[Budgeting] Revenue receipts: Direct taxes, Indirect taxes, Gross vs Net taxes, shortfalls in collection

SubscribeEconomy174 Comments

UPSC Paperset
  1. Parts of Budget
  2. #1: Direct Taxes
    1. Direct taxes under Interim Budget 2014
    2. Income Tax
    3. Shortfall in Direct tax collection = #EPICFAIL
    4. But Why shortfall in Direct tax collection?
  3. #2: Indirect taxes
    1. Indirect Taxes in Interim Budget 2014
      1. #I1: Service Tax
      2. #I2: Excise Duty: Automobiles
      3. #I3: Excise: Mobile handsets
      4. #I4: Custom Duty: soap industry
      5. #I5: Custom Duty: Bank note Mill
      6. #I6: Counter Veiling Duty (CVD): Road machines
    2. Indirect Tax collection = #EPICFAIL shortfall
    3. Why shortfall in indirect tax collection?
  4. MCQ Data for Tax collection: Ascending descending
    1. Table1: Direct vs indirect
    2. Table2: Ranking Among all taxes (2013-14)
    3. Table3: Ranking Among all taxes (2014-15)
    4. Table3: Tax collection highest to Lowest
  5. Gross vs net Tax revenue
  6. Appendix
    1. #1: Direct taxes can be levied on Expenditure also
    2. #2: Canons of taxation: why some taxes get abolished?

Parts of Budget

budget revenue part tax and non tax

Budget two parts.
revenue part (Current)capital part

within that, make two columns each, for incoming money (receipt) and outgoing money (Expenditure).

REVENUE PARTCAPITAL PART
ReceiptExpenditureReceiptExpenditure

Ya, but what’s the need of this labour? Why can’t we just have a simple income vs expense type of thing? We’ll come to that in third article.

For now, let’s focus on…

Budget => Revenue part

  • Revenue column has two sub-columns: incoming money (Receipt) vs. Outgoing Money (Expenditure).
  • The Incoming money (Revenue receipt) can come from two sources: from tax and non-tax sources.
REVENUE PARTCAPITAL PART
ReceiptExpenditureReceiptExpenditure
TaxNon Tax
  1. Direct taxes
  2. Indirect Tax

Thus, we’ve come to the main topics of today’s article= direct and indirect taxes and provisions of interim budget 2014 (related to these taxes).

#1: Direct Taxes

Have two subtypes

On Income/ Expenditureon properties/assets/Capital transaction
  1. Income tax
  2. Corporate Tax (and MAT)
  3. Interest tax (on banks)*
  4. Fringe benefits tax *
  5. Hotel receipt Tax*
  1. Wealth Tax
  2. Securities transaction Tax (STT)
  3. Banking cash transaction tax*
  4. Estate duty*
  5. Gift tax*
  • Taxes marked in (*) have been abolished long time ago. I’ve mentioned them here, only in case the nostalgic UPSC professor wants to ask classification type MCQs.

We should also know the direct taxes of state government.

DIRECT TAXES OF UNIONDIRECT TAXES STATE
Taxes on Income

  • Income tax
  • Corporation Tax (and MAT)

Taxes on assets

  • Wealth Tax
  • STT
Taxes on income

  • Agriculture income tax
  • Professional tax

Taxes on properties

  • Land Revenue
  • Stamp duty/registration duty
  • Property tax in urban areas

Now let’s check the provisions of:

Direct taxes under Interim Budget 2014

FM followed the Ethics(GS4) principles while making the interim budget, he did not make any changes in the direct taxes. That means, direct tax system remains the same like Budget 2013. Observe

Income Tax

Taxable IncomeIncome Tax
2 to 5 lakh10%
5 to 1020%
>1030%

Other direct taxes

Corporate tax (desi company)~34%
Corporate tax (foreign company)~43%
MAT Minimum alternative tax~21%
Wealth tax (for wealth >30 lakh rupees)1%
STT Securities Transactions tax0.1%-0.001%*

*Depending on nature of securities – future, option, equity etc.

However, FM has done a slight tweaking in the tax deduction for corporates.

until nowIn interim budget
if company spent money on “in-house” Research development = they can claim tax benefits.
  • Chindu proposed to setup a new organization called “Research Funding Organisation“.
  • This org. will fund fund research projects selected through a competitive process.
  • If company gives cash to this organization, it’ll be deducted from taxable income.

