of budget making 
? Detail the different sources of government revenue and expenditure  
?
Elucidate the process of management of public debt
 
 
 
 
3.1 INTRODUCTION  
Governments all over the world have to perform manifold functions from protecting their 
territories, maintaining law and order, provision of public goods and   implementation of 
comprehensive plans for economic and social welfare of its citizens. To execute these 
functions efficiently, the government requires adequate financial resources.  Budget   is a 
powerful policy instrument in the hands of government to regulate and to restructure a 
country's economic priorities. 
 
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
1.  
  
BUSINESS ECONOMICS 
 
 7.52 
The need for budgeting arises from the need to efficiently allocate limited resources to ensure 
maximum social welfare. The government also needs to reallocate resources in accordance 
with its declared priorities. By proper budgeting, the government is able to ensure 
redistribution of income and wealth. The other objectives of budgets are reduction/ 
elimination of economic fluctuations to bring in stability, sustainable increase in real GDP and 
reduction in regional disparities.  
In simple terms, a budget is a statement that presents the details of ‘where the money comes 
from’ and ‘where the money goes to’. The government budget is a document presented for 
approval and legislation by a government and contains estimates of the proposed expenditure 
for a given period and the proposed means of financing them. In other words, a government 
budget   is a schedule of the entire revenues and expenditures that the government expects 
to receive and plans to spend during the following year. The budget includes projections for 
the economy and its various sectors such as agriculture, industry, and services. The budget 
also contains estimates of the government’s accounts for the next fiscal year called budgeted 
estimates.  Being the document which consolidates revenues from all sources and outlays for 
all activities, the budget is the most comprehensive report of the government's finances.  
Apart from the union budget, state and the local bodies have their own budgetary processes for 
the next financial year. However, the focus of this unit will be the union budget only. 
3.2 THE PROCESS OF BUDGET MAKING 
The budgetary process is the means by which the executive and legislative branches together 
formulate a coherent set of taxing and spending proposals. The finances of the government of 
India have traditionally been controlled by the Ministry of Finance. The budget   is prepared by 
the Ministry of Finance in consultation with NITI Aayog and other relevant ministries. The budget   
must be presented and approved by both houses of parliament before the beginning of the fiscal 
year (April 1 to March 31).  
Despite the fact that the term ‘budget’ has not been used in the Indian Constitution, the 
process of making it is generally referred to as budgeting. Article112 of the constitution 
provides that in respect of every financial year the ‘president shall cause to be laid before both 
the houses of parliament a statement of the estimated receipts and expenditure of the 
government of India for that year, referred to as the “Annual Financial Statement’’.  
The budgetary procedures are - 
(i) Preparation of the budget   
(ii) Presentation and enactment of the budget   and 
(iii) Execution of the budget. 
© The Institute of Chartered Accountants of India
Page 3


 1.51 
 
 
 7.51 
PUBLIC FINANCE 
LEARNING OUTCOMES 
UNIT – 3: THE PROCESS OF BUDGET 
MAKING: SOURCES OF REVENUE, 
EXPENDITURE MANAGEMENT AND 
MANAGEMENT OF PUBLIC DEBT 
 
 
 
 
After studying this Chapter, you will be able to – 
? Define government budget and explain the need and objectives of 
budget   
? Describe the budget concepts and terminologies  
? Illustrate the process of budget making 
? Detail the different sources of government revenue and expenditure  
?
Elucidate the process of management of public debt
 
 
 
 
3.1 INTRODUCTION  
Governments all over the world have to perform manifold functions from protecting their 
territories, maintaining law and order, provision of public goods and   implementation of 
comprehensive plans for economic and social welfare of its citizens. To execute these 
functions efficiently, the government requires adequate financial resources.  Budget   is a 
powerful policy instrument in the hands of government to regulate and to restructure a 
country's economic priorities. 
 
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
1.  
  
