How are “Annual financial

statement”{Budget}
Prepared in India
 AFS
• In the Constitution of India the term Budget is
no where used rather it is AFS.
• Annual Financial Statement is that which
shows the receipts and payment of Govt.
under three parts in which Govt. accounts are
kept –
1. Consolidated Fund
2. Contingency Fund and
3. Public Account
 Consolidated Fund
• All revenues received by Govt.
• Loans raised by Govt.
• Receipts from recoveries of loans granted by
the Govt.
All expenditure of Govt. is incurred from
the Consolidated Fund and no amount can be
withdrawn from the Fund without authorisation
from Parliament.
 Contingency Fund
• Occasions may arise when Govt. may have to meet
urgent unforeseen expenditure pending
authorisation from Parliament. The Contingency
Fund is an imprest placed at the disposal of the
President to incur such expenditure.

• Parliamentary approval for such expenditure and for

withdrawal of an equivalent amount from the
Consolidated Fund is subsequently obtained and the
amount spent from Contingency Fund is recouped to
the Fund.
 Public Account
• Certain other transactions enter Govt.
accounts in respect of which government act
more as a Banker. For example – transactions
related to Provident Fund, Small savings of
Post offices etc. The money thus received are
kept in Public Account and the connected
disbursement are also made therefrom.
• Parliamentary approval is not required to
operate this fund
 Preparation of Budget
• By Budget Division of Min. of Finance
• It is prepared After consulting other Ministries
and the Planning Commission
• Planning Commission plays an important role
in making provision for plan activities of the
government and scrutinizing the plan
proposals of various Ministries / Departments
 Government Budget
• Under the Constitution, Budget has to
distinguish expenditure on revenue account
from other expenditure. Govt. Budget thus
comprises of -
• Revenue Budget
• Capital Budget
 Revenue Budget
• Revenue Budget consists of the revenue receipts of
Government (tax revenues and other revenues) and the
expenditure met from these revenues. Tax revenues comprise
proceeds of taxes and other duties levied by the Union. The
estimates of revenue receipts shown in the Annual Financial
Statement take into account the effect of various taxation
proposals made in the Finance Bill. Other receipts of
Government mainly consist of interest and dividend on
investments made by Government, fees, and other receipts for
services rendered by Government.
• Revenue expenditure is for the normal running of Government
departments and various services, interest payments on debt,
subsidies, etc. Broadly, the expenditure which does not result in
creation of assets for Government of India is treated as revenue
expenditure. All grants given to State Governments/Union
Territories and other parties are also treated as revenue
expenditure even though some of the grants may be used for
creation of assets.
 Capital Budget
• Capital Budget consists capital receipts and capital
payments.
• The capital receipts are loans raised by Government from
public, called market loans, borrowings by Government
from Reserve Bank and other parties through sale of
Treasury Bills, loans received from foreign Governments and
bodies, disinvestment receipts and recoveries of loans from
State and Union Territory Governments and other parties.
• Capital payments consist of capital expenditure on
acquisition of assets like land, buildings, machinery,
equipment, as also investments in shares, etc., and loans
and advances granted by Central Government to State and
Union Territory Governments, Government companies,
Corporations and other parties.
 Budget Timeline
• RE – BE Sept./Oct.
• Draft Budget prepared and finalized
28/29 February
• Budget tabled before Parliament – March
• General discussion on Budget Proposal
March/ April
• Study of DFG by Standing Committee – April
• Detailed discussion on DFG – April
• New Financial Year begins - April
 Stages in Budget enactment
1. Presentation of Budget before the Lok Sabha
2. General discussion on the Budget
3. Vote on Account –
Purpose is to keep the govt. functioning
pending voting on the Demand for Grants which
requires sufficiently long time. Vote on Account
is obtained from Parliament through an
Appropriation (Vote on Account) Bill.
 Stages in Budget enactment
4. Scrutiny by departmentally related Standing
Committees of Parliament.
5. Voting on Demand for Grants.
6. Passing of Appropriation Bill
7. Passing of Finance Bill (detailing the
imposition, abolition, remission, alteration or
regulation of Taxes proposed in the Budget)
 Budget in DoP
TABLE 1
Revenue and Expenditure
(for the year 2008-09 & 2009-10)
(INR in Million)
Particulars Actuals Actuals % age lnc (+)/
2008-09 2009-10 Dec(-) over
previous year
Revenue
Sale of Stamps 6056.64 6178.11 2.01%
Postage Realised in 20364.48 20972.82 2.99%
Cash 3382.97 3398.42 0.46%
Commission on Money
Orders 28024.60 31327.68 11.79%
and Indian Postal Orders
etc. 794.57 789.98 -0.58%
Remuneration for Saving
Bank/Saving Certificates
Work.
* Other Receipts
Total 58623.26 62667.01 6.90%
 Budget - Deptt. of Posts

Expenditure
General Administration
Operations 5999.55 7300.02 21.68%
Agency Services 60359.74 82596.64 36.84%
**Others 4300.06 4225.79 -1.73%
Total Gross 26902.95 39346.96 46.26%
Expenditure 97562.30 133469.41 36.80%
Less Recoveries 3008.16 4389.36 45.92%
Net Expenditure 94554.14 129080.05 36.51%
Deficit (Net Exp - 35930.88 66413.04 84.84%
Revenue)
Who controls Budget in the Govt.?
• Parliament
• Standing Committee of Parliament
• Planning Commission of India
• Administrative Head of the Ministry/Deptt.
• Financial Advisors
• Media
• Public
 Summary of General budget

• The Finance minister of India presents the

annual Union Budget (Annual Financial
Statement) in the Parliament on the last working
day of February. The budget has to be passed by
the Lok Sabha before it can come into effect on 1
April, the start of India's fiscal year. The Union
budget is preceded by an economic survey which
outlines the broad direction of the budget and
the economic performance of the country for the
outgoing financial year.
Thank You
-KARUNAKAR REDDY Y.C
- THARIKA N