MEANING OF BUDGET

• BUDGET (FROM FRENCH WORD

BOUGETTE, PURSE) GENERALLY REFERS
TO A LIST OF ALL PLANNED EXPENSES
AND REVENUES. ...
AN ANNUAL PROPOSAL THAT OUTLINES
THE ANTICIPATED FEDERAL REVENUE AND
DESIGNATES PROGRAM EXPENDITURES
FOR THE UPCOMING FISCAL YEAR.
 DEFINITIONS
• TAYLOR – “ A BUDGET IS THE MASTER
FINANCIAL PLAN OF THE
GOVERNMENT. IT BRINGS TOGETHER
ESTIMATES OF ANTICIPATED
REVENUE AND PROPOSED
EXPENDITURE FOR THE BUDGETED
YEARS”.
 According to BASTABLE
• THE BUDGET HAS COME TO MEAN
THE FINANCIAL ARRANGEMENTS OF A
GIVEN PERIOD, WITH THE USUAL
IMPLICATIONS THAT THEY HAVE BEEN
SUBMITTED TO THE LEGISLATURE
FOR APPROVAL
 According to FINDLAY SHIRRAS
• THE BUDGET IS AN ANNUAL
STATEMENT OF EXPENDITURE AND
REVENUE TO MEET THAT
EXPENDITURE PREPARED BY PUBLIC
AUTHORITIES AND USUALLY COVERS
ATLEAST TWO FISCAL PERIODS-THE
CLOSING PERIOD AND THE PERIOD
TO COME .
 IN THE WORDS OF MUNRO
• BUDGET IS A PLAN OF FINANCING
FOR THE INCOMING FISCAL
YEAR.THIS INVOLVES AN ITEMISED
ESTIMATE OF ALL REVENUES ON THE
ONE HAND AND ALL EXPENDITURES
ON THE OTHER
 A SUMMARY OF THE ABOVE
DEFINITIONS
• ON THE BASIS OF THE DEFINITIONS WE
CAN STATE THAT A BUDGET IS :
1. A statement of expected revenue and
proposed expenditure;
2. It has to sanctioned by the authority;
3. It is for a particular period-a year;
4. It puts forth conditions regarding the
procedures involved in the collection of
revenue and the expenditure to be incurred.
 MEANING OF BUDGET
• HENCE A BUDGET IS A STATEMENT
OF THE ESTIMATED REVENUE AND
EXPENDITURE OF THE GOVERNMENT
IN RESPECT TO A PARTICULAR
FINANCIAL YEAR.
 IMPORTANCE OF BUDGET
1. It sets a frame work for policy formulation
2. Budgeting is a means of policy
implementation
3. A budget is a means of legal control
4. It is a tool of accountability
5. It is a tool of management
6. It is an instrument of economic policy
 BUDGET IS CONCERNED WITH
THREE PERIODS
1. THE ACTUAL REVENUE AND
EXPENDITURE OF THE PREVIOUS YEAR [if
the current year is 2009-10 then 2008-09 will
be the preious year]
2. THE REVISED ESTIMATES OF REVENUE
AND EXPENDITURE OF THE CURRENT
YEAR.
3. ESTIMATES OF REVENUE AND
EXPENDITURE FOR THE NEXT FINANCIAL
YEAR.
 COMPONENTS OF BUDGET
• Revenue receipts
• Capital receipts
• Revenue expenditure
• Capital expenditure

THUS A BUDGET HAS TWO MAIN

COMPONENTS :[A] RECEIPTS ,[B]
EXPENDITURE.
COMPONERNTS OF BUDGET
• RECEIPTS
• A. REVENUE RECEIPTS [1+2 ]
• 1. TAX REVENUE
• 2. NON –TAX REVENUE
• B. CAPITAL RECEIPTS [3+5]
• 3.RECOVERY LOANS
• 4.OTHER RECEIPTS
• 5.BORROWING & OTHER LIABILITIES
• TOTAL RECEIPTS = A+B
A.REVENUE RECEIPTS D.REVENUE EXPEND.

A.1.TAX REVENUE 6.ON NON PLAN ACC.

2.NONTAX REV 7.ON PLAN ACCOUNT

B.CAPITAL RECEIPTS. E.CAPITAL EXP.[8+9]

[3+4+5]

3.RECOVERY OF LOAN 8.ON NON PLAN ACC.

