Budget Passing Procedure in India
Constitutional Mechanism, Parliamentary Practice & Financial Accountability — Comprehensive Notes
Constitutional Basis of Budget
Annual Financial Statement — Article 112
The Constitution does not use the word “budget.” Article 112 mandates the President to cause to be laid before both Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for each financial year — termed the Annual Financial Statement. This statement distinguishes between expenditure charged upon the Consolidated Fund of India and expenditure proposed to be made from the Consolidated Fund. The former is non-votable; the latter requires parliamentary approval through Demands for Grants.
Architecture of Related Articles
| Article | Subject | Key Provision |
|---|---|---|
| Art. 112 | Annual Financial Statement | President to lay statement of estimated receipts & expenditure before both Houses |
| Art. 113 | Demands for Grants | Estimates relating to non-charged expenditure submitted as Demands for Grants to Lok Sabha only |
| Art. 114 | Appropriation Bill | No money withdrawn from Consolidated Fund except under appropriation made by law; introduced only in Lok Sabha |
| Art. 115 | Supplementary / Additional / Excess Grants | When amount authorised is found insufficient, or new service arises, or excess over authorised amount |
| Art. 116 | Vote on Account, Vote of Credit, Exceptional Grants | Advance grants pending completion of budget procedure |
| Art. 117 | Special Provisions re: Financial Bills | Distinguishes Financial Bill Category I & II from Money Bills |
| Art. 110 | Money Bill | Definition; Speaker’s certification conclusive; RS limited to 14-day recommendations |
| Art. 265 | No Tax Without Authority of Law | No tax shall be levied or collected except by authority of law |
| Art. 266 | Consolidated Fund & Public Account | All revenues received, loans raised form Consolidated Fund; no withdrawal without Parliamentary authority |
Role of the Consolidated Fund of India
Under Article 266(1), all revenues received by the Government of India, all loans raised, and all money received in repayment of loans form part of the Consolidated Fund of India. No money can be withdrawn from this fund except in accordance with law and for purposes authorised by the Constitution. This makes the Budget procedure constitutionally necessary — the executive cannot spend without Parliament’s approval through the Appropriation Act. This is the foundational principle of parliamentary control over public finances, inherited from the British tradition of “no supply without redress.”
- Article 112 = Annual Financial Statement (not “Budget”). UPSC often uses the constitutional term to confuse.
- Article 110 ≠ Article 117. Money Bill (Art. 110) is narrowly defined; Financial Bills (Art. 117) are broader. The Finance Bill introduced after the Budget is a Money Bill, but not all financial bills are Money Bills.
- Article 114 = Appropriation Bill; Article 113 = Demands for Grants. Do not interchange them.
- Article 265 is about taxation authority; Article 266 is about the Consolidated Fund. Both are frequently mixed up.
- Charged expenditure is non-votable (Art. 112(3)) — it can be discussed but NOT voted upon by Lok Sabha.
Stages of Budget in Parliament — Step-by-Step Flow
| Stage | Duration (Approx.) | House | Key Feature |
|---|---|---|---|
| Presentation | 1 day (1 February) | Both Houses | FM reads Budget speech; no discussion |
| General Discussion | 3–4 days | Both Houses | Broad policy debate; FM replies; no voting |
| DSC Scrutiny | ~3 weeks (recess) | Standing Committees | Detailed examination; reports non-binding |
| Demands for Grants | ~20 days allotted; few discussed | Lok Sabha only | Ministry-wise voting; cut motions moved |
| Guillotine | Last allotted day | Lok Sabha | Undiscussed demands put to vote en bloc |
| Appropriation Bill | 1–2 days | LS first → RS | Money Bill; RS can recommend within 14 days |
| Finance Bill | 1–2 days | LS first → RS | Money Bill; tax proposals; must pass within 75 days of introduction |
| Presidential Assent | — | — | Assent to Appropriation Act & Finance Act completes budget cycle |
The entire budget mechanism is structurally tilted toward Lok Sabha. Demands for Grants are placed before Lok Sabha only (Article 113). Both the Appropriation Bill and Finance Bill are Money Bills — meaning Rajya Sabha can only recommend amendments within 14 days. This reflects the foundational principle that the directly elected House controls the purse.
