Budget Formulation and Implementation
****
[1] Overview [2] Definitions [3] Constitutional Aspect of Budget [4] Budget Concept & Formulations [5] Government Accounts [6] Controller General of Accounts [7] Types of Expenditure
==============================================================
[1] Overview
1.1 Any Financial administration is an important facet of public administration. It operates through the instrument of Budget and encompasses the entire budgetary cycle. These are – (a) Formulation of Budget; (b) Enactment of Budget; (c) Execution of the Budget & (d) Accounting and auditing of Budget.
1.2 According to sources, the term budget was used in its present sense for the first time in 1773 in a satire entitled ‘Opening the Budget’ directed against Walpol’s Financial plan for that year.
1.3 According to Aaron Wildavsky, an American political scientist known for his pioneering work in public policy “Budget is the life blood of the Government”. In view of David Lloyd George (Ex-Prime Minister of United Kingdom), “Government is Finance” & in the view of Morstein Marx, “Finance is universally involved in administration as oxygen is the atmosphere”.
1.4 It is evident from above that, how much Budget is essential for a Government and country. It is essential to discuss about budget in length.
1.5 Meaning of Budget: The term Budget is derived from old English word ‘Bougett’ which means a sack or pouch. It was a leather bag from which British Chancellor of Exchequer used to extract his papers to present to the Parliament.
1.6 Actually, budget is a statement of the estimated receipts (revenue or income and expenditure of the Government in respect of a Financial Year. In other words, it is a financial document of the Government as presented to the legislature and as sanctioned by the legislature.
1.7 Union Budget and Railway Budget: Railway budget is merged with Union Budget in the Financial Year 2017 – 18.
1.8 Significance of Budget is widely discussed in successive paras herein after. But before taking nosedive into Budget, it is important to understand specific important terms which are part of Budget and have vital roles. Definitions of important terms used in budget is discussed in para 2.
[2] Definitions
2.1 Terms which are used in formulation, preparation and submission of annual general budget before the parliament are required to be discussed for better understandings. Definitions of important terms used are defined in successive paras herein after.
2.2 Financial Year: Financial Year (FY) begins from first day of April of current year and concludes to last day of March of the successive year. In short, Financial years is known as 1St April to 31St March [GFR Rule 42]. Current Financial Year is 2022 – 2023 (April’ 2022 to march 2023).
2.3 Budget: A budget is an estimation of revenue and expenses over a specified future period of time (specifically for the FY) and is utilized by Governments, businesses, and individuals.
A budget is basically a financial plan for a defined period, normally a year that is known to greatly enhance the success of any financial undertaking. Budget is also known as Annual Financial Statement.
The Constitution of India refers to the budget as ‘Annual Financial Statement’ that has been dealt within Article 112 of the Constitution. In other words, the term budget has nowhere been used in the Constitution.
2.4 Receipt Estimates: Estimated receipt stands for cash estimated to be received within the Budget year/Financial Year and shall include the cash surplus estimated to be appropriable at the beginning of the Budget Year/Financial Year.
Ex: Tuition fee collected by University/College/Institutions etc.
2.5 Major Head: Major Head means the main head of account provided in the Budget with the object of classifying the receipt and expenditure within the financial year. It is in both income and expenditure side. Government of India, Ministry of Finance, Department of Expenditure defines major and minor heads and publishes it from time to time.
2.6 Minor head: Minor Head is classified as subordinate to the Major Head. It identifies the ‘Programme’ undertaken to achieve the objectives of the function.
2.7 Sub-Head: The sub head is classified as below the Minor Head. It represents various schemes or activities under the programme.
2.8 Tax Revenue: Tax revenue is the income generated by the Government through taxation. Tax revenue forms a part of the Receipt Budget/Receipt Estimates, which in turn is part of the Annual Financial Statement of the Union Budget. Tax revenue is the result of the application of a tax rate to a tax base.
2.9 Non-Tax revenue: Non-Tax Revenue is the recurring income earned by the Government from sources other than taxes.
Example: Receipts of interest on loans, dividends and profits received from public sector companies.
2.10 User Charges: User charges are charges which are paid by consumer of a specified public goods or service, calibrated to the quantity consumed, and the proceeds used to cover the costs of the good or service provided.
