• Parliamentary Control over Public Finance: In India, parliamentary control over public finances is ensured through approval of the Annual Budget. While the Government formulates the Union Budget, Parliament approves it and also enforces accountability of the Executive.
• Constitutional Framework (Art. 265, 266, 112, 114): The Constitution outlines the mechanism for parliamentary control over public purse through three cardinal rules:

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    No tax without law — no tax shall be levied or collected except by authority of law (Art. 265)
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    No expenditure without Legislature's authorization — no expenditure can be incurred without legislative sanction (Art. 266, 114)
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    Annual Financial Statement before Parliament — President shall cause AFS to be laid before both Houses every financial year (Art. 112)

• Date of Presentation: As per Rule 204(1) of Rules of Procedure and Conduct of Business in Lok Sabha, the Budget is presented on such date as decided by the President.
• Time of Presentation: Budget is presented at 11.00 am on 1st February or any other date as decided by the Government.
• Election Year — Double Budget: In the year when General Elections to Lok Sabha are held, the Budget may be presented twice:

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    First: Interim Budget — to secure a Vote on Account for a few months
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    Later: Full Budget — for the full financial year (by the new Government)
• Approval Process: President's approval for Budget presentation is obtained by the Secretary General, Lok Sabha Secretariat — after the Speaker agrees to the date suggested by Government — before commencement of the Budget Session.
• Communication to Members: After President's approval, Members are informed of the date and time through Lok Sabha/Rajya Sabha Bulletin Part-II.

• Purpose: Before Budget presentation, President's recommendation is obtained under Article 117(1) and 117(3) for introduction and consideration in Lok Sabha of:

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    (a) Finance Bill — along with recommendation under Article 274
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    (b) Appropriation Bill (General)
• Documents accompanying Summary: The President's approval is obtained through 'Summary for the President' along with:

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    (i) Annual Financial Statement   (ii) Finance Bill   (iii) Demands for Grants   (iv) FRBM Act Statements
• Content of Summary Note: Includes direct and indirect tax proposals and miscellaneous financial provisions as proposed through the Finance Bill.
• Approval Chain: The summary note is approved by Finance Minister → Prime Minister before being taken for President's approval — normally in the morning of the date of Budget presentation. ⭐ FM → PM → President — in sequence

• Timing: Immediately prior to the presentation of the Budget in Parliament, the Finance Minister briefs the Cabinet on Budget proposals and the Finance Bill.
• Who Prepares: The Budget Division prepares the 'Summary for the Cabinet'.
• Contents of Cabinet Summary:

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    Revised Estimates proposals for the current year
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    Budget proposals for the ensuing year
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    Estimated receipts — including direct and indirect tax proposals
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    Miscellaneous financial provisions through Finance Bill
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    Brief on compliance with FRBM Act and Rules
• Sequence: Note approved by Finance Minister → Cabinet briefed by FM → immediately after, Budget presented in Parliament.

• Budget Speech — Lok Sabha: The Finance Minister makes a speech in Lok Sabha providing details of proposals for the new financial year regarding taxation, borrowings and expenditure plans.
• Nature of Speech: The Budget Speech is largely a policy document — highlights the policies and programmes of the Government.
• Rajya Sabha: Budget is laid on the Table of Rajya Sabha soon after FM completes speech in Lok Sabha. No discussion takes place on the day the Budget is presented. Sets of Budget papers are supplied to Members through electronic/digital mode.
• Speech Copies: Five copies of the Finance Minister's speech are provided to the Secretary General, Lok Sabha from the Official Gallery as soon as FM starts reading.

• Dates Fixed by: The Ministry of Parliamentary Affairs in consultation with Ministry of Finance fixes the dates for General Discussions on the Budget — subsequent to the day of presentation.
• Scope: The House is at liberty to discuss the Budget as a whole or any question of principle involved therein. No motion can be moved and the Budget is NOT submitted to vote during General Discussion. ❗ No motion, No vote at this stage
• FM's Right to Reply: Finance Minister has a right to reply at the end of discussions. Scope is confined to: general examination of Budget; taxation policy as in Budget Speech; general schemes and structures. Specific issues are taken up when relevant Demands for Grants or Finance Bill is taken up.
• Officers Assigned: Officers not below the rank of Under Secretaries are assigned to cover General Discussions in both Houses.