Detailed Explanation of Each Stage
A. Presentation of Budget
The Union Budget is presented by the Finance Minister in Lok Sabha. Since 2017, the Budget date was shifted to 1 February (from the last working day of February) to ensure early passage before the financial year begins on 1 April. The Budget Speech has two parts: Part A covers the general economic survey, fiscal policy, and expenditure programme; Part B deals with taxation proposals. The Annual Financial Statement is simultaneously laid in Rajya Sabha.
Railway Budget Merger
Since 2017, the Railway Budget has been merged with the General Budget, ending a convention dating back to the Acworth Committee recommendation (1921). The separate Railway Budget was an anomaly unique to India — no other country had a separate railway budget. The merger was implemented on the recommendation of the Bibek Debroy Committee (2015).
B. General Discussion
After the Budget is presented, a general discussion follows in both Houses. Members discuss the Budget as a whole — fiscal policy, allocation priorities, and economic direction — but no voting takes place. The Finance Minister responds at the end. This stage is primarily an opportunity for the opposition to critique government policy and for the ruling party to defend its fiscal philosophy. The discussion lasts approximately 3–4 days in each House.
C. Departmental Standing Committees (DSCs)
After the General Discussion, the Houses are typically adjourned for a recess during which the 24 Departmentally Related Standing Committees (reconstituted after the 2004 reforms — originally introduced in 1993) examine the Demands for Grants of the ministries allocated to them. Each committee has 31 members (21 from LS, 10 from RS). The committees produce detailed reports with recommendations — but these are not binding on the government. The government may or may not accept them. However, these reports provide the most systematic scrutiny of the Budget and are invaluable for parliamentary oversight.
The DSC system represents the most substantive mechanism of budget scrutiny in Indian Parliament. Yet, their non-binding nature, combined with declining sitting hours and limited media attention to committee work, undermines their effectiveness. For GS-II essays, the DSC system is a critical reform tool — strengthening committees is widely seen as the most practical path to restoring parliamentary control over finances.
D. Demands for Grants — Lok Sabha Only
Article 113 provides that Demands for Grants shall be submitted to Lok Sabha alone. Each ministry presents a separate Demand, which is debated and voted upon. Rajya Sabha is constitutionally excluded because the principle of “popular House controls finance” — derived from British parliamentary tradition — is embedded in the Indian Constitution. If a Demand is defeated, it is treated as a vote of no-confidence in the government on that expenditure item. In practice, the ruling party’s majority ensures demands are always passed.
E. Cut Motions
Cut Motions are the principal instrument through which members of Lok Sabha can challenge government expenditure during the discussion on Demands for Grants. Three types exist:
| Type | Formal Name | Effect | Political Significance |
|---|---|---|---|
| Policy Cut | “that the amount of the demand be reduced to Re 1” | Total disapproval of the policy underlying the demand | Equivalent to a censure of the ministry’s entire policy direction |
| Economy Cut | “that the amount of the demand be reduced by Rs ___” | Expresses opinion that expenditure is excessive and should be reduced by a specified amount | Targets wasteful spending; most technically grounded |
| Token Cut | “that the amount of the demand be reduced by Rs 100” | Ventilates a specific grievance within the ministry’s jurisdiction | Used to draw attention to particular issues; symbolic reduction |
Cut motions are almost never successful in the Indian context due to strict party discipline enforced by the Tenth Schedule. They serve a purely deliberative function — allowing the opposition to place grievances on record. Their symbolic value far exceeds their practical impact.
