The media headlines are all about budget these days. The Union Budget is one of the most anticipated financial events for the common man. But the question is how many of us truly understand the basics of the budget we hold so close to our wallet? Here we will look at the basics of budget relevant to the common man and an economy as a whole.
Imagine the government as a Khanna family for a second. Our fictitious Khanna family earns Rs 5,00,000 a year. Now, Khannas spent over Rs 5,35,000 last year, which means they borrowed the additional Rs 35,000. So, they adopted some cost-cutting measures next year. But this to a little over Rs 1000 a year. The family then decides to do both – Cut spending and increase income to meet the shortfall which is called as fiscal deficit.
This balancing act performed by the government is called as the Budget. Of course, when it comes to the government and their budget, the income mostly from taxes, isn’t spent on themselves. They are like a family business and, as citizens, we are their customers. As a service to us, they help us make more money by giving jobs, child care, infra, etc. In return they earn income in the way of taxes.
The Union Budget is the blueprint of the Government’s revenue and expenditure for a fiscal year, starting from 1st April to 31st March. It is presented during the month of February so that it can be materialized before the start of a new financial year.
Budget is classified into two parts – revenue budget and capital budget. Revenue budget contains the government's revenue receipts and expenses, while the Capital Budget comprises of the government's capital receipts and payments.
Fiscal Deficit: It is the shortfall explained in our example above. More simply, it equals the amount of borrowings made by the government in a year.
Direct Taxes: Taxes imposed directly on the public such as the Income Tax and the Corporate Tax.
Indirect Taxes: Generally imposed on suppliers or manufacturers who pass it on to the final consumer. The Goods and Services Tax (GST) is an example of an indirect tax.
Non-Plan Expenditure: Expenditure on interest payments, defense, subsidies, police, pensions, economic services, loans to public sector enterprises and to State governments, Union territories and foreign governments.
Plan Expenditure: Expenditure on the Central Plan, Central Assistance to States and Union Territories.
The general objective of the Union Budget is to bring about a rapid and balanced economic growth of our country coupled with social justice and equality. Ensuring efficient allocation of resources, reduce unemployment, income disparities, and changing the tax structure are some of the objectives. Basically, the Union Budget is a fine balancing act and we as citizens must understanding how this balance is maintained.
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