4.OTHERB RECEIPTS 9.ON PLAN ACCOUNT

5.BORROWINGS AND F.TOTAL EXP.[D+E]
OTHER LIABILITIES G.BUDGE.DEFI-F-C
H.REV. DEFI D-A

C.TOTAL RECEIPTS-A+B I.FISCAL DEFICIT[F_(A+3+4)]

 EXPENDITURE
• EXPENDITURE
• A. REVENUE EXPENDITURE [1+2]
• 1 ON PLAN ACCOUNT
• 2 ON NON PLAN ACCOUNT
• B.CAPITAL EXPENDITURE
 RECEIPT ITEMS OF THE
BUDGET

RECEIPT
ITEMS OF BUDGET

REVENUE CAPITAL
RECEIPTS RECEIPTS
REVENUE RECEIPTS
 TAX REVENUE
• TAX REVENUE INCLUDES ALL THE
REVENUES EARNED THROUGH
VARIOUS KINDS OF TAXES.TAXES
ARE BROADLY DIVIDED INTO DIRECT
& INDIRECT TAXES.
 DIRECT TAXES
1. CORPORATION TAX
2. INCOME TAX
3. INTEREST TAX
4. WEALTH TAX
5. GIFT TAX
6. EXPENDITURE TAX
 INDIRECT TAX
1. CUSTOM DUTIES
2. EXCISE DUTIES
3. SALES TAX
4. SERVICE TAX
 NON TAX REVENUE
• IT INCLUDES THE REVENUE
ACCRUING TO THE GOVERNMENT
FROM SOURCES OTHER THAN
TAX.THESE ARE ;
1. INTEREST RECEIPTS
2. DIVIDENDS
3. GRANTS
4. FINES
 CAPITAL RECEIPTS
• THESE INCLUDE BORROWING OF THE
GOVERNMENT.SINCE THESE
RECEIPTS HAVE TO BE REPAID BY
THE GOVERNMENT ,THE CAPITAL
RECEIPTS ARE LIABILITIES.CAPITAL
RECEIPTS INCLUDE PUBLIC
BORROWING ,RECIVERY OF LOANS
AND RESALE OF SHARES AND BONDS
HELD BY THE GOVERNMENT.
 EXPENDITURE ITEMS

EXPENDITURE

REVENUE CAPITAL
EXPENDITURE EXPENDITURE
 REVENUE EXPENDITURE
• IT IS THE EXPENDITURE INCURRED
FOR THE DAY-TO-DAY FUNCTIONONG
OF THE GOVERNMENT
DEPARTMENTS AND VARIOUS
SERVICES OFFERED TO THE PEOPLE,
PAYMENT OF INTEREST ON
BORROWINGS,SUBSIDIES ETC.
• REVENUE EXPENDITURE WILL NOT
RESULT IN THE CREATION OF
ASSETS
 REVENUE EXPENDITURE
• IT IS THE EXPENDITURE INCURRED
FOR THE DAY-TO-DAY FUNCTIONONG
OF THE GOVERNMENT
DEPARTMENTS AND VARIOUS
SERVICES OFFERED TO THE PEOPLE,
PAYMENT OF INTEREST ON
BORROWINGS,SUBSIDIES ETC.
• REVENUE EXPENDITURE WILL NOT
RESULT IN THE CREATION OF
ASSETS
 CAPITAL EXPENDITURE
• CAPITAL EXPENDITURE IS THE
EXPENDITURE INCURRED ON
CREATING PERMANENT
ASSETS.SUCH EXPENDITURE IS
INCURRED ON ITEMS LIKE
CONSTRUCTION OF
BUILDINGS,ROADS,BRIDGES,CANALS,
POWER PLANTS,CAPITAL
EQUIPMENTS
 REVENUE RECEIPTS
• THE REVENUE RECEIPTS REFER TO
ALL RECEIPTS RECEIVED DURING BY
THE GOVERNMENT FRM
 Taxation
• Meaning : Non quid pro quo transfer of
private income to public coffers by
means of taxes.
• Classified into
1. Direct taxes- Corporate tax, Div.
Distribution Tax, Personal Income Tax, Fringe
Benefit taxes, Banking Cash Transaction Tax
2. Indirect taxes- Central Sales Tax,
Customs, Service Tax, excise duty.
 Government Expenditure

 It includes :
• Government spending on the purchase
of goods & services.
• Payment of wages and salaries of
government servants
• Public investment
• Transfer payments
EXPENDITURE HEADS- 2009-10
BUDGET
RUPEE GOES TO

7% CENTRAL PLAN
4% 18%
INTEREST PAYMENTS
15%
DEFENCE
SUBSIDIES
OTHER NON-PLAN EXPEN
20% STATES' SHARE OF TAXES
14% NON-PLAN ASSIST. TO STA
9% 13% PLAN ASSISTANCE TO STA
 RECEIPTS OF 2009-10 BUDGET
Where does the Rupee come from

BORROWINGS &
10% 1% OTHER LIABILITIES
6% 29% CORPORATION TAX
10%
INCOME TAX

CUSTOMS

10% EXCISE

12% 22% OTHER TAXES

NON-TAX REVENUE

NON-DEBT CAPITAL
RUPEE COMES FROM
2009-10
RUPEE GOES TO
TOTAL RECEIPTS
TOTAL EXPENDITURE
BUDGET OF 2011-12
CUSTOMS DUTY
DIRECT TAXES
FISCAL DEFICIT