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    They report important points to Heads of Divisions/Heads of Departments for preparing 'Notes'
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    Notes prepared promptly and submitted to Finance Minister — not to be deferred to the following day
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    'Gist of Points' raised during the day required to be submitted to Finance Minister
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    Form for 'Notes' is part of Annexure I of the Handbook of Parliamentary Procedure issued by Ministry of Finance
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    Parliament Cell uploads uncorrected verbatim record of Proceedings of both Houses on the same day or following day

• When: After General Discussion, Demands for Grants of individual Ministries are taken up in Lok Sabha for discussion and voting as per a timetable decided at the Business Advisory Committee meeting.
• Who Can Move: When a Demand is taken up, any Member who has given prior notice may move any of the following types of Cut Motions to seek reduction in the amount of the Demand.

• Advance Copies: Advance copies of Cut Motions relating to Ministry of Finance when received are sent to the Financial Adviser for preparation of briefs for the Finance Minister's use.
• Reply: Cut motions are generally replied by the administrative Minister concerned.

• What is Guillotine: On the last day of discussion on Demands for Grants, the Speaker puts all outstanding Demands for Grants to the vote of the House simultaneously. This is known as the 'Guillotine' — a device for bringing the debate on financial proposals to an end within a specified time — with the result that several Demands have to be voted without discussion.
• Procedure When Guillotine Applied:

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    Member or Minister in attendance is asked by the Speaker to resume his/her seat
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    Cut Motions already moved are immediately put to vote and disposed (negated)
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    Ministry of Parliamentary Affairs ensures that Ministers of guillotined Ministries/Departments are present in the House — to provide material/answers on points raised by Members

• Authorizes: Payment and appropriation of sums voted + charged expenditure from the Consolidated Fund of India for the services during the financial year.
• Restricted Debate (Post-Guillotine): Scope of debate on Appropriation Bill (after remaining demands have been guillotined) is restricted to important matters or administrative policy in grants covered by the Bill — that have not already been raised during relevant Demands for Grants discussion.

• Introduction: Finance Bill is introduced by FM immediately after AFS is presented in Lok Sabha. Being a Money Bill, introduced in Lok Sabha with President's recommendation under Art. 117(1). Finance Bill is considered and passed after passing of the Appropriation Bill. In RS, procedure is same as for other Money Bills.
• Secret Bill: Finance Bill is a Secret Bill — copies are NOT circulated to Members two days in advance (as required under Direction 19 of 'Directions by the Speaker'). 🔒 Secret — No advance circulation
• Cannot be Opposed on Introduction: Introduction of the Finance Bill cannot be opposed.
• 75-Day Rule: Under the Provisional Collection of Taxes Act, 1931 — Finance Bill must be passed by both Houses and receive President's assent within 75 days of its introduction. ⭐ 75 days from introduction
• Immediate Effect — Customs & Excise: Provisions relating to Customs and Central Excise duties come into force immediately on expiry of the day of introduction by virtue of declaration under the Provisional Collection of Taxes Act, 1931 (expedient in public interest). This effect lasts for 75 days or till enactment, whichever is earlier.
• Second Finance Bill: Although there is no bar to introducing more than one Finance Bill in a year, if a second Finance Bill containing supplementary tax proposals is introduced, it must be preceded by Demands for Grants and the connected Appropriation Bill. The sequence under Arts. 112–115 must be followed.
• Speaker's Ruling: Finance Bill should not contain permanent amendments to both direct and indirect tax laws if they are not consequential to taxation proposals — for that, a separate Taxation Laws Amendment Bill should be brought forward.

• Constitutional Basis: The Constitution empowers Lok Sabha to make any grant in advance in respect of estimated expenditure for a part of the financial year — pending completion of procedure for voting of Demands. The purpose of Vote on Account is to keep Government functioning pending voting of final budget.
• Convention: As a convention, Vote on Account is treated as a formal affair and passed by Lok Sabha.
• When Used: After advancement of budget cycle (Budget now presented 1 Feb), Vote on Account is presented in the election year when interim Budget is presented.

• Executive Authority: Executive authority of the Union is vested in the President of India — exercised directly or through officers as per Constitutional provisions. However, President acts in accordance with advice tendered by the Council of Ministers headed by the Prime Minister — collectively responsible to Parliament.
• Individual Ministerial Responsibility: Each Minister holding a portfolio is individually responsible (as part of collective responsibility) to formulate departmental policies, oversee implementation and ensure efficient working of administrative machinery.

• Overall Responsibility: The finances of Government have traditionally been controlled by the Ministry of Finance. With increase in complexities, select powers delegated to Administrative Ministries — but Ministry of Finance retains overall responsibility for co-ordination and control.
• Budget Preparation: The Budget Division has the responsibility for preparing the Union Budget.
• Rules & Regulations: Ministry of Finance has issued various rules and regulations on financial management and control to be followed uniformly across Government of India.