- Policy Cut reduces demand to Re 1, not to zero. This is the most common wrong option.
- Token Cut reduces by Rs 100 — a nominal amount to ventilate a specific grievance.
- Cut motions can only be moved in Lok Sabha, not Rajya Sabha.
- If a cut motion succeeds, it is equivalent to a vote of no-confidence — the government must resign.
F. Guillotine
Given the time constraints of the Budget Session, Parliament cannot discuss every Demand for Grants in detail. On the last of the allotted days, all remaining undiscussed Demands are put to vote together without discussion — this procedure is called the Guillotine. In practice, the vast majority of Demands pass through the guillotine unexamined. This has been criticised as a serious democratic deficit — billions of rupees are approved without any legislative scrutiny. The guillotine is among the strongest arguments for strengthening the DSC system as the primary scrutiny mechanism.
G. Appropriation Bill
After all Demands for Grants are voted upon (including through guillotine), the Appropriation Bill is introduced in Lok Sabha under Article 114. This Bill authorises the government to withdraw money from the Consolidated Fund of India for the voted and charged expenditure. It is a Money Bill — Rajya Sabha can only recommend amendments within 14 days, and Lok Sabha may or may not accept these recommendations. The Appropriation Bill cannot be amended to vary the amount or alter the destination of a grant. No new Demand for Grant can be introduced at this stage.
Article 114(3) explicitly states: “No money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law.” This makes the Appropriation Act the legal foundation for all government spending — without it, the government cannot spend a single rupee.
H. Finance Bill
The Finance Bill gives effect to the taxation proposals contained in the Budget. It is introduced in Lok Sabha and is certified by the Speaker as a Money Bill under Article 110. The Finance Bill must be passed by Parliament within 75 days of its introduction — failing which, the tax proposals lapse. Rajya Sabha’s role is limited to recommendations within 14 days. The Finance Act enacts changes to tax rates, introduces new cesses or surcharges, and amends various tax statutes. Together, the Appropriation Act and Finance Act constitute the legal architecture for the government’s fiscal operations for the year.
Role of Rajya Sabha in Budget
Limited but Not Absent
Rajya Sabha’s role in the Budget process is constitutionally restricted but not negligible. The Annual Financial Statement is laid before both Houses. General Discussion occurs in both Houses. However, Demands for Grants are submitted to Lok Sabha alone (Art. 113). Both the Appropriation Bill and Finance Bill are Money Bills — giving Rajya Sabha only a 14-day recommendatory window. Rajya Sabha cannot reject or amend a Money Bill; it can only suggest amendments, which Lok Sabha may accept or reject at its discretion.
Why Lok Sabha Is Dominant
The principle of the directly elected chamber controlling finance is central to parliamentary democracy. Members of Lok Sabha are directly accountable to the electorate and can therefore be held responsible for fiscal decisions at the next election. Rajya Sabha, being indirectly elected and representing states, serves a revisory function on legislation but not a controlling function on finance. This mirrors the British tradition where the House of Commons has monopolised financial power since the 17th century.
| Feature | India (Rajya Sabha) | UK (House of Lords) | USA (Senate) |
|---|---|---|---|
| Financial Bills Origin | Only in Lok Sabha | Only in Commons | Only in House of Representatives |
| Amendment Power | Recommend only (14 days) | Cannot amend/reject Money Bills (Parliament Act 1911) | Full power to amend; co-equal |
| Budget Rejection | Cannot reject | Cannot reject | Can reject (leads to shutdown) |
| Demands for Grants | LS only | Commons only | Both chambers (Appropriations) |
| Overall Power | Advisory | Advisory (since 1911) | Co-equal (can cause government shutdown) |
The US Senate stands as the outlier — it retains co-equal financial power with the House of Representatives, which is why the US regularly experiences government shutdowns when the two chambers disagree. India and the UK, following the Westminster model, have resolved this tension firmly in favour of the lower house.