Did not implement

  1. GAAR
  2. Direct tax code (DTC)
  3. Goods and services tax (GST)

Shortfall in Direct tax collection = #EPICFAIL

shortfall direct taxes

Observe

  • Feb 2013: FM proposes taxes for year 2013-14. Along with this, he’d give estimate of tax collection e.g. x crore from income tax, y crore from corporate tax and so on. Let’s label this column as Budget estimate (BE) 2013.
  • 1st April 2013: new tax rates would have become effective, people start paying taxes accordingly….May, june, july, august, September, October, November, December,….January 2014… So now FM gets new data. So, he’d correct (revise) his previous “estimate”. We label this Revised Estimate (RE)2013.
  • And finally for the year 2014-15 (Starting from 1/4/14 to 31/3/15, FM would again make budget estimates for next (interim budget) so let’s label it (BE)2014.

Thus total we’ve three estimates:

Direct taxBE 2013RE 2013BE 2014
Wealth Tax950950950
Securities Transaction Tax672054975992
Income Tax240919236194300474
Corporation Tax419520393677451005
Total from Direct tax668109636318758421

Absolute numbers are not important but “interpretation” is. Let’s try a clichéd MCQ.

Which of the following direct tax, fetches maximum revenue to government of India

  1. Wealth Tax
  2. Securities Transaction Tax
  3. Income Tax
  4. Corporation Tax

For all three columns, you can see: Corp>>IT>>STT>>Wealth tax.

Anyways, let’s enter into a deeper analysis. Observe the total collection from direct Tax (in above table).

  • In Feb 2013, Chindu estimated ~6.68 lakh crore rupees would come from direct taxes alone! (BE2013)
  • But he revised the data yesterday, we see barely 6.36 lakh crore have come from direct taxes (RE2013).
  • So, what’s the “shortfall” in direct tax collection here? 6.68-6.36= 32,000 cores

But Why shortfall in Direct tax collection?

  1. Because IT officials are lazy and incompetent, hence lot of people managed to evade tax? NOPE.
  2. Because Chindu (Harward Graduate) and his finance Secretary (IAS) are weak in maths and economics, hence they made wrong estimates in the first place? NOPE.

Then who is the main “villain” behind this shortfall? Ans. (1) inflation (2) policy paralysis.

Why high Inflation = Low collection of Direct taxes?

  1. Corporate tax= paid by Tata, Birla, Reliance, Samsung, LG, Motorola, Videocon etc. They’ll pay less tax IF their profit is DOWN. Now, High food/fuel inflation=> people spend less money on consumer durables– mobile, TV, fridge etc.=> sales down=>profit down=> corporate tax goes down.
  2. Less profit=> company cuts jobs, doesn’t give salary raise to existing staff= people pay less income tax.
  3. Less profit = less dividends to shareholders => mutual fund/sharemarket investment declines= security transaction tax also goes down.
  4. High inflation = real interest rates are negative (recall Urjit Patel) = people invest more in gold and less in mutual funds/sharemarket etc.=> security transaction tax collection is lower than expected.

Why Policy paralysis = Low collection of Direct taxes?

Run the same logic and you’ll see the connection. e.g.

  1. Policy paralysis=corporates cannot open new factories=> less profit=>less corporate tax.
  2. Since corporates cannot open new factories=> less new jobs=>less people fall in the income tax bracket (starting from Rs.2 lakh to 5 lakh).

ok enough of direct taxes. let’s move on. otherwise our remaining jawaani will be spent in analyzing the direct tax only.

budget revenue part tax and non tax

REVENUE PARTCAPITAL PART
ReceiptExpenditureReceiptExpenditure
TaxNon Tax
  1. Direct taxes (DONE)
  2. Indirect Tax (now let’s study this)

#2: Indirect taxes

What are the indirect taxes of Union and States?

Indirect taxes (Union)Indirect Taxes (States)
  1. Custom Duty (Import, Export)
  2. Excise Duty (CENVAT system)
  3. Service Tax
  4. Central sales tax (CST)*
  1. Sales Tax/ VAT
  2. Excise duty on DESI liquor and Narcotics
  3. Motor vehicle tax, Taxes on boats and animals.
  4. Toll tax (opposed by MNS/Shiv Sena)
  5. Electricity tax.
  6. Luxury tax (on restaurant, spa etc.)
  7. Taxes on Betting and gambling (on whether Modi will become PM or not)
  8. Advertisement tax (other than TV, Radio, Newspaper)

*Note: CST-Central sales tax- it belongs to Union but ca$h entirely given to States. So in budget estimates, it’s collection is listed as “–” or “00”. But for MCQ purpose, know that it is the “Indirect tax of the Union.”

