decoding-the-budget

The Interim Budget session, also known as the "vote-on-account", commenced today with President Droupadi Murmu's address. Union Finance Minister Nirmala Sitharaman is set to present the interim Budget on Thursday, February 1, 2024. 

 

The Union Budget serves as the annual financial statement for the Union of India, encapsulating the government's revenue and expenditure for a fiscal year. This document is comprehensive and intricate, detailing various aspects of the nation's finances, including allocations for different sectors, taxation policies, fiscal deficit projections, and economic priorities. 

 

As a pivotal document, the Union Budget reflects the government's financial strategy and priorities, shaping the trajectory of economic growth and development for the country. 

 

To comprehend the Budget more effectively, certain glossary terms need to be understood:

 

Tax Surcharge:

 

A tax surcharge is an additional fee imposed on individuals with higher incomes, calculated based on the tax owed rather than the total income earned. It applies to taxpayers earning above ₹50 lakh, serving as a supplement to the existing tax rate.

 

Cess on Tax:

 

A cess is an earmarked tax collected for a specific purpose and must be spent only for that purpose. It is charged on the total tax liability, including surcharges, and currently stands at 4 per cent.

 

Rebate:

 

A rebate is a reduction in total income tax, enabling taxpayers to lower their tax burden. It stimulates economic activity by reducing the tax component for taxpayers.

 

Tax Collection at Source (TCS):

 

TCS is an additional amount collected as tax by a seller of specified goods from the buyer at the time of sale, remitted to the government account.

 

TDS:

 

Tax Deducted at Source (TDS) is collected from the source of income to ensure tax compliance. The deductor deducts tax and remits it to the Central Government's account.

 

Tax Deduction:

 

Tax deduction refers to claims made to reduce taxable income, arising from various investments and expenses incurred by a taxpayer, thus reducing overall tax liability.

 

Old Tax Regime:

 

The old tax regime had four slabs, with the highest tax rate at 30 percent for incomes above ₹10 lakh, offering a higher exemption limit of Rs. 5 lakh.

 

Tax Saving Instruments:

 

Tax-saving instruments are investments that reduce tax liability and serve as valuable investment options for financial planning and wealth creation.

 

New Tax Regime:

 

Introduced in Budget 2020, the new tax regime has seven slabs with concessional rates, becoming the default regime in the financial year 2023-24, replacing the old tax regime.

 

Primary Deficit:

 

The primary deficit is the difference between the fiscal deficit and the previous year's interest payments to the government.

 

Revenue Deficit:

 

A revenue deficit occurs when government revenue isn't enough to cover basic operations.

 

Fiscal Deficit:

 

A fiscal deficit is the shortfall in government income compared to its spending, filled by government borrowings.

 

Customs Duty:

 

Customs Duty is a tax imposed on imports and exports of goods.

 

Capital Budget:

 

A capital Budget outlines the financial demands of investments, development, or major purchases.

 

Revenue Budget:

 

A revenue Budget outlines expected income and proposed expenditure for the upcoming fiscal year.

 

Subvention:

 

Subvention refers to government grants or aid support, including asking financial institutions to grant loans to certain sectors below market rates, like loans to farmers, etc.