Finance Minister Nirmala Sitharaman will present the Union Budget 2022-23 on February 1. It’s that time of the year when citizens wait with bated breath for the announcements, particularly those concerning income tax. Comprehending the budget as its whole is a challenging task because it contains numerous complex terms that many people are unfamiliar with. So, ahead of Ms Sitharaman’s budget presentation, here’s a quick rundown of key phrases and frequently asked questions.
Union Budget: The government presents the budget to highlight its expenditures and receipts in a fiscal. When revenue collections are equal to the revenue spending in a year, it is said to be ‘balanced’. The term ‘revenue deficit’ refers to when the government’s spending exceeds its income. A ‘fiscal deficit’ occurs when the expenditures, excluding borrowings, exceed receipts in a particular year. The Parliament must approve the budget.
Interim budget: A government’s interim budget is usually presented in the final year of its term. While it is similar to a full budget, the administration must acquire a vote on account in Parliament to sanction funds from the Consolidated Funds of India until the elected government approves the entire budget after the polls. As part of the process, Parliament must also approve a vote on account, which gives the government spending authority until the full budget is approved after the elections.
Fiscal consolidation: The goal of this policy is to reduce the government’s deficits and debts.
Gross Domestic Product (GDP): It’s the worth of all officially recognised products and services produced in a given period. It’s used to gauge a country’s standard of living.
Revenue expenditure: It’s also known as income statement expenditure, and refers to non-capitalised short-term cost-related assets. These are ongoing expenses that the government incurs on a regular basis in order to pay workers and maintain fixed assets.
Capital expenditure: It refers to money spent by the government to acquire, maintain, or improve assets such as property, infrastructure projects, or buy new equipment. When the government spends money on big projects, the costs are typically classified as capital expenditure.
Aggregate demand: This term denotes the total amount of goods and services demanded in an economy.
Balance of payments: In the foreign exchange market, the gap between demand and supply for a country’s currency refers to the balance of payments.
Budget estimates: Funds allocated for various activities and ministries are set forth while presenting the budget. These figures are referred to as budget estimates. They are the wishes and objectives of the government.
Direct tax: It is a tax imposed on an individual’s or an organisation’s earnings. Direct taxes include income tax, corporation tax, inheritance tax, and so on.
Indirect tax: Consumers pay these taxes when they purchase products and services.
Goods and Services Tax (GST): This was put in place on July 1, 2017, in order to bring a number of indirect taxes under one umbrella. It is a tax imposed on the provision of goods and services.
Income tax: This includes earnings of an individual from various sources, such as salaries, investments, and interest.
Customs duty: When specific items are imported into or exported out of the country, customs duty is levied. These costs are passed on to the final consumer.
Monetary policy: This refers to the Reserve Bank of India’s (RBI) decision to change the money supply and interest rates, consequently affecting economic activity.
Current account deficit: It is a measure of a country’s trade in which the value of imported goods and services exceeds the value of exported goods and services. It’s part of the country’s overall balance of payments.
Revenue deficit: When the government’s income or revenue falls short of the predicted net income, a revenue deficit occurs. This is a situation in which actual revenue or expenditure differs from the budgeted projections.
Revenue surplus: This is the opposite of a revenue deficit. Here, the net realised income or revenue generation exceeds the predicted net income. The actual revenue and expenditures are higher than those projected in the budget.
Fiscal deficit: The fiscal balance of a country is determined by the government’s revenue versus its expenditure in a financial year. The difference between the two is a fiscal deficit — when the government’s expenditures have exceeded its revenue. It is calculated in both absolute and percentage terms of the country’s GDP.
Government borrowing: This is the amount borrowed by the government to pay for public services and benefits.
Disinvestment: This is a way in which the government sells or liquidates an asset. It’s a calculated move to ensure that the proceeds from the disinvestment are used elsewhere where they can garner a maximum return.
Inflation: This means a rise in the overall prices of goods and services in an economy over time. Each unit of currency buys fewer products and services when the price rises.