Special Financial Instruments
| Instrument | Article | When Used | Key Feature |
|---|---|---|---|
| Vote on Account | Art. 116(a) | When full Budget cannot be passed before 1 April (e.g., election year); interim provision for expenditure | Typically grants expenditure for 2 months; no new tax proposals; treated as Money Bill. Cannot be used for new schemes — only continuation of existing expenditure |
| Vote of Credit | Art. 116(b) | Emergencies (war, crisis) where expenditure details cannot be stated | Blank cheque to the executive — amount placed at government’s disposal without specifying demand. Extremely rare in Indian practice |
| Exceptional Grant | Art. 116(c) | Expenditure that does not form part of the current financial year’s service | For expenditure not contemplated in the Annual Financial Statement |
| Supplementary Grants | Art. 115(1)(a) | When original grant proves insufficient, or new service arises during the year | Presented during the year; follows same procedure as Demands for Grants. Common instrument — used every year |
| Excess Grants | Art. 115(1)(b) | Post-facto regularisation when government has spent in excess of authorised amount | Based on CAG’s report; regularises past overspending. Raises accountability concerns — spending before approval defeats the purpose of parliamentary control |
- Vote on Account ≠ Interim Budget. A Vote on Account is a limited grant for expenditure; an Interim Budget is a full budget presented by a caretaker government before elections. The two are distinct in scope and purpose — though in practice, an interim budget may include a vote on account provision.
- Vote of Credit is not the same as Vote on Account. Credit = blank cheque for emergencies; Account = continuation of routine spending.
- Excess Grants are regularised after spending, based on CAG reports examined by the Public Accounts Committee.
What Happens if Budget Is Not Passed?
Constitutional Crisis Scenario
If the Budget (specifically, the Appropriation Bill) is not passed by Lok Sabha, the government loses its legal authority to spend. Under Article 114(3), no money can be withdrawn from the Consolidated Fund without appropriation by law. In a parliamentary system, failure to pass the Budget is constitutionally equivalent to a vote of no-confidence — it signifies that the government has lost the confidence of the House on the most fundamental issue: the right to govern.
Practical Safeguards
India has built-in mechanisms to prevent a US-style government shutdown. The Vote on Account under Article 116 allows the government to seek advance grants while the full Budget is pending. Additionally, charged expenditure (including the President’s salary, Supreme Court judges’ salaries, interest payments on debt, and CAG’s salary) is automatically drawn from the Consolidated Fund without requiring a vote — ensuring that constitutional machinery continues even without a passed Budget.
Political Consequences
If the Appropriation Bill is rejected, the government would be constitutionally obliged to resign or seek dissolution of Lok Sabha. In Indian history, no Union government has ever lost a Budget vote — party discipline under the Tenth Schedule makes this virtually impossible as long as the government commands a majority. This is structurally different from the US, where the separation of powers and weak party discipline regularly produce fiscal deadlocks.
Three factors prevent Indian-style government shutdowns: (a) the parliamentary system ensures the executive always commands a legislative majority, (b) the anti-defection law prevents members from voting against their party’s Budget, and (c) the Vote on Account provides an escape valve for interim spending. The US experiences shutdowns because the President and Congress can belong to different parties and neither is constitutionally obliged to agree with the other on appropriations.