Indirect Taxes in Interim Budget 2014

We saw that FM has not changed direct taxes. BUT for indirect taxes, he has made slight reductions/tweaking for certain items, to boost the economy. Let’s check them one by one

#I1: Service Tax

The “Rate” of Service tax is not changed. It is same as last year (2013-14)

Service tax12.00%
2% educational cess. Meaning tax on tax = 2% of 12%+0.24
1% Senior & Higher Education Cess= 1% of 12%+0.12
Effective service tax=12.36%

Then what is new in interim budget?

Following items have been exempted from service tax payment

  1. Rice: services related to loading, unloading, packing, storage and warehousing (Because)
    1. Tamilandu CM Jayalalitha has wrote letter to Mohan, demanding the same.
    2. putting service tax on rice related services=raises the cost of implementing Food security act.
  2. Cord Blood bank (they store umbilical cord for future stemcell therapy)

Make no mistake: they’re exempted, but not put in “negative list”.

Service tax “negative list”Exempted list
Govt. cannot levy Service tax on the names included in this list (total 17 items.)Theoretically, these services are taxable under service tax, BUT for the time being, FM gave them exemption.
To modify this list, FM needs parliament approval (because he needs to amend the Finance Act.).FM can modify this list by a simple notification. He doesn’t need parliament’s approval.
Examples

  1. Services by the Reserve bank of India;
  2. Betting and gambling. (because they fall under State list.)
  3. Funeral, burial
Examples

  1. Rice loading-unloading
  2. Cord blood bank

#I2: Excise Duty: Automobiles

For past few months, Automobile sector was facing slowdown because

  1. High inflation =people postpone purchase of high value items
  2. High interest rates (because to combat inflation, RBI did not reduce monetary policy rate i.e. repo rate)
  3. High Fuel prices.

Therefore, to go a boost to automobile sector, FM has reduced the excise duty on

  • Automobile: SUV, Small cars, motor cycles, scooters and commercial vehicle (rickshaw, bus etc)
  • This will be applicable only upto 30 June 2014.
  • Result: cheaper vehicles, (hopefully) more people will buy more, and automobile sector will see boost in sales.

#I3: Excise: Mobile handsets

To decrease the imports of mobile phones, FM has reduced the excise duty on mobile handsets as well. How does it help?

Foreign mobileSubjected to custom duty. (But FM did not reduce it)
Desi mobileSubjected to excise duty (FM reduced it)

Result? Price wise: Desi mobile cheaper than Foreign mobile. = more sales. Import of foreign mobiles declined=> less CAD. (just like the gold logic.)

By the way, why did not FM raise the custom duty of Foreign mobiles instead -afterall, that’d also make desi phones cheaper!

Reasons:

  1. US/China may drag us to WTO
  2. Higher custom duty doesn’t decrease consumption. It only increases smuggling. (lesson learned from gold!)

So it is better to reduce excise on desi phones, than raise custom on foreign phones.

#I4: Custom Duty: soap industry

  • Rationalized the import duty on non-edible oils, fatty acids, fatty alcohols.
  • This will reduce the cost of (imported) raw material used in soap industry and oleo-chemicals industry (e.g. glycerin)
  • Results? Soaps will become cheap. (because that was the matter of life and death!)

#I5: Custom Duty: Bank note Mill

  • Bank Note Paper Mill India ltd. (Bangalore)
  • They make the special paper for producing currency notes
  • FM allowed them to import capital good (machines) @a very low duty (5%)

#I6: Counter Veiling Duty (CVD): Road machines

First, What is CVD and how does it affect sales?

Vehicle manufactured bySubjected to
Desi playerExcise duty
Foreign company (and imported in India)Custom duty
  • It may happen that, desi vehicle is expensive because high excise duty on its input (chassis, engine, wiring, glass etc.)
  • Result: Foreign vehicle cheaper, juntaa more attracted to buying foreign vehicle than Desi.
  • Consequence: domestic industry gets less sales. IIP declined, job loss, industrial sickness.

