Budget concepts

Mrs.S.Haridas Faculty

 Do you always get caught in technical economic terms? Here's your guide to all the financial terms the FM uses while creating the most popular document. Yes, the budget...

 Revenue Budget: Revenue receipts of govt+Expenditure met Revenue receipts: Tax revenues+Interest & dividend on investments+fees & receipts for govt services. Revenue Expenditure: Expenditure which doesn't result in the creation of assets+All grants given to state govts.

 Capital Budget: Capital receipts+payments. It includes transactions in the Public A/C. Capital receipts: Market loans+borrowings from RBI+loans from foreign bodies+ loan recoveries Capital Payments: Expenditure on land, buildings+ investments in shares+loans & advances granted by the centre to state & UTs+govt firms+corporations

 Finance Bill: The proposals of govt for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill.

 Performance Budget: This is the budget of the ministry in terms of functions, programmes and activities & gives appraisal reports separately in respect of major central sector projects/programmes estimated to cost Rs 100 crore or more. Net up 7.9% at Rs 219 cr Sales for Apr-Dec'04 grew 31% Net profit for Apr-Dec'04 was up 17% at Rs 603 cr

Appropriation bills:
After the Demands for Grants are voted by the LS, Parliament's approval to the withdrawal from the Consolidated Fund of the amounts so voted and the amount to meet the expenditure charged on the Consolidated Fund is sought through the appropriation bill.

Budget deficit:
The receipts minus total expenditure on both revenue and capital accounts.

Balance of Payments (BOP)

It is the statement of the country's trade and financial transactions with the rest of the world during the year.

Capital Gains Tax:

It is a tax on the surplus obtained from the sale of an asset for more than was originally paid for it.

Convertibility:
The extent to which one foreign currency or international reserve asset can be exchanged for some other foreign currency or international reserve asset.

Direct Investment
It is any expenditure on physical assets such as plant, machinery and stocks. VAT: A general tax applied at each point of exchange of goods or services from primary production to final consumption. It is levied on the difference between the sale price of output and the cost of inputs.

Countervailing duty
A tax levied on an imported product which raises the price of the product in the domestic market to prevent unfair trade practices by other countries.

Direct Tax
Tax levied by govt on the income and wealth received by households and businesses. Indirect tax : A tax levied by govt on goods & services.

 Double taxation: The taxation of incomes and profits, first in the country in which they arise and again when these incomes and profits are repatriated to the income earner's home country. Tax base: The total pool which tax authorities can tap when levying a tax.

Macro economic policy

Monetary policy: The tool of macroeconomic policy which involves the regulation of money supply, credit and interest rates in order to control the level of spending in the economy. Fiscal policy: An instrument of demand management which seeks to influence the level of economic activity in an economy through the control of taxation and govt expenditure.

 J curve effect: The tendency for a country's balance of payments deficit to initially worsen following a devaluation of its currency before then moving into surplus. Tax avoidance: Efforts to avoid paying tax by legal means. Tax evasion: Efforts to evade the payment of tax by illegal means

 National Debt: The money owed by the central govt to domestic and foreign lenders. Public Debt: National debt and other miscellaneous debt for which the govt is ultimately responsible. This would include the accumulated debt of nationalized industries and local authorities

 Treasury bill: Instrument of short term borrowing for the govt. Ad Valorem tax: An indirect tax which is expressed as a proportion of the price of a commodity. Specific tax: A tax of an absolute amount levied per unit of a commodity sold or produced.

 Demands for grants: This is the form in which estimates of expenditure included in the annual financial statement & required to be voted in the Lok Sabha are submitted. Generally one demand for grant is presented in respect of each ministry or department. However, for large ministries and departments more than one demand is presented.