2.11 Dividends: A dividend is the distribution of some of a company’s earnings to a class of its shareholders.
2.12 Expenditure Estimates: Expenditure Budget shows the revenue and capital disbursements of various ministries/departments and presents the estimates in respect of each under ‘Plan’ and ‘Non-Plan’. Expenditure estimates gives a detailed analysis of various types of expenditure and broad reasons for the variations in estimates.
2.13 Plan Expenditure: Plan expenditure is that component of Government expenses which helps increase the productive capacity in the economy. It includes outlays for different sectors, such as rural development and education.
Example: (i) Expenditure on electricity generation; (ii) Irrigation and Rural developments, (iii) Construction of roads, bridges, canals and (iv) Science, technology, environment, etc.
2.14 Non-Plan Expenditure: Non-Plan expenditure is a generic term, which is used to cover all expenditure of Government not included in the Plan.
2.15 Revenue Account: A revenue account is an account with a credit balance. It includes all the revenue receipts also known as current receipts of the Government. These receipts include tax revenues and other revenues of the Government.
As revenue includes the income earned by a business, a revenue account is essentially an account that contains the receipts of this income. Such an account includes the income from the operations in hand. Same as a common business, the Government also generates income by carrying out various operations. In this case, these operations include – Direct Tax revenue, Indirect Tax revenue, Revenue from sources other than taxes.
2.16 Capital Account: A capital account is an account that includes the capital receipts and the payments. It basically includes assets as well as liabilities of the Government. Capital receipts comprise of the loans or capital that are raised by Governments by different means.
2.17 Assets: In financial accounting, an asset is any resource owned or controlled by a Government, business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can be converted into cash.
2.18 Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.
2.19 Fiscal Deficit: The difference between total revenue and total expenditure of the Government is called as Fiscal Deficit. It is an indication of the total borrowings needed by the Government. While calculating the total revenue, borrowings are not included.
2.20 Fiscal Year: A fiscal year is a one-year period that companies and Governments use for financial reporting and budgeting. A fiscal year is most commonly used for accounting purposes to prepare financial statements. Although a fiscal year can commence on 1st January and conclude on 31st December. It depends on Government as not all fiscal years correspond with the calendar year.
2.21 Finance Bill: Finance Bill is a money bill which is defined in Article 110 of the Constitution.
2.22 Controller General of Accounts: The Controller General of Accounts (CGA) is the Principal Accounting Adviser to the Government of India. The office is in the Department of Expenditure, Ministry of Finance. It is widely discussed in Para 7.1 to 7.5.
[3] Constitutional Aspect of Budget
3.1 The provisions for preparation, formulation and submission of budget to the Parliament are contained in Articles 112 to 116 of the Constitution.
3.2 Under the provisions of Article 112 (1) of the Constitution, the Finance Minister arrange to lay before both houses of the Parliament the Annual financial Statement that is called budget.
[4] Budget Concept and Formulations
4.0 It is important to discuss the principles of budget on which a sound budget can be prepared and executed. Main principles of sound budgeting are –
4.1 (a) Budget should be on annual basis: This principle of annularity of budget is considered ideal because – (i) a year is the optimum period for which the legislature can afford to give financial authority to the executive; (ii) a year is the minimum period needed by the executive ti implement the budget effectively; and (iii) a year corresponds with the customary measure of human estimates.
4.2 (b) Estimate should be on Departmental basis: The observance of this principle is suggested because – (i) it gives a clear picture of the programmes and activities of every department & (ii) it ensures the financial solvency of every department.
4.3 (c) Balanced Budget: This principle means that the estimated expenditure should not exceed the estimated revenue. A budget should be balanced. If estimated revenue is more than the estimated expenditure, it is called surplus budget and if the estimated revenue is less than the estimated expenditure, it is called deficit budget.
4.4 (d) Cash basis estimates: This principle means that the expenditure and revenue estimates of budget should be prepared on the basis of what is expected to be actually spent or received during the Financial Year. Cash budgeting facilitates an early closure of public accounts than revenue budgeting.
The opposite of cash budgeting is revenue budgeting under which the budgeting estimated are prepared on a demand and liability basis. UK, USA, India have cash based budget while France and some other countries have revenue budgeting.
4.5 (e) Single budget system: This principle means that Government should incorporate all its revenues and expenditure (of all departments) in a single budget. Single budget system reveals the overall financial position of the government as a whole which means, overall surplus or deficit budget.
The opposite of single budget system is plural budget system in which separate department wise budget is prepared. India, UK, USA has single budget system while, France, Switzerland and Germany have plural budget system.