Possible- Solutions:

  1. Give subsidy to desi vehicle makers
  2. Reduce excise duty on desi vehicle (and its inputs)
  3. Increase custom duty on foreign vehicle.
  4. Put additional custom duty on foreign vehicle to such a level that, [taxes on foreign vehicle] become of same level like [taxes on desi vehicle].. This solution is called counter veiling duty (CVD).

Interim budget & CVD

Import of Road construction machinery will be subjected to CVD. (= it’ll help desi manufactures, because now foreign machines will no longer be very cheap compared to desi. So road contractors/companies are more likely to be buy desi items.)

Indirect Tax collection = #EPICFAIL shortfall

Just like Direct tax collection, here also, Chindu failed to meet targets

Indirect TaxBE 2013RE 2013BE 2014
Excise Duties196804178787199831
Customs187308175056201314
Service Tax180141164927215478
Total from Indirect Tax5.65 lakh cr.5.19 lakh cr.616623

Observe the columns of (original) budget estimate BE2013 VS Revised estimate RE2013. Every duty collection is less than original target.

What is the shortfall in the collection of indirect taxes?

5.65 MINUS 5.19 =~45000 Crore rupees.

Why shortfall in indirect tax collection?

#1: Excise duty down

In the recent months, IIP has been going down for Consumer durables

  • Example of consumer durables: TVs, mobiles, cars, bikes, fans, ACs, refrigerators, ceramic tiles and carpets. (all these subjected to excise duty)
  • High level of inflation =>people spend less on consumer durables. (because they’ve to spend more on food and fuel.)

#2: Custom duty down

  • Duty on gold increased => smuggling => tax is evaded.
  • Policy paralysis => Big projects file pending => businessman won’t need to import any raw material/ machines/construction-vehicles etc. (Even if he wants to!) therefore custom duty declined.

#3: Service tax

  • Inflation responsible. High level of food-fuel inflation => people spend less on luxuries – hotels, spa, gym etc.
  • In fact, government knew in advance that service tax collection would be lower than target, hence they had been running ads of “Voluntary Compliance Encouragement Scheme (VCES) for service tax.” From July 2013 onwards. But still, barely ~6000 crore recovered from people who had been evading service tax payment so far.

MCQ Data for Tax collection: Ascending descending

enough of shortfalls in tax collection, we need to worry more about MCQs than about economy. So let’s update tables

Table1: Direct vs indirect

TaxBE 2013RE 2013shortfallBE 2014
Direct6.686.3632k7.58
Indirect5.655.1945k6.2
Total (lakh cr.)12.3511.5877k13.78

ya but What’s the wisdom here for MCQs? =that DIRECT tax brings MORE revenue to government that INDIRECT tax.

So far, we’ve data for Direct taxes and indirect taxes. Now for MCQs, we need the overall ranking (of which tax brings highest/lowest revenue.) Since we’ve revised estimates (RE 2013), so we can now ignore the ORIGINAL estimates of BE 2013.

Tax collection ranking revised 2013-14

Table2: Ranking Among all taxes (2013-14)

TypeTaxesRE 2013
directWealth Tax950
directSecurities Transaction Tax5497
indirectService Tax164927
indirectCustoms175056
indirectExcise178787
directIncome Tax236194
directCorporation Tax393677

Table3: Ranking Among all taxes (2014-15)

TypeTaxesBE 2014
directWealth Tax950
directSecurities Transaction Tax5992
indirectExcise199831
indirectCustoms201314
indirectService Tax215478
directIncome Tax300474
directCorporation Tax451005

lets make one final table

Table3: Tax collection highest to Lowest

Rank2013 (Revised Estimate)2014 (projected)
1Corporation TaxCorporation Tax
2Income TaxIncome Tax
3ExciseService Tax
4CustomsCustoms
5Service TaxExcise
6STTSTT
7Wealth TaxWealth Tax

Observe the rank of top two (Corpo, IT) and bottom two (STT, wealth) are same for each year.

only difference is in the rank 3-4-5 because Chindu hopes Service tax will bring highest collection among all indirect taxes in the year 2014-15. (will it? well, that remains to be seen!)