BUSINESS ECONOMICS 
 
 7.52 
The need for budgeting arises from the need to efficiently allocate limited resources to ensure 
maximum social welfare. The government also needs to reallocate resources in accordance 
with its declared priorities. By proper budgeting, the government is able to ensure 
redistribution of income and wealth. The other objectives of budgets are reduction/ 
elimination of economic fluctuations to bring in stability, sustainable increase in real GDP and 
reduction in regional disparities.  
In simple terms, a budget is a statement that presents the details of ‘where the money comes 
from’ and ‘where the money goes to’. The government budget is a document presented for 
approval and legislation by a government and contains estimates of the proposed expenditure 
for a given period and the proposed means of financing them. In other words, a government 
budget   is a schedule of the entire revenues and expenditures that the government expects 
to receive and plans to spend during the following year. The budget includes projections for 
the economy and its various sectors such as agriculture, industry, and services. The budget 
also contains estimates of the government’s accounts for the next fiscal year called budgeted 
estimates.  Being the document which consolidates revenues from all sources and outlays for 
all activities, the budget is the most comprehensive report of the government's finances.  
Apart from the union budget, state and the local bodies have their own budgetary processes for 
the next financial year. However, the focus of this unit will be the union budget only. 
3.2 THE PROCESS OF BUDGET MAKING 
The budgetary process is the means by which the executive and legislative branches together 
formulate a coherent set of taxing and spending proposals. The finances of the government of 
India have traditionally been controlled by the Ministry of Finance. The budget   is prepared by 
the Ministry of Finance in consultation with NITI Aayog and other relevant ministries. The budget   
must be presented and approved by both houses of parliament before the beginning of the fiscal 
year (April 1 to March 31).  
Despite the fact that the term ‘budget’ has not been used in the Indian Constitution, the 
process of making it is generally referred to as budgeting. Article112 of the constitution 
provides that in respect of every financial year the ‘president shall cause to be laid before both 
the houses of parliament a statement of the estimated receipts and expenditure of the 
government of India for that year, referred to as the “Annual Financial Statement’’.  
The budgetary procedures are - 
(i) Preparation of the budget   
(ii) Presentation and enactment of the budget   and 
(iii) Execution of the budget. 
© The Institute of Chartered Accountants of India
 1.53 
 
 
 7.53 
PUBLIC FINANCE 
The budget process mainly consists of two types of activities: 
1. The administrative process, wherein the budget along with the accompanying 
documents are prepared in consultation with various stakeholders;  
2. The legislative process wherein the budget   is passed by the parliament after 
discussions. 
Despite the fact that the union budget   is presented on1st February (or any other suitable date as 
decided by the government), the process of budget   preparation commences in August-September 
of the previous year. The Budget Division of the Ministry of Finance prepares a comprehensive 
schedule for carrying out the budget   preparation activities. 
The process of budget   making is set off with the Budget   Division issuing the budget   circular 
containing detailed instructions and formats for preparing the estimates to all ministries, 
states, union territories and autonomous bodies. The detailed estimates of expenditure are 
prepared by ministries and departments according to their assessment of requirements for 
the subsequent year. Every department prepares estimates for receipts and expenditure 
separately. 
A series of pre-budget consultations are done by the union finance minister with the finance 
ministers and chief ministers of states, various stakeholders and interest groups including 
industry associations, representatives from agriculture and social and welfare sectors, labour 
organisations, experts from NITI Aayog, economists etc. to elicit their suggestions on the 
proposed budget.   
The budget   is presented in the Parliament in such form as the Finance Ministry may decide 
after considering the suggestions (if any) of the Estimates Committee. Broadly, the budget 
documents depict information relating to receipts and expenditure for two years. They are: 
(i) Budget estimates (BE) of receipts and expenditure in respect of current and ensuing 
financial year 
(ii) For the current year through Revised Estimates (RE); and 
(iii) Actuals of the year preceding the current year  
The budget speech is mainly a policy document which draws attention to the proposed 
policies and programmes of the government. The finance minister makes a detailed budget   
speech at the time of presenting the budget   before the Lok Sabha. The budget   speech 
present details of the proposals for the new financial year regarding taxation, borrowings and 
expenditure plans of the government.  
The budget speech of the Finance Minister is usually in two parts.  
© The Institute of Chartered Accountants of India
Page 4


 1.51 
 
 
 7.51 
PUBLIC FINANCE 
LEARNING OUTCOMES 
UNIT – 3: THE PROCESS OF BUDGET 
MAKING: SOURCES OF REVENUE, 
EXPENDITURE MANAGEMENT AND 
MANAGEMENT OF PUBLIC DEBT 
 