4.6 (f) Rule of lapse: If the granted money is not spent by the end of the Financial year, then the balance would expire and should be returned to the treasury, this is called rule of lapse. While budgeting, it should be avoided.
4.7 Revenue & Capital should be separated: This principle means the current financial transactions of the Government should be distinguished from the transaction of a Capital nature and the two must be shown in two separate parts of the budget called revenue budget and capital budget.
Formulation of Budget
4.8 Formulation of Budget means the preparation of budget estimates which is preparing the statement of estimates of expenditure and receipts (income) of the Government in respect of the financial year.
4.9 In addition to estimates of receipts and expenditure, the budget contains certain other elements which are as follows:
(a) Estimates of Revenue & Capital Receipts; (b) Ways and means to raise Revenue; (c) Estimates of expenditure; (d) Details of actual receipts and expenditure of the previous financial year and the reasons for the deficit or surplus for that year as the case may be & (e) Economic and Financial policy of the coming year means taxation proposals, prospects of revenue, spending programme and introduction of new schemes/projects.
4.10 Agencies involved in Budgeting: Mainly four different agencies are involved in the formulation of budget and these are –
(a) Ministry of Finance: It has the overall responsibility. It provides the required leadership and direction.
(b) Administrative Ministries: These ministries has the detailed knowledge of administrative requirement.
(c) Niti Ayog: It facilitates the incorporation of plan priorities in the budget. In other words, the Finance Ministry remains in close touch with the Niti Ayog in order to incorporate the plan priorities in the budget.
(d) CAG: It provides accounting skills which is necessary for formulation of budget.
4.11 Stages/Process: Stages/process which are involved in formulation of budget are given below and are discussed in successive paras hereinafter.
4.12 (a) Preparation of estimates by DDO: In September-October month (5-6 months before the commencement of the financial year), Ministry of Finance dispatches circulars and forms to Administrative Ministries inviting their estimates of expenditure for the financial year. Each forms contains following columns:
(i) Actual figures of the previous year
(ii) Sanctioned budget estimate for the current year
(iii) Revised estimates of the current year
(iv) Proposed estimates for the next year (with full explanation of any increase or decrease with reasons
(v) Actuals of the current year available (at the time of preparation of estimates.
(vi) Actuals for the corresponding period of the previous year.
4.13 (b) Scrutiny and consolidation of Estimates by the Departments and Ministries: All estimates are scrutinized by HOD properly and then submitted to administrative ministry. Administrative ministry also scrutinizes the estimates in the light of general policies and consolidates estimates received from all departments and submits the same to Ministry of Finance.
4.14 (c) Scrutiny by Ministry of Finance: Ministry of Finance scrutinizes estimates received from administrative ministries from the point of view of economy of expenditure and availability of revenues. Scrutiny is nominal in case of standing charges and more exacting in case of new items of expenditure.
4.15 (d) Settlement of dispute: if there is any difference of opinion between the Administrative Ministry & Ministry of Finance on the inclusion of a scheme in the budget, the matter is referred to Union Cabinet. Decision of Union Cabinet is final.
4.16 (e) Consolidation by Ministry of Finance: After this, the Ministry of Finance, Budget Division consolidates the budget estimate on the expenditure side. Based on the estimated expenditure, the Ministry of Finance prepares the estimates of revenue inn consultation with Central Board of Direct Taxes and the Central Board of indirect Taxes. Assistance of Income Tax departments and Customs departments are also consulted.
4.17 (f) Approval by the Cabinet: Ministry of Finance places the consolidated budget before the Cabinet. After approval of the Cabinet, the budget can be presented to the Parliament. Budget is a secret document and should not be leaked out before it is presented before the Parliament.
Enactment of Budget
4.18 Enactment of Budget means passage or approval of the budget by the Parliament and ratification by the President. This legalizes the receipts and expenditure of the Government. It means, Government can neither collect money nor spend money without the enactment of the budget.
4.19 Stages in enactment: The budget goes through six stages inn the Parliament which are discussed in successive paras hereinafter.
4.20 (a) Presentation of Budget: Rule 213 of the Lok Sabha provides for the presentation of budget to the Lok Sabha in two or more parts. Generally, Union budget is presented in Lok Sabha on the last working day of February.
4.21 Finance Minister presents the General Budget with a speech known as Budget Speech. At the end of the budget speech in Lok Sabha, the budget is laid before the Rajya Sabha which can only discuss it and has no power to vote on the demand of grants.