From exam point of view,

  • At the moment, Tax Ranking of 2013 is more important. (Because it is near to reality – based on actual data gathered from April 2013 to almost upto Feb 2014. this ranking is unlikely to change.)
  • While tax ranking of 2014 is just projected revenue from interim budget. It’ll change when new government makes new (full) budget (=tax rates changed= collection ranking will be changed).
  • Then you’ll have to mugup the new updated ranking accordingly. (we’ll see when full budget comes after election).

Gross vs net Tax revenue

Before going into gross vs net, let’s take two quick bites:

#1: Tax sharing

80th amendment 2000: 29% of total taxes of the Union need to be shared with states
13th FC (Kelkar)= Union to share 32% with states.
14th FC (YV Reddy): yet to give recommendation.

#2: NCCF

National Calamity Contingency Fund (NCCF)

  • Under Home ministry
  • Part of Public account (hence parliament approval not necessary.)

Now coming to the main point:

Gross Tax revenue

It includes

  1. Total direct taxes of union (we already saw)
  2. Total indirect taxes of union (we already saw)
  1. +Union territories without legislature (Diu, Daman etc.)=> their direct & indirect taxes are also counted here.

Net Tax revenue

This equals, Gross tax revenue MINUS [revenue shared with states + money sent to National calamity contingency fund]

Let’s observe the data (numbers not important.)

croresRE 2013BE 2014
A.(Gross) Tax Revenue [=direct + indirect + UT w/o legislature]11589061379199
B.MINUS tax revenue shared with States/UT318230387732
C.MINUS money transferred to calamity fund (NCCF)46505050
NET Tax revenue=A-(B+C)836026986417

Ok, but why do we need to find Net tax revenue?

Because, from gross tax revenue, union has to give some money to States/UT and calamity fund=> remaining money is the “actual” money left in the hands of Union government (that they can spend as per their own wishes).

Let’s try a very cheap MCQ

Which of the following statements is/are correct

  1. In union budget, gross tax revenue is always lower than net tax revenue
  2. In the union budget, net tax revenue is calculated as the sum of [Gross tax revenue + taxes shared by States + money unspent in calamity fund]
  3. Both A and B
  4. Neither A nor B

Approach: When in doubt about gross vs. net, just count the number of alphabets in their spelling. Gross (5) and Net (3). So any formula that seems to go the other way = wrong. (e.g. observe statement B, if it were true, then NET would be higher than GROSS. Because everyhing is +…+) hence, B is definitely wrong. Same way, statement A is wrong because 5 > 3.

Side note:

Net GDP = Gross GDP MINUS depreciation.

Here also, Net (3 letters) is lower than Gross (5 letters).

So far,

REVENUE PARTCAPITAL PART
ReceiptExpenditureReceiptExpenditure
TaxNon Tax
  1. Direct taxes (DONE)
  2. Indirect Tax (DONE)

budget revenue part tax and non tax

Remaining columns and topics, in next articles, one by one.

Appendix

some allied topics that’d have broken the flow of the article, hence putting @bottom appendix.

#1: Direct taxes can be levied on Expenditure also

Observe the case of Service tax vs FBT:

SERVICE TAXFBT
service sector= self-explanatory- doctor, spa, hotel etc.Fringe benefit=when boss gives some facility to worker, Apart from his usual salary.
Salman himself joins a posh Gymnasium, Annual fees Rs.1 lakh (+12% service tax)Salman buys membership to a posh gym, for his bodyguard “Shera”. = 1 Lakh + 12% service tax + 30% FBT on.
paid 1,12,000 to Gym Owner. Gym owner pays 12k to government as service tax.
  • Pay Rs. 1,12,000 to Gym owner (fees + service tax)
  • Pay Rs. 30000 to government (FBT)
Hence it’s called “indirect” tax, because Salman paid the tax but government did not took it from his hand. But from that Gym owner.Called direct tax, because Salman directly had to pay FBT to government (and not to the Gym owner, not to bodyguard Shera.)
this is a tax on “expenditure” (on services)this is also a tax on “expenditure” (on fringe benefits)
still levied as of 2014discontinued from 2009

let’s try a very cheap MCQ:

  1. A Direct tax can be levied only on the income OR property of a person
  2. Fringe Benefit tax is an example of Indirect tax.
  3. Both A & B
  4. Neither A nor B

#2: Canons of taxation: why some taxes get abolished?

Mind the spelling: “canon” (rules/principles) and not “cannon” (used for bombing).
Adam Smith gave four canons of good taxation system.