Comparative Analysis — India vs UK vs USA
| Feature | India | United Kingdom | United States |
|---|---|---|---|
| Executive Control Over Budget | Very high — FM presents; party discipline ensures passage | Very high — Chancellor presents; whip system ensures passage | Low — President proposes; Congress disposes. Budget is a “wish list” |
| Upper House Power | Advisory only (14-day recommendation) | None on Money Bills (Parliament Act 1911) | Co-equal — Senate can amend, reject, rewrite |
| Money Bill Origin | Lok Sabha only | Commons only | House of Representatives (but Senate freely amends) |
| Government Shutdown Possible? | No — Vote on Account + party discipline | Extremely rare — convention prevents | Yes — regular occurrence (2013, 2018, 2019) |
| Cut Motions | Exist but never succeed | Exist but very rare; last success was 1979 | No equivalent — appropriations voted directly |
| Committee Scrutiny | DSCs (non-binding) | Select Committees + Public Accounts Committee | Congressional committees (very powerful; binding amendments) |
| Party Discipline | Very strong (Tenth Schedule) | Strong (whip system; no anti-defection law) | Weak — members frequently break party lines |
| Budget as Confidence Issue | Yes — rejection = no-confidence | Yes — defeat on Budget = resignation | No — budget failure ≠ government fall |
The US experiences government shutdowns because its separation of powers creates structural deadlock — the President and Congress can be controlled by different parties, and neither is constitutionally compelled to yield. In parliamentary systems (India, UK), the fusion of executive and legislative majorities eliminates this possibility. However, this very fusion — strengthened by the anti-defection law in India — also means that parliamentary scrutiny of the Budget is nominal. The executive proposes, and the legislature rubber-stamps. The real question for GS-II is whether this trade-off (stability over scrutiny) serves democratic governance adequately.
Budget & Democratic Accountability
Is Parliamentary Financial Control Real?
In theory, Parliament is supreme over public finances. In practice, executive dominance has rendered this control largely formal. The government prepares the Budget, presents it, and — through its majority in Lok Sabha and the whip system — ensures its passage. Opposition cut motions never succeed. The guillotine ensures most Demands pass unexamined. DSC recommendations are non-binding. The real financial scrutiny occurs post-facto through the CAG and PAC, not pre-facto through the Budget debate.
Factors Weakening Parliamentary Control
- Anti-Defection Law: MPs cannot vote against the party Budget without risking disqualification. This converts the Budget vote from a genuine exercise of legislative judgment into a party ritual.
- Guillotine: Over 90% of Demands routinely pass without discussion. The time allotted for Budget scrutiny has declined steadily.
- Declining Sitting Days: Less time for debates means less scrutiny. PRS Legislative Research data consistently shows that the time spent on Budget discussion has fallen.
- Executive Monopoly on Information: The Budget is prepared entirely within the executive. Parliament has no independent budget office (unlike the US Congressional Budget Office) to provide alternative fiscal analysis.
- Weak Committee System: DSC reports lack binding force. Attendance in committee meetings is uneven. Media coverage is negligible.
Reforms for Strengthening Financial Accountability
- Establish a Parliamentary Budget Office (on the model of CBO, USA) for independent fiscal analysis.
- Make DSC recommendations binding or semi-binding — require the government to formally respond to each recommendation.
- Increase allotted time for Budget discussion; abolish or reform the guillotine.
- Mandate outcome-based budgeting where Parliament reviews not just allocations but actual outcomes of expenditure.
- Strengthen the CAG–PAC audit cycle with mandatory government follow-up on PAC recommendations.
The constitutionalisation of parliamentary supremacy over public finances — through Articles 112–117, the requirement of appropriation by law, and the principle that no tax can be levied without authority of law (Art. 265) — represents a deliberate design to prevent executive despotism. Yet, the very instruments that were meant to empower Parliament — Demands for Grants, cut motions, and the two-bill system — have been hollowed out by party discipline, time constraints, and executive information monopoly. The Budget process today resembles a constitutional ritual more than a genuine exercise in financial accountability. Restoring substance to this ritual requires institutional reforms: an independent Parliamentary Budget Office, enforceable committee recommendations, and a reconceptualisation of the anti-defection law to permit conscience votes on fiscal matters. Without these changes, the constitutional promise of “no taxation without representation” remains unfulfilled in spirit, even as it is technically honoured in form.
Important Terms — Short Definitions
All revenues received, all loans raised, and all repayments of loans form this fund. No withdrawal without parliamentary authority. The Budget’s primary purpose is to authorise spending from this fund.