 
 
 
After studying this Chapter, you will be able to – 
? Define government budget and explain the need and objectives of 
budget   
? Describe the budget concepts and terminologies  
? Illustrate the process of budget making 
? Detail the different sources of government revenue and expenditure  
?
Elucidate the process of management of public debt
 
 
 
 
3.1 INTRODUCTION  
Governments all over the world have to perform manifold functions from protecting their 
territories, maintaining law and order, provision of public goods and   implementation of 
comprehensive plans for economic and social welfare of its citizens. To execute these 
functions efficiently, the government requires adequate financial resources.  Budget   is a 
powerful policy instrument in the hands of government to regulate and to restructure a 
country's economic priorities. 
 
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
1.  
  
BUSINESS ECONOMICS 
 
 7.52 
The need for budgeting arises from the need to efficiently allocate limited resources to ensure 
maximum social welfare. The government also needs to reallocate resources in accordance 
with its declared priorities. By proper budgeting, the government is able to ensure 
redistribution of income and wealth. The other objectives of budgets are reduction/ 
elimination of economic fluctuations to bring in stability, sustainable increase in real GDP and 
reduction in regional disparities.  
In simple terms, a budget is a statement that presents the details of ‘where the money comes 
from’ and ‘where the money goes to’. The government budget is a document presented for 
approval and legislation by a government and contains estimates of the proposed expenditure 
for a given period and the proposed means of financing them. In other words, a government 
budget   is a schedule of the entire revenues and expenditures that the government expects 
to receive and plans to spend during the following year. The budget includes projections for 
the economy and its various sectors such as agriculture, industry, and services. The budget 
also contains estimates of the government’s accounts for the next fiscal year called budgeted 
estimates.  Being the document which consolidates revenues from all sources and outlays for 
all activities, the budget is the most comprehensive report of the government's finances.  
Apart from the union budget, state and the local bodies have their own budgetary processes for 
the next financial year. However, the focus of this unit will be the union budget only. 
3.2 THE PROCESS OF BUDGET MAKING 
The budgetary process is the means by which the executive and legislative branches together 
formulate a coherent set of taxing and spending proposals. The finances of the government of 
India have traditionally been controlled by the Ministry of Finance. The budget   is prepared by 
the Ministry of Finance in consultation with NITI Aayog and other relevant ministries. The budget   
must be presented and approved by both houses of parliament before the beginning of the fiscal 
year (April 1 to March 31).  
Despite the fact that the term ‘budget’ has not been used in the Indian Constitution, the 
process of making it is generally referred to as budgeting. Article112 of the constitution 
provides that in respect of every financial year the ‘president shall cause to be laid before both 
the houses of parliament a statement of the estimated receipts and expenditure of the 
government of India for that year, referred to as the “Annual Financial Statement’’.  
The budgetary procedures are - 
(i) Preparation of the budget   
(ii) Presentation and enactment of the budget   and 
(iii) Execution of the budget. 
© The Institute of Chartered Accountants of India
 1.53 
 
 
 7.53 
PUBLIC FINANCE 
The budget process mainly consists of two types of activities: 
1. The administrative process, wherein the budget along with the accompanying 
documents are prepared in consultation with various stakeholders;  
2. The legislative process wherein the budget   is passed by the parliament after 
discussions. 
Despite the fact that the union budget   is presented on1st February (or any other suitable date as 
decided by the government), the process of budget   preparation commences in August-September 
of the previous year. The Budget Division of the Ministry of Finance prepares a comprehensive 
schedule for carrying out the budget   preparation activities. 
The process of budget   making is set off with the Budget   Division issuing the budget   circular 
containing detailed instructions and formats for preparing the estimates to all ministries, 
states, union territories and autonomous bodies. The detailed estimates of expenditure are 
prepared by ministries and departments according to their assessment of requirements for 
the subsequent year. Every department prepares estimates for receipts and expenditure 
separately. 
A series of pre-budget consultations are done by the union finance minister with the finance 
ministers and chief ministers of states, various stakeholders and interest groups including 
industry associations, representatives from agriculture and social and welfare sectors, labour 
organisations, experts from NITI Aayog, economists etc. to elicit their suggestions on the 
proposed budget.   
The budget   is presented in the Parliament in such form as the Finance Ministry may decide 
after considering the suggestions (if any) of the Estimates Committee. Broadly, the budget 
documents depict information relating to receipts and expenditure for two years. They are: 
(i) Budget estimates (BE) of receipts and expenditure in respect of current and ensuing 
financial year 
(ii) For the current year through Revised Estimates (RE); and 
(iii) Actuals of the year preceding the current year  
The budget speech is mainly a policy document which draws attention to the proposed 
policies and programmes of the government. The finance minister makes a detailed budget   
speech at the time of presenting the budget   before the Lok Sabha. The budget   speech 
present details of the proposals for the new financial year regarding taxation, borrowings and 
expenditure plans of the government.  
The budget speech of the Finance Minister is usually in two parts.  
© The Institute of Chartered Accountants of India
1.  
  