  1. Canon of Equality: taxes should be Proportionate to income.
  2. Canon of Certainty: about deadline and rates.
  3. Canon of Convenience: to the tax payer.
  4. Canon of Economy: tax collection cost should be minimum. (i.e. staff salary, Database Management)

+ Misc. principles: – transparency, simplicity, elasticity (to economic fluctuation) etc.
ya but where is it relevant? Recall that government abolished certain direct taxes (estate duty, gift tax etc.) in past. Why? Because, they were not following some of these canons. for example

Gift tax (abolished)

Most people managed to evade. Hence Gift tax used to fetch barely ~10 crores in revenue. Thus, fourth canon missed. (Collection cost very high- staff salary and database Management.)
Finally, in the late 90s, government dropped this tax. Although it doesn’t mean there is no tax on expensive gifts- they’re counted under Taxable income (of the person who receives the gift)

Estate duty (abolished)

  • Estate duty was charged during the “inheritance” of estate. (although this was a Union tax- entirely cash was given to states.)
  • Problem: most people evaded, Estate duty Barely fetched ~15 crores = Again 4th canon missed.

Hotel Receipt Tax (abolished)

  • In the late 80s, we did not have service tax. But government imposed tax if you spent money on luxury hotels. (direct tax- because you had to pay this tax to government and not via hotel owner)
  • problem: same as above. barely fetched a few crores.

Banking cash transaction tax (Abolished)

  • introduced in 2005:
  • 0.1% on cash withdrawals of more than Rs 50,000 (individuals) and Rs 1 lakh for others in a single day from non-savings bank account.
  • Why? to track unaccounted money and trace its source and destination.
  • Abolished in 2009, when Chindu felt he had fetched enough information.
  • Although indirectly the canons were also responsible: #1, #3 and #4.

Fringe Benefit tax (Abolished)

2005Chindu started FBT
2009Pranab abolished FBT
  • Compliance cost was very high (Because company would need to keep record and acount of every little fringe benefit they gave to employees)
  • in other words, inconvenience to tax payer (company)=> it was even called “nuisance tax”. Therefore, 3rd canon missed.
  • Besides, revenue collection was ~8k crore. and company would pay less salary to employees in pretext of giving those fringe benefits= employee’s pay less income tax. so indirectly, government was axing its own leg. (Recall our MCQ tables: income tax is the second largest source of revenue for union government!)

Mock Questions
Visit Mrunal.org/Economy For more on Money, Banking, Finance, Budget, Taxation and Economy.

Mrunal recommends

  1. (free) NCERT, NIOS, TN-Books 4 History,Geo,Sci
  2. Indian Polity M.Laxmikanth (Hindi | English)
  3. Spectrum: Modern History (Hindi | English)
  4. Maths: Quantam CAT Sarvesh Kumar
  5. Objective General English SP Bakshi
  6. Word Power made Easy -Norman Lowe
  7. Topic wise Solved Paperset by Disha

174 Comments on “[Budgeting] Revenue receipts: Direct taxes, Indirect taxes, Gross vs Net taxes, shortfalls in collection”

  1. Today only i got to know about dis knowledge bhandhara.,
    Awesome xplanation in a very simple and understand manner even with some funny n interesting names. One more name added to ur fan list..

  2. Trademark Mrunal article! Tricky concepts explained with remarkable ease with witty, innovative examples…. Thanks and God bless you…

  3. Dear Mrunal Baba

    For me you are my god of CAPF Exam….. I understand the the things so easily from your article which is not possible for me from any other source.
    I really want to say thanks from the core of my heart and after my 2014 exam i definitely come to meet you and want to see a real genius…

    Mrunal baba ki jai

  4. a small doubt: if budget of 2013-14 is valid till march 31st 2014, then why vote on accounts?? from where 2 months gap arises? FM presents budget in feb , it takes effect form 1st april 2014.anyways till march 31th 2014 old budget will be in effect.! please clarify!

    1. Vote on account Duration: two months. (from 1st April 2014 to 31st May 2014)…where parliamentary discussions goes on from February till May end….