Expenditure mandated by the Constitution — President’s salary, SC judges’ salaries, CAG’s salary, interest on debt. Non-votable; can only be discussed in Parliament, not put to vote.
All expenditure other than charged expenditure. Submitted as Demands for Grants to Lok Sabha for approval. Forms the majority of Budget spending.
An imprest placed at the President’s disposal for unforeseen expenditure. Parliamentary approval is obtained post-facto. Currently fixed at ₹500 crore.
All other public money received by the government (provident funds, small savings, etc.). The government acts as a banker. Does not require parliamentary authorisation for withdrawal.
Total expenditure minus total receipts (excluding borrowings). Indicates the extent of government borrowing. Central to the FRBM Act framework and fiscal consolidation debates.
Expenditure that does not create assets or reduce liabilities — salaries, pensions, interest payments, subsidies. Ideally financed from revenue receipts.
Expenditure that creates assets (roads, bridges, defence equipment) or reduces liabilities (loan repayments). Financed from capital receipts including borrowings.
UPSC Orientation Section
A. Prelims Focus
| Topic | Key Fact | Common Trap |
|---|---|---|
| Annual Financial Statement | Art. 112; Constitution does not use “Budget” | Assuming “Budget” is a constitutional term |
| Finance Bill vs Appropriation Bill | Finance Bill = taxation; Appropriation = expenditure authority | Confusing the two; both are Money Bills |
| RS Powers on Money Bill | 14-day recommendation; LS not bound | Thinking RS can amend or reject |
| Cut Motions | Policy Cut = Re 1; Economy Cut = specified reduction; Token Cut = Rs 100 | Mixing up the amounts/meanings |
| Guillotine | Undiscussed demands voted en bloc | Confusing with closure motion |
| Vote on Account | Art. 116; interim spending authority | Equating with Interim Budget |
| Demands for Grants | Lok Sabha only (Art. 113) | Thinking RS also votes on Demands |
| Charged Expenditure | Non-votable; discussed only | Assuming Parliament votes on all expenditure |
B. Mains Focus
- Decline of Financial Scrutiny: Guillotine, declining sitting days, DSC non-binding reports — Parliament’s financial control is nominal. Use PRS data.
- Role of Committees: DSCs as the real scrutiny mechanism. Reforms needed — binding recommendations, better attendance, public hearings.
- Budget Reforms: Parliamentary Budget Office, outcome-based budgeting, gender budgeting, green budgeting, FRBM compliance.
- Strengthening Parliamentary Control: Compare with US (CBO), UK (OBR). Argue for institutional autonomy in fiscal analysis.
- Rajya Sabha’s Relevance: Is the Upper House irrelevant in financial matters? Analyse the democratic deficit of excluding an entire chamber from fiscal decisions.
UPSC Mains Questions
Q1. “Parliamentary control over public finances in India is more constitutional fiction than functional reality.” Critically examine. (250 words)
Q2. Discuss the constitutional procedure for the passing of the Union Budget in India. What is the role of each House in this process? (150 words)
Q3. “The guillotine reduces parliamentary budget scrutiny to a constitutional formality.” Examine the impact of the guillotine on democratic accountability and suggest reforms. (250 words)
Q4. Is Rajya Sabha irrelevant in financial matters? Discuss with reference to the constitutional provisions governing Money Bills and the Budget process. (250 words)
Q5. Distinguish between Vote on Account, Vote of Credit, and Exceptional Grant. When is each used? (150 words)
Q6. “The anti-defection law, while ensuring political stability, has undermined Parliament’s role as a financial watchdog.” Discuss in the context of the Union Budget process. (250 words)
Q7. Why does the United States frequently experience government shutdowns while India does not? Explain with reference to the constitutional and political frameworks of both countries. (150 words)
Q8. Examine the role of Departmentally Related Standing Committees in budget scrutiny. How can their effectiveness be enhanced? (250 words)
Q9. What are cut motions? Explain the different types and their constitutional significance. Why do they rarely succeed in India? (150 words)
Q10. Evaluate the case for establishing an independent Parliamentary Budget Office in India on the lines of the US Congressional Budget Office. (250 words)
Answer Writing Frameworks
Framework — Q1: Parliamentary Control Over Finances
Framework — Q4: Rajya Sabha & Financial Irrelevance
Framework — Q7: Government Shutdowns — India vs USA
Framework — Q8: Role of DSCs in Budget Scrutiny
Framework — Q10: Parliamentary Budget Office
Prelims MCQs — With Answers & Explanations
Which of the following Article(s) deal with the “Annual Financial Statement”?
