Finance Minister Nirmala Sitharaman is set to present the Union Budget 2025, marking her eighth budget presentation and the second full budget of Modi 3.0. The budget, scheduled for February 1, is a crucial document that outlines the government’s financial plans for the upcoming fiscal year. To better understand the budget, it is essential to familiarize yourself with some key terms. Below is a detailed explanation of 25 important terms related to the Union Budget 2025.
The Annual Financial Statement (AFS) is a comprehensive document that outlines the government’s receipts and expenditures during the financial year. It is a mandatory document presented under Article 112 of the Indian Constitution and provides a detailed account of the government’s financial activities.
The Budget Estimate refers to the estimated funds allocated to various ministries, departments, sectors, and schemes. It serves as a blueprint for how and where the government plans to spend its resources and the costs associated with these expenditures.
Capital Expenditure (Capex) refers to the funds allocated for the development and acquisition of assets that can boost the economy. This includes investments in infrastructure, machinery, and other long-term projects that contribute to economic growth.
Capital Receipts are the funds the government receives from borrowing, asset sales, or equity investments. These receipts are crucial for financing the government’s capital expenditures and other long-term projects.
A Cess is an additional tax levied on income tax to fund specific initiatives such as health and education. It is calculated on the total tax liability, including any surcharge, and is earmarked for particular purposes.
The Consolidated Fund of India is the primary account that includes all the government’s revenue, market borrowings, and loan receipts. Most government expenditures are met from this fund, except for those covered by the Contingency Fund.
The Contingency Fund is a reserve fund set aside for unforeseen events and is at the President’s disposal. Any withdrawals from this fund require Parliament’s approval and are later repaid from the Consolidated Fund.
Direct Taxes are taxes levied directly on individuals and organizations, such as income tax and corporate tax. These taxes are paid directly to the government by the taxpayer.
Divestment refers to the process of the government selling its existing assets, such as shares in public sector enterprises. This is often done to raise funds and reduce the government’s role in certain sectors.
The Economic Survey is a flagship document presented during the Budget Session. It provides a detailed analysis of the economy’s performance over the past year and sets the stage for the upcoming budget.
The Finance Bill is a legislative document that introduces the government’s taxation policies, including new taxes, changes to the existing tax structure, or the continuation of current tax policies.
Fiscal Deficit is the difference between the government’s total spending and its total revenue receipts. This gap is often filled by borrowing from the Reserve Bank of India (RBI) and other sources. It is expressed as a percentage of the GDP.
Fiscal Policy is a tool used by the government to manage the economy through taxation and government spending. It aims to influence economic growth, inflation, and employment levels.
Indirect Taxes are levied on goods and services rather than directly on income. Examples include GST, VAT, customs duties, and excise duties. These taxes are typically passed on to the consumer.
Inflation refers to the increase in the general price level of goods and services over time. High inflation reduces the purchasing power of consumers, making goods and services more expensive.
The New Tax Regime, introduced in 2022, features seven tax slabs with concessional rates. It became the default tax regime in 2023-24, with the old tax regime remaining as an optional choice for taxpayers.
The Old Tax Regime consists of four tax slabs, with the highest tax rate of 30% for incomes above ₹10 lakh. Taxpayers can choose between the old and new regimes based on their financial situation.
The Public Account contains funds where the government acts as a banker. This includes money received on behalf of the central or state governments, such as provident funds and small savings.
A Rebate is a reduction in the total income tax liability, aimed at stimulating economic activity by reducing the tax burden on taxpayers. It is often used to encourage savings and investments.
A Revenue Deficit occurs when the government’s total revenue expenditure exceeds its total revenue receipts. This indicates that the government is spending more than it earns from regular sources.
Revenue Expenditure refers to the government’s spending on salaries, allowances, and other operational costs required to run various departments and services. It also includes interest payments on government debt and subsidies.
Revenue Receipts are the funds the government earns from its operational activities, such as taxation, fines, and the sale of goods and services. These receipts are used to meet the government’s day-to-day expenses.
Tax Collected at Source (TCS) is the tax amount collected by a seller from the buyer on the sale of goods or services. The seller then deposits this amount with the tax authorities.
A Tax Deduction reduces the taxable income, effectively lowering the overall tax liability. Taxpayers can claim deductions by investing in instruments such as PPF, NSC, and tax-saving fixed deposits (FDs).
A Tax Surcharge is an additional tax applied to individuals earning more than ₹50 lakh annually. For example, a 10% surcharge on a 30% tax rate increases the total tax liability to 33%.
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