    2. yes, my friend the budget of 2013-14 is vaild till 31march 2014..but at the same time the finance minister will also represent the budget of 2014-15 on the table of loksabha in the last week working day of febuary..then the budget paper will go near the parlimentary committee. then parliamentry committee investigate the estimate and send back to loksabha and then discussion on the budget.. this whole process takes some time. but in mid way if goverment have required some money for investment or any development agenda then goverment can take the money from lekhanudan by the behalf of “vote of account”. on which member of lokshabha gives their vote…(money should be1/6 of total money for 2 month)….

  5. hello sir….. which dept. of Fin. Ministry prepares Budget documents?

  6. you said validity of VoA is 2months.But it is taken for FOUR months in 2004-05 by NDA governments.Please clarify sir

    1. That year was the election year…UPA I came up… in election year it took atnd 4 months to get the budget pass after all parliamentry rituals..I.e. swearing in, cabinet fotmatn n all…

    2. it may be 4 years for interim budget

  7. sir aap god ho upsc ke
    plzz economy ke aur bi article likhiye
    aur sir baaki history ke bi likh dijiye baaki chapters ke jo aapne nhi likhe hai
    thanku

  8. Such a simple and relevant explanation. Everytime I read an article, it is like getting imprinted in my memorey. Excellent work…

  9. SO in fringe benefit taxes, companies have to give fringe benefit for its employees and also at same time get taxed for these??. or is it a provision to cut down its taxes??

  10. sir very beneficial cn easily apprenhend their r some other issue plz make it easy in ur way

  11. sir very beneficial cn easily apprenhend their r some other issue plz make it easy in ur way thank u so much sir fanatastic

  12. awesome explanation sir………

  13. Amazingly organized the tax collection ranking in 2013 and 2014 in a concise manner.
    2-3 hours of toil saved!!
    Truly jawab nahin!!!

  14. Money bill can be introduced at any period of the year or a particular period andI have read that finance bill contains provisions involving expenditure from the consolidated fund of india , if so what is the need of appropriation bill sir . Please distinguish between money bill , finance bill 1 and finance bill 2

    1. Adeepna, if you add cess, surcharge then corporate tax turns out to be ~34% for desi company and ~43 for foreign company. Mrunal hasnt covered all caveats like more than one crore, less than one crore, royalty, no royalty because in the exam they don’t ask all such minute technical details.

  15. i think appropriation bill is Art 204…even 266 speaks about taking parliaments approval and all..bt 204 is an exclusive one i feel

  16. It was awesome..if m nt wrong,for a good economy direct taxes are better than indirect taxes?

  17. Mrunal sir,
    Under ‘Public Accounts in India’ you wrote: “Does government need parliament’s permission to spend money from here? Nope”
    BUT, in the year 2004, there was a question:
    With reference to Indian Public Finance, consider the following statements:
    1.. Disbursements from Public Accounts of India are subject to the Vote of Parliament.
    2. The Indian Constitution provides for the establishment of a Consolidated Fund, a Public Account and a Contingency Fund for each State.
    3. Appropriations and disbursements under the Railway Budget are subject to the same form of parliamentary control as other appropriations and disbursements.
    Which of the statements given above are correct?
    The answer to this is statements 1 and 3.
    My question is regarding statement 1 exactly. If the govt. does NOT need parliament’s permission, how come the disbursements are subject to the vote of parliament?

  18. Hii mrunal,
    i am in love with your site since last month.your articles are awesome.But i have doubt regarding “REVENUE FOREGONE”.can you clarify it ?
    And how the highest proportion of tax revenue foregone is not on account of corporate tax but customs duties ???

  19. Sir, Please throw some light on the non tax sources of revenue.
    Thanks.

  20. Respected Sir, First of all I would like to thank you for untiring efforts for us(students), and explaining in the way that the teacher is standing before us so no words ..Now coming to the point…can you please tell the basics of budget also i.e. what exactly is called budget estimate, revised estimate and other terms used in budget..I will be highly thankful to you

  21. Also sir, can you please explain union budget 2014-15 in detail..thanks

  22. Mrunal,
    U know nerve of all Aspirants(Serious and Non-Serious) of this exam…

    And Most important thing is, you help individual to assess their position on Exam Preparation..

    You inspired me to start preparation of this once again…

    Regards
    MI.

  23. if appropriation bill 2013-14 yet to pass then how government managed their expenditure in 2013-14?

  24. Respected Sir,
    I would like to thank you for providing useful study material to the students for the competitive exams and explaining it in such a simple way.

Leave a Reply

Your email address will not be published. Required fields are marked *