BUSINESS ECONOMICS 
 
 7.54 
• Part A of the budget   speech gives an outline of the prevailing macro economic 
situation of the country and the budget estimates for the next financial year. 
Elaborating the priorities of the government, the minister presents a broad framework 
of the total funds raised by the government via taxes or borrowings, proposed 
government expenditure allocations for different sectors and fresh schemes for 
different sectors.   
• Part B of the budget speech details the progress the government has made on various 
developmental measures, the direction of future policies and the government’s tax 
proposals for the upcoming financial year including variations in the current taxation 
system. 
The Annual Financial Statement shows the receipts and expenditure of government in three 
separate parts under which government accounts are maintained, namely:  
1. Consolidated Fund of India  
2. Contingency Fund of India, and the 
3. Public Account. 
The list of budget documents presented to the parliament, besides the finance minister’s 
budget speech, is given below: 
(a) Annual Financial Statement (AFS) 
(b) Demands for Grants (DG) 
(c) Finance Bill 
(d) Statements mandated under FRBM Act: 
i.  Macro -Economic Framework Statement 
ii.  Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement 
Nine other documents which are in the nature of explanatory statements supporting the 
mandated documents are also presented along with the documents mentioned above.  
The expenditures of certain categories (e.g. the emoluments and allowances of the President 
of India and his/her office, and emoluments of Judges of supreme courts and high ranking 
personnel of constitutional bodies across India) are ‘charged’ on the Cons olidated Fund of 
India and are not subject to the vote of parliament, are also indicated separately in the budget. 
By convention in an election year, the budget may be presented twice. The first one is to first 
to secure a Vote on Account for a few months. This is followed by the Annual financial 
statement for that year or the full-fledged Budget. 
 
© The Institute of Chartered Accountants of India
Page 5


 1.51 
 
 
 7.51 
PUBLIC FINANCE 
LEARNING OUTCOMES 
UNIT – 3: THE PROCESS OF BUDGET 
MAKING: SOURCES OF REVENUE, 
EXPENDITURE MANAGEMENT AND 
MANAGEMENT OF PUBLIC DEBT 
 
 
 
 
After studying this Chapter, you will be able to – 
? Define government budget and explain the need and objectives of 
budget   
? Describe the budget concepts and terminologies  
? Illustrate the process of budget making 
? Detail the different sources of government revenue and expenditure  
?
Elucidate the process of management of public debt
 
 
 
 
3.1 INTRODUCTION  
Governments all over the world have to perform manifold functions from protecting their 
territories, maintaining law and order, provision of public goods and   implementation of 
comprehensive plans for economic and social welfare of its citizens. To execute these 
functions efficiently, the government requires adequate financial resources.  Budget   is a 
powerful policy instrument in the hands of government to regulate and to restructure a 
country's economic priorities. 
 
CHAPTER OVERVIEW 
 
© The Institute of Chartered Accountants of India
1.  
  