4.22 Following documents are also presented in Lok Sabha along with Union Budget –
(i) An explanatory memorandum on the budget.
(ii) An Appropriation bill.
(iii) A Finance Bill containing the taxation proposals
(iv) Annual reports of ministries.
(v) Economic classification of budget.
4.23 (b) General Discussion: General discussion begins after few days of presentation of the budget. It takes place both houses of the Parliament and lasts usually for three to four days. During the debate, the Lok Sabha can discuss the budget as a whole or on any question of principle involved therein but no cut motion (to move motions to reduce any demand for grant) shall be involved nor shall the budget be submitted to the vote of the House. The Finance Minister reply at the end of the discussion.
4.24 (c) Scrutiny by Departmental Committees: After general discussion on the budget is over, the House are adjourned for about three to four weeks. During this period, the 24 departmental standing committees of the Parliament examine and discuss in detail the demand for grants of the concerned ministries and prepare reports on them. These reports are submitted to both Houses of the Parliament for consideration.
4.25 (d) Voting on demands for Grants: In the lights reports of the departmental standing committees, Lok Sabha takes up voting of demands for grants. The demands are presented ministry wise. A demand becomes a grant after it has been duly voted.
4.26 In this process, two points are required to be noted in this context, one, the voting of demands for grants is the exclusive privilege of the Lok Sabha as Rajya Sabha has no power of voting on demands. Second, the voting is confined to the votable part of the budget means the expenditure charged on the Consolidated Fund of India is not submitted to the vote (it can only be discussed).
4.27 General Budget has approximately 141 demands (103 for Civil expenditure, 6 for defence expenditure and 32 for Railways),
4.28 (e) Passing of Appropriation Bill: The Constitution states that no mone shall be withdrawn from the Consolidated Fund of India except under appropriation made by law. Accordingly, the Appropriation Bill is introduced to provide for the Appropriation out of the Consolidated Fund of India.
4.29 Appropriation bill is called Appropriation Act after it is assented by the President. The Act legalizes the payments from the Consolidated Fund of India. This means, Government cannot withdraw money from the Consolidated Fund of India till the enactment of the Appropriation bill and this takes time usually goes on till the und of April. But Government needs money to carry on its normal activities after 31st March. To overcome this financial difficulty, the Constitution Authorises Lok Sabha to make any grant in advance in respect to the estimated expenditure for a part of the financial year, pending the completion of the voting of demands for grants and enactment of the Appropriation Bill. This provision is known as Vote on Account. It is passed after the general discussion on the budget is over. It is genrally granted for two months for an amount equivalent to 1/6th of the total estimation.
4.30 (f) Passing of Finance Bill: Under Rule 219 of the Lok Sabha, The Finance Bill means the Bill ordinarily introduced in each year to give effect to the financial proposals of the Government of India for the next following financial year, and includes a bill to give effect to supplementary financial proposals for any period. Amendment can be moved in the Finance Bill.
Execution of Budget
4.31 Execution of budget means enforcement or implementation of the budget proposals after its enactment by the Parliament. It means, implementation of the Appropriation Act (Dealing with expenditure) and the Finance Bill (dealing with revenue).
4.32 The execution of budget has main two parts – (a) Expenditure Part; & (b) Revenue Part.
4.33 (a) Expenditure Part: The execution of budget in expenditure side involves _ (i) proper allocation of grants and their optimum use as per estimates; (ii) fixing of responsibility of expenditure; (iii) control over excess expenditure etc.
4.34 The Ministry of Finance controls expenditure in may ways which are recorded and circulated to Administrative Ministries well in advance for strict compliance viz. providing financial advice, Internal Audit system, Test Audit system, system of DDO; systems of financial sanctions; delegation of financial powers etc.
4.35 Revenue Part: Execution of budget on revenue part involves proper – (a) collection of revenues; (b) custody of collected funds; (c) distribution of funds.
4.36 The collection of revenues involves the following states:
(i) Devising a suitable machinery for tax administration and determination of procedure.
(ii) Assessment of Tax, preparation of a list of persons liable to pay tax and determining the amount to be paid by them.
(iii) making provisions for hearing of objections and appeals.
(iv) Collection, realization of amount due from the various assesses.
(v) Following up the realization of arrears, dealing with the defaulters.
4.37 The Department of Revenue of the Ministry of Finance exercises overl control and supervision over the machinery charged with the collection of taxes through the CBDT and CBEC.
