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BUDGET AND TAXATION

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Budget: an approximation of revenue and expenses over a specified period
of time

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Asset Liability

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I A propert owned by a L
Something that someone
person (Something that economical value) is responsible for (Debt/obligation)
Eg: Gold, Property Eg: payment of Loan

According to Govt.
Income
->-
Expenditure
Receipt
Expenditure R -
Share in profit is called dividend
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Budget
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Revenue
- ->
↳
Capital
Asset
Frequent transactions Liability ↓ Less frequent
Asset
↑I
/
Liability
-

~ ↓ I
N
PA

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Receipt Expenditure Capital Capital
(Paisa aa raha hai) (Paisa jaa raha hai) Receipt Expenditure
↓ ↓ (Kabhi-kabhi wala paisa (Kabhi-kabhi wala paisa
Neither decrease in Neither increase in
asset nor increase in asset nor decrease in liability
jo aa raha)
↳
↓ jo jaa raha hai)

↓ ↓ Plan Capital Exp ↓

liability Non-plan Non-plan Capital Exp
Plan
X t
Revenue Exp Revenue
Tax Revenue Non-tax revenue Exp
eg: Wealth tax eg: Challan
 l
Burrowing:
Borrowing Liability
4)
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- Capital Receipt
I Disinvestment: Asset
Entertainment tax
-- Revenue
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Excise duty

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Two components
Examplesof budget
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↓ - Capital Expenditure

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Revenue Expenditure Road, bridge, etc
↓ ↑
Construction of any infrastructure

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Salary/Pension -

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Subsidy/Grant >
Purchase of land/machinery
Interest Payment Investment
Maintenance of Infrastructure .
1
Loan
Repayment of Loan

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Budget >
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Annual Fiscal Statement: Art 112

Prepared by: Department of Economic Affairs

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(Ministry of Finance) Loan - Principal amount -> Capital

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Presented by: Finance Minister Interest ->Revenue

1st budget presented by: R. K. Shanmukham Cherry n
Chetty
2nd budget by: John Mathai * Committee At present General Budget and Railway
Most no. of budget: Budget is merged
In a row 6 times
1. Morarji Desai (10 times) - Earlier ↓
PA

2. P Chidambaram (9 times)
3. Pranab Mukherjee (8 times) 1921: Acworth Recommendation Committee (Separate)
↓ ↓
General Budget Railway Budget

2016: Bibek Debroy Committee (Amalgamate)

Interim Budget and Full Time Budget
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Presented on
Election Year
 Deficits: loss

Receipt Expenditure = Surplus budget Expenditure = Receipt Balanced Budget

3 Receipt = Deficit Budget
- >
-

· Expenditure

Types:

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1. Budgetary Deficit
2. Revenue Deficit: Revenue Expenditure - Revenue Receipt
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3. Fiscal Deficit: Total Exp - [Total receipt - dept creating Capital Receipt]

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I Or
accurate Total Exp A-= [Revenue receipt + Non-debt creating Capital Receipt]
measure of govt. deficit/govt. borrowing

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4. Primary Deficit: Fiscal Deficit - Interest Payment
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5. Effective Revenue Deficit: Revenue Deficit - Grant given for developmental
purpose
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Taxation System in India
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Direct Tax
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Indirect Tax

·
Directly payable
paid to govt.
to Govt. ,

*
Not directly
Indirectly paid totoGovt.
payable govt.
I

It cannot be passed to someone else -

It can be passed to someone else

Progressive tax Regressive tax /proportional tax
PA

·
I

↑ eg: Income tax, Wealth tax, Gift -

eg: GST Tobacco, alcohol
7

tax, capital gain tax -

Excise duty >
Petrol, Diesel, Aviation turbine fuel
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Corporate tax
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Custom duty

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Income↑ > Tax↑
d
Marginal tax > Avg. tax rate

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Marginal tax > Avg. tax rate
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 GST

↑ 101 CA
I Operational by: 1st July 2017
/
Assam was the first state to ratify it
GST council is a constitutional body: Art 279A

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33 members (2 from Centre+31 from States/UTs)
Chairman: Finance Minister

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Levied by Central govt. but
Surcharge Tax: Tax pe Tax (on rich people) not shared by State govt.
↑
Cess Tax: for a definite purpose (charged on everyone)
Pigouvian Tax: to lower the negative externalities

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Published 1 week before

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the budget roughly in the
month of January or
February

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Laffers Curve

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Bell-shaped
Curve
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 SEBI
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