BUSINESS ECONOMICS 
 
 7.52 
The need for budgeting arises from the need to efficiently allocate limited resources to ensure 
maximum social welfare. The government also needs to reallocate resources in accordance 
with its declared priorities. By proper budgeting, the government is able to ensure 
redistribution of income and wealth. The other objectives of budgets are reduction/ 
elimination of economic fluctuations to bring in stability, sustainable increase in real GDP and 
reduction in regional disparities.  
In simple terms, a budget is a statement that presents the details of ‘where the money comes 
from’ and ‘where the money goes to’. The government budget is a document presented for 
approval and legislation by a government and contains estimates of the proposed expenditure 
for a given period and the proposed means of financing them. In other words, a government 
budget   is a schedule of the entire revenues and expenditures that the government expects 
to receive and plans to spend during the following year. The budget includes projections for 
the economy and its various sectors such as agriculture, industry, and services. The budget 
also contains estimates of the government’s accounts for the next fiscal year called budgeted 
estimates.  Being the document which consolidates revenues from all sources and outlays for 
all activities, the budget is the most comprehensive report of the government's finances.  
Apart from the union budget, state and the local bodies have their own budgetary processes for 
the next financial year. However, the focus of this unit will be the union budget only. 
3.2 THE PROCESS OF BUDGET MAKING 
The budgetary process is the means by which the executive and legislative branches together 
formulate a coherent set of taxing and spending proposals. The finances of the government of 
India have traditionally been controlled by the Ministry of Finance. The budget   is prepared by 
the Ministry of Finance in consultation with NITI Aayog and other relevant ministries. The budget   
must be presented and approved by both houses of parliament before the beginning of the fiscal 
year (April 1 to March 31).  
Despite the fact that the term ‘budget’ has not been used in the Indian Constitution, the 
process of making it is generally referred to as budgeting. Article112 of the constitution 
provides that in respect of every financial year the ‘president shall cause to be laid before both 
the houses of parliament a statement of the estimated receipts and expenditure of the 
government of India for that year, referred to as the “Annual Financial Statement’’.  
The budgetary procedures are - 
(i) Preparation of the budget   
(ii) Presentation and enactment of the budget   and 
(iii) Execution of the budget. 
© The Institute of Chartered Accountants of India
 1.53 
 
 
 7.53 
PUBLIC FINANCE 
The budget process mainly consists of two types of activities: 
1. The administrative process, wherein the budget along with the accompanying 
documents are prepared in consultation with various stakeholders;  
2. The legislative process wherein the budget   is passed by the parliament after 
discussions. 
Despite the fact that the union budget   is presented on1st February (or any other suitable date as 
decided by the government), the process of budget   preparation commences in August-September 
of the previous year. The Budget Division of the Ministry of Finance prepares a comprehensive 
schedule for carrying out the budget   preparation activities. 
The process of budget   making is set off with the Budget   Division issuing the budget   circular 
containing detailed instructions and formats for preparing the estimates to all ministries, 
states, union territories and autonomous bodies. The detailed estimates of expenditure are 
prepared by ministries and departments according to their assessment of requirements for 
the subsequent year. Every department prepares estimates for receipts and expenditure 
separately. 
A series of pre-budget consultations are done by the union finance minister with the finance 
ministers and chief ministers of states, various stakeholders and interest groups including 
industry associations, representatives from agriculture and social and welfare sectors, labour 
organisations, experts from NITI Aayog, economists etc. to elicit their suggestions on the 
proposed budget.   
The budget   is presented in the Parliament in such form as the Finance Ministry may decide 
after considering the suggestions (if any) of the Estimates Committee. Broadly, the budget 
documents depict information relating to receipts and expenditure for two years. They are: 
(i) Budget estimates (BE) of receipts and expenditure in respect of current and ensuing 
financial year 
(ii) For the current year through Revised Estimates (RE); and 
(iii) Actuals of the year preceding the current year  
The budget speech is mainly a policy document which draws attention to the proposed 
policies and programmes of the government. The finance minister makes a detailed budget   
speech at the time of presenting the budget   before the Lok Sabha. The budget   speech 
present details of the proposals for the new financial year regarding taxation, borrowings and 
expenditure plans of the government.  
The budget speech of the Finance Minister is usually in two parts.  
© The Institute of Chartered Accountants of India
1.  
  