4.38 RBI, SBI, district treasuries (about 300) and sub-treasuries (about 1200) are engaged in the custody and distributions of funds.
Deficit Financing
4.39 Deficit Financing in general refers to any public expenditure that is in excess of current public revenue.
4.40 When Government cannot raise sufficient resources through taxation, public borrowing ad so on, it resorts to deficit financing to mee its development expenditure.
4.41 According to Niti Ayog, deficit financing in India includes –
(a) Withdrawal of past accumulated cash balances by the Government.
(b) Borrowing from Central Bank (RBI).
(c) Issuing of new currency.
4.42 When Government borrows from RBI, it merely transfers its securities to the Bank which on the basis of these securities, issues more nots and puts them into circulation on behalf of the Government. This accounts to creation of money. In short, the deficit financing in Indian context connotes direct increase in money supply through the issue of fresh currency by the Government in order to meet budget deficit.
4.43 The Government of India recognizes five concepts of deficit financing and these are discussed in successive paras hereinafter.
4.44 Revenue Deficit: When revenue expenditure of the Government is more than its revenue receipts.
4.45 Budget Deficit: When the total expenditure of the Government is more than its total receipts.
4.46 Fiscal Deficit: Fiscal deficit refers to budgetary deficit plus market borrowings and other liabilities of the Government. It measures the total borrowing requirements of the Government from both internal and external sources.
4.47 Primary Deficit: Fiscal deficit minus amount of interest paid by the Government. It is also called non-interest deficit.
4.48 Monetised Deficit: The budget deficit can be financed in two ways – (a) By borrowing from public or by borrowing from RBI. When it is financed through borrowings from RBI, it is called Monetised Deficit.
4.49 Deficit Financing should be kept in safe limit so that it may lead to capital formation without inflationary rise in prices.
Public Debt
4.50 When revenue raised through taxation and other sources is not sufficient to meet the increased expenditure of the Governemnt, Revenue from taxation cannot raised beyond a certain limit, while deficit financing becomes inflationary when it crosses the safe limit.
4.51 Public debt denotes borrowing by the Government from people, banks, financial institutions and so on. It is the debt incurred by the Government in mobilizing resources in the form of loans, which are to be repaid at a future date with interest.
4.52 Public debt is classified as – (i) Internal & External debt; (ii) Voluntary and Compulsory; (iii) Funded & Unfunded ; (iv) Productive and Unproductive etc.
Accounts & Audit
4.53 Accounts: The term accounts is defined as statements of facts relating to money or things having money value. The facts which are incorporated in records of are called transactions. Hence, accounting means keeping a systematic record of financial transactions.
4.54 It involves collection, recording, classifying and summarizing transactions of a financial nature and interpreting results.
4.55 Audit: Audit is an important means of legislative control over financial administration. It is an instrument of enforcing accountability of administration to the legislature.
4.56 Audit is an examination of accounts in order to discover and report the the legislature the unauthorized, illegal or irregular expenditure and unsound financial practices on the part of administration.
4.57 Departmentalisation of Accounts: In 1976, the Central Government separated accounting from audit by adopting the new scheme of departmentalization of accounts.
4.58 Earlier, Accounts and Audit both was carried out by CAG.
[5] Government Accounts
5.1 Accounts of Union Government shall be prepared every year showing the receipts (income) and disbursements (expenditure) for the year, surplus or deficit generated during the year and changed in Government liabilities and assets.
5.2 The Accounts shall be generated by Controller General of Accounts certified by Comptroller General of India (CAG).
5.3 Along with the reports of CAG is submitted to the President of India preferably within 06 (six) months from the closure of the Financial Year for which it pertains.
5.4 Principles of Accounting: The main principles according to which the accounts of the Government of Indi shall be maintained are contained in Government Accounting Rules, 1990; Accounting Rules for Treasuries; and Account Code Volume-III.
5.5 Period of Accounts: Annual accounts of the Central Government is recorded from 1st April to 31st March.
5.6 Currency of Accounts – Indian National Rupees (INR). All foreign currency transactions foreign aid shall be brought into account after conversion into INR.
5.7 Main Divisions and Structure of Accounts: The Accounts of Government is kept in three parts –
(a) Consolidated Fund of India (CFI), Part – I;
(b) Contingency Fund (Part-II); &
(c) Public Account (Part-III).