- Article 110
- Article 112
- Article 114
- Article 266
Show Answer & Explanation
Consider the following statements regarding Demands for Grants:
1. They are presented before both Houses of Parliament.
2. They relate to charged expenditure on the Consolidated Fund of India.
Which of the above is/are correct?
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Show Answer & Explanation
A “Policy Cut Motion” in the context of the Union Budget means:
- Reducing the demand by Rs 100
- Reducing the demand by a specified amount
- Reducing the demand to Re 1
- Rejecting the demand outright
Show Answer & Explanation
Consider the following statements about the Appropriation Bill:
1. It is a Money Bill.
2. Rajya Sabha can amend the Appropriation Bill.
3. It authorises the government to withdraw money from the Consolidated Fund of India.
Which of the above is/are correct?
- 1 and 3 only
- 2 and 3 only
- 1 only
- 1, 2, and 3
Show Answer & Explanation
Which of the following is NOT a type of “charged expenditure” on the Consolidated Fund of India?
- Salary and allowances of the President
- Salary of the Prime Minister
- Salaries of judges of the Supreme Court
- Debt charges including interest payments
Show Answer & Explanation
A Vote on Account under Article 116:
- Can introduce new taxation proposals
- Authorises the government to withdraw money from the Consolidated Fund for a part of the financial year
- Is presented only during election years
- Must be approved by both Houses through a Joint Sitting
Show Answer & Explanation
The “Guillotine” in the parliamentary budget process refers to:
- The Speaker’s power to reject cut motions
- The process of putting all undiscussed demands to vote together
- The President’s power to withhold assent to the Finance Bill
- Rajya Sabha’s power to delay the Appropriation Bill
Show Answer & Explanation
Consider the following statements:
1. The Finance Bill must be passed within 75 days of its introduction.
2. The Finance Bill is a Money Bill under Article 110.
3. The Finance Bill deals with expenditure authorisation.
Which of the above is/are correct?
- 1 and 2 only
- 2 and 3 only
- 1, 2, and 3
- 1 only
Show Answer & Explanation
Excess Grants under Article 115 are regularised based on the report of:
- Finance Commission
- Estimates Committee
- Comptroller and Auditor General (CAG)
- NITI Aayog
Show Answer & Explanation
Which of the following can Rajya Sabha NOT do with respect to the Union Budget?
- Discuss the Annual Financial Statement
- Vote on Demands for Grants
- Recommend amendments to the Appropriation Bill
- Participate in General Discussion on the Budget
Show Answer & Explanation
Frequently Asked Questions
Can Rajya Sabha reject the Budget?
No. The Budget involves two key instruments — the Appropriation Bill and the Finance Bill — both of which are Money Bills. Under Article 109, Rajya Sabha can only recommend amendments within 14 days. If Rajya Sabha fails to return the bill within 14 days, it is deemed to have been passed. Rajya Sabha has no constitutional power to reject, amend, or block either bill. The Budget is exclusively within the domain of Lok Sabha’s financial supremacy.
What happens if the Finance Bill is not passed?