BUSINESS ECONOMICS 
 
 7.54 
• Part A of the budget   speech gives an outline of the prevailing macro economic 
situation of the country and the budget estimates for the next financial year. 
Elaborating the priorities of the government, the minister presents a broad framework 
of the total funds raised by the government via taxes or borrowings, proposed 
government expenditure allocations for different sectors and fresh schemes for 
different sectors.   
• Part B of the budget speech details the progress the government has made on various 
developmental measures, the direction of future policies and the government’s tax 
proposals for the upcoming financial year including variations in the current taxation 
system. 
The Annual Financial Statement shows the receipts and expenditure of government in three 
separate parts under which government accounts are maintained, namely:  
1. Consolidated Fund of India  
2. Contingency Fund of India, and the 
3. Public Account. 
The list of budget documents presented to the parliament, besides the finance minister’s 
budget speech, is given below: 
(a) Annual Financial Statement (AFS) 
(b) Demands for Grants (DG) 
(c) Finance Bill 
(d) Statements mandated under FRBM Act: 
i.  Macro -Economic Framework Statement 
ii.  Medium-Term Fiscal Policy cum Fiscal Policy Strategy Statement 
Nine other documents which are in the nature of explanatory statements supporting the 
mandated documents are also presented along with the documents mentioned above.  
The expenditures of certain categories (e.g. the emoluments and allowances of the President 
of India and his/her office, and emoluments of Judges of supreme courts and high ranking 
personnel of constitutional bodies across India) are ‘charged’ on the Cons olidated Fund of 
India and are not subject to the vote of parliament, are also indicated separately in the budget. 
By convention in an election year, the budget may be presented twice. The first one is to first 
to secure a Vote on Account for a few months. This is followed by the Annual financial 
statement for that year or the full-fledged Budget. 
 
© The Institute of Chartered Accountants of India
 1.55 
 
 
 7.55 
PUBLIC FINANCE 
The budget is discussed in two stages in the Lok Sabha. First, there is the general discussion 
on the budget   as a whole. After the first stage of general discussion on the union budget   is 
over, the house is adjourned for a fixed period. During this period, the demands for grants of 
various ministries/ departments are considered by the standing committees concerned, and 
once the reports are presented by these committees within the stipulated time, the house 
proceeds to discussion and conducts ministry-wise voting on demands for grants.  
The Lok Sabha has the power to concur or to refuse any demand or even to reduce the amount 
of grant sought by government. The budget   is laid on the table of the Rajya Sabha soon after 
the Finance Minister has completed her/his budget speech in the Lok Sabha. The Rajya Sabha, 
does not vote on the demands for grants and there is only a general discussion on the budget.  
After the general discussion on the budget   proposals and voting on demands for grants have 
been completed, the government introduces the Appropriation Bill. The Appropriation Bill is 
intended to give authority to government to incur expenditure from and out of the 
Consolidated Fund of India. Motions for reduction to various demands for grants are made in 
the form of ‘cut motions’ seeking to reduce the sums sought by government. 
The Finance Bill seeking to give effect to the government’s taxation proposals is introd uced 
in Lok Sabha immediately after the presentation of the general budget. It is accompanied by 
a memorandum explaining the provisions of the bill and their effect on the finances of the 
country. The motion for leave to introduce a finance bill cannot be opposed. The finance bill 
is taken up for consideration and passing after the Appropriation Bill is passed. The finance 
bill seeks to give effect to the financial proposals of the government for the next financial 
year. The Parliament has to pass the Finance Bill within 75 days of its introduction. 
On the last day of the days allotted for discussion on the demands for grants, the speaker 
puts all the outstanding demands for grants to the vote of the house. This process is known 
as ‘Guillotine’. It is a device for bringing the debate on financial proposals to an end within a 
specified time. 
After the Finance Bill has been passed by the Lok Sabha, it is transmitted to the Rajya Sabha 
for Its recommendations.  The bill being a money bill, Rajya Sabha has to return it within a 
period of 14 days, with or without recommendations. The recommendations of Rajya Sabha 
may be accepted or rejected by the Lok Sabha.  
However from 2017-18, the date of presentation of the budget   has been advanced to 1st 
February.  An important budgetary reform was the merger of railway budget   with the general 
budget from the budget for financial year 2017-18.  
  
© The Institute of Chartered Accountants of India