5.8 Consolidated Fund of India (Part-I): Consolidated Fund of India is a Government Account which is constituted under Article 266 (1) of the Constitution.
5.9 All revenues received by the Government by way of taxes (Income Tax, Central Excise Tax, Customs etc.) and other receipts flowing to the Government in connection with the conduct of Government Business.
5.10 Non-Tax revenues are credited into the CFI (Part-I). Likewise, all loans raised by the Government by issue of Public notifications, treasury bills (Internal debt) and loans obtained from foreign Governments and International Institutions (External debt) are credited into this fund.
5.11 All expenditure of the Government is incurred from this fund and no amount can be withdrawn from the Fund without authorization of the Parliament.
5.12 Each state can have its own Consolidated Fund of the State with similar provisions.
5.13 CAG audits these funds and reports to the relevant legislatures on their management.
5.14 Consolidated Fund of India is divided into two parts – (i) Revenue Division & (ii) Capital Division.
5.15 Revenue Division: Revenue Division is comprising of – (a) Receipts Head (Revenue Account) dealing with the proceeds of taxation and other receipts classed as revenue.
5.16 Receipt Heads (Revenue Accounts): Dealing with the proceeds of taxation and other receipts classified as revenue.
5.17 Expenditure Heads (Revenue Accounts): Dealing with the revenue expenditure met therefrom.
5.18 Capital Division (Revenue Accounts): Capital Division comprises of 03 (three) sections. (i) Receipt Heads; (ii) Expenditure Heads (Capital Division); & (c) Public Debt, Loans and Advances etc.
5.19 These services are further divided into sectors such as General Services, Social and Community Services, Economic Services, etc.
5.20 Contingency Fund (Part-II): Article 267(1) of the Constitution provides that Parliament may by law establish a Contingency Fund in the nature of an imprest to be entitled the Contingency Fund of India into which shall be paid from time to time such as may be determined by such law and the said fund shall be placed at the disposal of the President to enable advances to be made by him out of such Fund for purposes of meeting unforeseen expenditure pending authorisation of such expenditure by Parliament by law under Article 115 or Article 116.
5.21 Corpus of this fund is INR 500 crores. It is in the nature of an imprest (money maintained for a specific purpose).
5.22 The Secretary, Ministry of Finance holds this fund on behalf of the President of India.
5.23 This fund is used to meet unexpected or unforeseen expenditure. It requires Parliamentary authorisation after expenditure.
5.24 Each State Government can have its own Contingency fund established under Article 267 (2).
5.25 Public Account (Part-III): Public Account is constituted under Article 266 (2) of the Constitution, the transaction relates to debt other than those included in the Consolidated Fund of India.
5.26 All other public money other than those covered under the Consolidated fund of India received by or on behalf of the Government of India are credited to this account.
5.27 Public Account is made up of – (a) Bank savings accounts of the various ministries/departments; (b) National small savings fund; (c) Defence fund; (d) National Investment Fund (Money earned from disinvestment); (e) national Calamity & Contingency Fund (for disaster management); (f) Provident Fund, Postal Insurance, etc.
5.28 Government does not need permission to take advanced from this account.
5.29 The audit of the expenditure from the Public Account of India is carried out by CAG.
5.30 The transactions under Debt, Deposits and Advances in this part are those in respect for which Government incurs a liability to repay the money received or has claim to recover the amount paid.
5.31 Transactions relating to Remittance and suspense shall embrace all adjusting heads. The initial debts or credits to these heads will be cleared eventually by corresponding receipts or payments. The receipts under Public Account do not constitute normal receipts of Government. Parliamentary authorization for payments from the public account is therefore not required.
[6] Controller General of Accounts
6.1 Controller General of Accounts: The Controller General of Accounts (CGA) is the Principal Accounting Adviser to the Government of India. The office is in the Department of Expenditure, Ministry of Finance,
6.2 Duties of CGA: It is responsible for establishing and maintaining a technically sound management Accounting system.
6.3 It prepares and submits the accounts of the Central Government.
6.4 It is incharge of the exchequer control and internal audits.
6.5 At present, Shri Deepak Das (1986) is the CGA we.f. 01/08/2021. He is 25th CGA. His predecessor was Smt. Soma Roy Burman (1986) and 7th woman to hold this dignified position (List of CGA is available – https://cga.nic.in/Page/Former-CGAs.aspx).
