Basics of budget Part I

The word Budget is derived from French, which means purse. 

What is budget?

It is an estimate of income and expenditure for a set period of time. If you do it for yourself (estimating your income and expenditure) it can be called as ‘Personal budget’ and if it done for a company, it can be called as ‘Annual Budget. Similarly, when it is done for the Government of India, it is called Union Budget.

Union Budget – According to Article 112 of the Indian Constitution, the Union Budget of a year is a statement of the estimated receipts and expenditure of the government for the fiscal year that runs from 1st April to 31st March. Union budget is classified into Revenue Budget and Capital Budget.

What is Revenue Budget?

Revenue means Income. Income includes the government’s Tax collections and Non Tax collections. Expenditure includes the running expenses of the government such as salary paid to politicians, officials and other services offered to citizens. (In business parlance, we can compare this with a Profit and Loss Account).  If Expenditure is more than Income, it is called Revenue Deficit (in case of business, we call it as Loss)

What is Capital Budget?

In business parlance we can compare this with Balance Sheet items. Capital receipts (comparable to liabilities)can be loans from public, foreign governments and RBI. Capital expenditure (comparable to assets) includes purchase of machinery, building, health facilities, education etc. If the total expenditure (of Revenue and Capital expenditure) is more than total income (of Revenue and Capitalincome – borrowed funds) it is called Fiscal Deficit.

How Fiscal Deficit can be met – Through borrowings. So every government tries to minimize Fiscal Deficit so that their external borrowing can be reduced.

When is the Budget presented?

The Union Budget of India is presented each year on the last working day of February by the Finance Minister of India in Parliament. The budget has to be passed by both the Houses of Parliament (LokSabha and RajyaSabha) before it can come into effect on April 1, the start of India’s financial year.

If that is the case, why is it being presented on 10th July, 2014?  I will explain in my next post.


 Continue ReadingUnion Budget Part II – Interim Budget


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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 28+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional, Registered Valuer (F&SA) and Social Auditor.Prasad welcomes your comments and questions. Please email him at

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