Difference Between Interim Budget and Full Budget: Do you know how the Interim Budget is Different from Full budget? You might have heard about the term interim budget as Shri Piyush Goyal is about to introduce interim budget for this year. So lets see what it is all about.
How is Interim Budget different from Full Budget?
Introduction: Every year the Central Government in power presents the budget for the coming financial year. The date of presentation of the budget is now February 01 of the year.
- But do you know why this year in 2019 the government will present only the interim budget and not the full budget?
- What is the difference between Interim budget and full budget?
- What is Vote on account?
We will discuss all this in this post.
What is an Annual Budget?
The Annual Budget of India is also known as Annual Financial Statement. It consists of two parts:
Part 1: Statements of income and expenses made by the Government in the previous fiscal year April to March.
Part 2: Announcements related to ways in which income will be generated by the Government for the coming fiscal year (April-March) (By ways of taxation) and how the government will spend this money on various schemes and infrastructures. The various welfare schemes related to general public comes in this part.
When is annual budget presented?
Till the year 2016 the custom of presenting the Union Budget on the last working day of February was followed. From 2017 the then Finance Minister Arun Jaitley made a change in the timing of announcement of Annual Budget and since then the Annual Budget is presented on February 1.
What happens after a Budget is presented?
As you are aware that in the annual budget the government seeks to generate income by various means for their expenditures for the coming fiscal (as Part 2 of the budget). Now the Article 266 of the Constitution of India mandates that to draw money from the Consolidated fund of India, Parliamentary approval is required.
For this parliamentary approval, first a lot of discussion is held in the parliament. This discussion and approval takes time. This time from Feb 1 to March 31 is utilised for this discussion as the budget will come into force from April 01 of the year.
Usually this discussion is not finalised before April 01 and goes beyond April 01 when the budget has to come into force. So have you wondered how the govt manages its expenditure during this period?
How does the government takes care of expenditure when parliamentary approval of budget is not passed on time?
Keep this in mind: Article 266 of the Constitution of India mandates that to draw money from the Consolidated fund of India, Parliamentary approval is required. Apart from this, Article 114 (3) of the Constitution mandates that no amount can be withdrawn from the Consolidated Fund without the enactment of a law (appropriation bill).
An appropriation bill( supply bill or spending bill)– is a proposed law that authorizes the expenditure of government funds.
When the parliament is not able to pass the appropriation bill before the commencement of the new financial year, there is a special provision by which the government can manage its expenditure. It is known as Vote on Account.
What is Vote on Account:
As per this provision the government obtains the vote of Parliament for some amount of money that would be sufficient to incur expenditure on various items for a part of the year. This would enables the government to cater to its expenses for a short period of time or until a full Budget is passed.
Two cases when Vote on Account may come into play
Case 1: When appropriation bill is not passed on time. Then it comes into play till the appropriation bill is passed.
Case 2: In the year of Election there is a situation that suppose (Political Party A that is in power) presents a budget on Feb 1. Now after April 01 the budget as to come in force and after the election the government may or may not remain in power. Suppose the result of elctions is to come on June 01. For this time period of April 01 to May 31 Party A in power will have to carry out its expenses keeping in mind that after June 01 the government might get changed. So the concept of Vote on Account comes into play.
Duration of Vote on Account:
The vote on account is taken for two months. The amount of money granted under this is equivalent to one-sixth of the estimated expenditure for the entire year under various demands for grants. But it can be extended for three to four months as well.
Note: A ‘Vote on Account’ cannot alter direct taxes since they need to be passed through a Finance Bill.
What is Interim Budget
An interim budget is the budget presented by a government that is going through a period of transition by means of election.
An interim budget is a complete set of accounts and includes both expenditure and receipts, and gives the complete financial statement.
When is an interim budget presented?
An interim budget is presented when the government presenting the budget does not have the full time to presenting the full budget as in case of election during the year.
So in case when elections are due in the year of which budget is presented, the government in power presently will present an interim budget while the task of framing the full budget is left to the incoming government.
The interim Budget is the budget that functions during the transition time between the two governments so that the government can continue to function. The government may remain same or may change.
Difference between Interim Budget and Vote on Account:
A vote-on-account only deals with the expenditure side of the government’s budget. While an Interim Budget is a complete set of accounts, including both expenditure and receipts, similar to a full budget.
Difference between Full Budget and Interim Budget?
Practically an interim budget is same as the full budget but it is presented by the government during the last year of its term – ie. just before the election. An interim Budget is a complete set of accounts, including both expenditure and receipts. But it may not contain big policy proposals. This is the main difference. Also after the elections the interim budget may be replaced by a full budget.
Interim Budget in 2019
The Finance Ministry has clarified that the Budget to be presented by Shri Piyush Goyal on February 01, 2019 will be called interim Budget 2019-20.
This year the general election is scheduled to be held between April and May, and accordingly, the new government at the Centre can be formed sometime in June. So after the formation of a fresh government we may expect a Full Budget after that.
History of Vote on Account in India
The first Vote on Account, in India was presented in the year 1952-53. Till now there have been 11 VOAs held in India. Out of this 11, five have been done by the outgoing government while six by the new government as they did not have enough time to present a full annual budget.
Conclusion:
So you must have understood why this year interim budget will be introduced and the difference between Interim Budget, Full Budget and VOA.
What announcements do you expect in this year’s Interim Budget? You can comment below.
Keep following us for the latest update of the interim budget 2019.