The Finance Bill must be passed within 75 days of its introduction. If not passed, the tax proposals that were provisionally enacted under the Provisional Collection of Taxes Act, 1931, would lapse. This means new tax rates, cesses, or surcharges would cease to apply, and the previous tax regime would revive. In practice, this situation has never arisen because the ruling majority ensures passage. Failure to pass the Finance Bill would also be treated as a loss of confidence, potentially triggering the government’s resignation.
Is the President bound to give assent to the Appropriation Bill?
The Constitution does not explicitly state that the President must assent to the Appropriation Bill. However, the Appropriation Bill is introduced on the recommendation of the President (since all Money Bills require presidential recommendation under Article 110). Since the President acts on the aid and advice of the Council of Ministers (Article 74), and the Bill has been passed by Parliament, there is an overwhelming constitutional convention and practical expectation that assent will be granted. The President cannot return a Money Bill for reconsideration under Article 111 — assent is effectively automatic.
Why does India never experience government shutdowns?
Three structural reasons prevent Indian-style shutdowns. First, the parliamentary system ensures the government always commands a majority in Lok Sabha — the Budget is the government’s own proposal backed by its own votes. Second, the anti-defection law (Tenth Schedule) prevents ruling party members from voting against the Budget. Third, Article 116 provides the Vote on Account mechanism — even if the full Budget is delayed (as in election years), the government can secure interim spending authority. The US experiences shutdowns because separated powers allow the President and Congress to disagree on appropriations without any constitutional resolution mechanism.
What is the difference between the Finance Bill and a Financial Bill?
The Finance Bill is the specific bill introduced after the Budget to give effect to taxation proposals. It is always a Money Bill under Article 110. Financial Bills under Article 117 are broader — they are of two categories. Category I Financial Bills deal with some matters listed in Article 110 but also contain other non-financial provisions. Category II Financial Bills involve expenditure from the Consolidated Fund but do not deal with Article 110 matters. Financial Bills are NOT Money Bills — they follow the ordinary legislative procedure and Rajya Sabha has equal powers on them. This distinction between “Finance Bill” and “Financial Bill” is a classic UPSC Prelims trap.
Can the Lok Sabha increase a Demand for Grant beyond the government’s proposal?
No. Lok Sabha can only reduce or reject a Demand for Grant through cut motions. It cannot increase the amount demanded by the government. This is because the Budget is an executive proposal, and the legislature’s role is to approve or reduce, not to expand. This principle — that Parliament controls the purse by limiting, not enlarging, executive spending — is a fundamental feature of parliamentary financial procedure inherited from British practice.
What is the Provisional Collection of Taxes Act, 1931?
This Act allows the government to collect taxes immediately upon the Finance Bill’s introduction, even before it is formally passed by Parliament. Without this Act, new tax proposals would only take effect after the Finance Bill receives Presidential assent — creating a gap where the old rates apply. The Act provides that tax changes proposed in the Budget have immediate provisional effect, subject to the Finance Bill being passed within 75 days. If the Bill is not passed, the provisional collection ceases and refunds may become necessary.
Who is the first to receive the Budget — Lok Sabha or Rajya Sabha?
The Budget is presented in Lok Sabha by the Finance Minister. Simultaneously, the Annual Financial Statement is laid on the table of Rajya Sabha. Both Houses receive the document at essentially the same time, but the formal presentation (Budget Speech) occurs in Lok Sabha. This simultaneous laying was introduced to ensure Rajya Sabha is not kept uninformed, even though its financial powers are limited.
Is charged expenditure debated in Parliament?
Yes, it can be discussed in Parliament, but it cannot be voted upon. Article 112(3) lists items of charged expenditure — including the President’s salary, Supreme Court judges’ salaries, CAG’s salary, and debt charges — which are automatically drawn from the Consolidated Fund. Parliament can debate whether these charges are appropriate, but it cannot reduce or reject them through voting. This protects the independence of constitutional offices from legislative whim.