[7] Types of Expenditure
7.1 Types of Expenditure: (a) Charged Expenditure; (b) Voted Expenditure
7.2 Charged Expenditure: The expenditure covered under Article 112 (3) of the Constitution is called Charged expenditure. It is non-voteable charges are called charged expenditure.
7.3 No voting takes place for this amount which is spend from Consolidated Fund of India. Parliamentary Approval is not needed as payment under it are deemed guaranteed by the State.
7.4 Charged expenditure is paid whether budget is passed or not. Even though, voting does not take place, discussion on these can take place in both the houses.
7.5 Emoluments, allowances and expenditure of the President and his office, salary and allowances of Chairman, Deputy Chairman of Rajya Sabha, Speker Lok Sabha, salaries and pensions of Justices of Supreme Court, salary & pension of CAG & Deputy Speaker of Lok Sabha, Pensions of High Court justices, salaries allowances and pension of Chairman/Members of UPSC, Administrative expenses of Hon. Supreme Court, CAG, UPSC including the salaries allowances and pensions of the persons serving in these offices, the debt charges for which the Government of India is liable, including intrest etc., any sum required to satisfy any judgement, decree or award of any court arbitral tribunal and any other expenditure declared by the Parliament to be so charged comes under this expenditure.
7.6 Voted Expenditure: Voted expenditure is also known as actual budget. The expenditure in the budget are actually in the form of Demand for grants.
7.7 The demands for grants are presented to the Lok Sabha along with the Annual Financial Statement/budget. Generally, one Demand for Grant is presented for each Ministry or Department.
7.8 Suppliantly Grants: These are granted when the sum approved by the Parliament vis the appropriation act for a certain service for the current financial year is found to be inadequate.
7.9 Additional Grants: These are granted when a need has emerged for duration of the present financial year for additional expenditure for certain new service not considered in the budget for that year.
7.10 Excess Grants: These are granted when the cash spent on any provision in a financial year exceed the amount granted for that service in the budget.
[8] Banking
8.1 Banking Arrangements: Reserve Bank of India is the banker to the Government. It maintains cash balance of the Government and provide banking facilities to the Ministries directly through its own offices or through its agent banks.
8.2 For the purpose, RBI in consultation with the Controller General of Accounts, nominate a bank to function as Accredited Bank of a Ministry or Department.
8.3 Annual Accounts: Annual Account consists of two accounts – Appropriation Accounts & Finance Accounts.
8.4 Appropriation Accounts: Appropriation Accounts of Central Ministries except Min. of Railways and Central civil department of Posts and Defence services is prepared by Principal Accounts Officer of the respective Ministries.
8.5 Appropriation Accounts pertaining to Departments of Posts and Defence Services is to be prepared and signed by the Secretaries to the Government of India.
8.6 Appropriation Accounts (Civil) Union Government is required to be submitted to the Parliament.
8.7 Finance Accounts: Annual Accounts of the Government of India including transactions of Department of Posts, Railway, Defence under Public Account of India of Union Territory showing
9.1 Presentation of Annual Accounts: Appropriation and Finance Accounts mentioned above, are prepared by the respective authorities on the dates mutually agree upon
9.2 Proforma Accounts: Subsidiary Accounts of Government Departments undertaking involved in commercial activities working on commercial or quasi-commercial basis, shall require to maintain subsidiary proforma accounts in commercial form as may be agreed between Government and Comptroller and Auditor General of India. This includes the maintenance of suitable manufacturing, Trading, profit and loss Accounts and Balance Sheet.
[10] Capital & Revenue Accounts
10.1 Capital Expenditure: Significant expenditure incurred with the object of acquiring tangible assets of a permanent nature (for use in the organization and not for sale in the ordinary course of business) or enhancing the utility of existing assets, shall broadly be defined as Capital Expenditure.
10.2 Revenue Expenditure: Subsequent charges on maintenance, repair, upkeep and working expenses, which are required to maintain the asset in a running order as also all other expenses incurred for the day to day running of the organization, including establishment and administrative expenses shall be classified as Revenue expenditure.
Capital and Revenue expenditure required to be shown separately in the Accounts.
[11] Principles for allocation of expenditure between Capital and Revenue
Following are the principles governing the allocation of expenditure between Capital and Revenue:
11.1 Capital shall bear all charges for the first construction and equipment of a project as well as charges for intermediate maintenance of the work while not yet opened for service.
11.2 The Ministry of Finance, Budget Division is soul player for Budget formulation and presentation of the same before the Parliament