• Mandate: Department of Expenditure is concerned with expenditure-related financial policies covering: financial rules and regulations; delegation of financial powers; financial sanctions on issues not covered by delegated powers; review of staffing of government establishments; general principles of government accounting; capital restructuring of public sector undertakings.
• Finance Commission Awards: Administers grants part of the Finance Commission award comprising:

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    Revenue deficit grants
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    Calamity Relief Fund (CRF) grants
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    Grants for local bodies
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    Health, education and other special purpose grants
• Scheme Guidelines: Guidelines for formulation, appraisal and approval of Government funded schemes/projects are issued/updated from time to time.

• Chief Accounting Authority: The Secretary of each Ministry is the Chief Accounting Authority — responsible for collection of revenue and control of expenditure with respect to his/her Ministry/Department.
• How Discharged: The Secretary discharges this function through and with the advice of:

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    The Financial Adviser (FA) — budget, financial advice, expenditure control
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    The Chief Controller of Accounts (CCA) — accounting and accounts

• Why Introduced: Due to volume of work and administrative convenience, the system of integrated Financial Adviser was introduced.
• Role: Financial Adviser acts on behalf of Ministry of Finance in respect of matters outside the delegated financial powers of the Administrative Ministry.
• Redefined Charter (1 June 2006): Financial Advisers responsible for: Budget formulation; FRBM tasks; Expenditure & Cash Management; Project/programme formulation, appraisal, monitoring and evaluation; Screening of proposals; Leveraging non-budgetary resources; Non-tax receipts; Tax expenditure.

• (i) Ensure that the schedule for Budget preparation is adhered to — timelines and stipulations in Budget Circular closely monitored.
• (ii) Scrutinize budget proposals thoroughly before sending to Ministry of Finance.
• (iii) Screen proposals for Supplementary Demands for Grants.
• (iv) Estimates scrutinized for: correctness of accounts classification; full coverage; reasonableness — and modified to the extent necessary in the FA's judgment.
• (v) Estimates of interest and capital receipts to be prepared as per Budget Circular guidelines and submitted to Budget Division in the prescribed form.
• (vi) Expenditure estimates to be based on realistic assessment. For new schemes — no provision without completion of pre-Budget scrutiny. North East provisions (unless exempt) to be indicated separately.
• (vii) Account for economy instructions issued by Finance Ministry — rationalize subsidies, improve operational efficiency, direct subsidies to targeted groups. Estimates must conform to prescribed economy measures.
• (viii) Estimates finally recommended by FA to be summarized in Statement of Budget Estimates (Proposed)/Expenditure Budget — and 18 copies forwarded thereof.
• (ix) After pre-Budget meetings — prepare Statement of Budget Estimates (Final) as per approved expenditure ceilings — sent to Budget Division with other required statements.
• (x) Follow broad guidelines for preparation of Notes on Demands as mentioned in Budget Circular.
• (xi) Statement showing items of new service / new instrument of service included in Demands for Grants — FA to ensure these are sent as soon as SBE (Final) is forwarded to Budget Division.
• (xii) While preparing Detailed Demands for Grants — ensure classification (major head, minor head etc.) is as per the List of Major and Minor Heads of Accounts.
• (xiii) Monthly Expenditure Plan (MEP) for selected Ministries to be drawn up as per extant guidelines for release of funds — and included as an annex in Detailed Demands for Grants.
• (xiv) Gender Budget, Child Budget, SC/ST allocation and FRBM Disclosures statements to be sent immediately after SBE is finalized.

• Primary Role: CGA has responsibility for establishing and maintaining a technically sound accounting system in the Departmentalised Accounts Offices.
• Monthly Report: CGA prepares an analytical report on expenditure, revenues, borrowings and deficit for the Finance Minister — every month. Also prepares annual Appropriation Accounts and Union Finance Accounts for presentation to Parliament.
• Line Item Accounts: CGA maintains line item-wise accounts of all transactions involving:

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    Consolidated Fund of India  |  Contingency Fund of India  |  Public Account of India
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    Various subsidiary accounts — Loan accounts, Fund accounts etc.
• Completes Budget Cycle: Preparation and submission of Appropriation and Finance Accounts to Parliament by CGA completes the cycle of budgetary process. ⭐ CGA completes the Budget cycle
• Parliament Informed via Appropriation Accounts: Through Appropriation Accounts, Parliament is informed about expenditure incurred against appropriations made by Parliament in the previous financial year.
• Audit of Expenditure: All expenditures are duly audited. Excesses or savings in expenditure are required to be explained in the Appropriation Accounts.

• Background: NITI Aayog (National Institution for Transforming India) came into existence on 1st January, 2015 replacing the erstwhile Planning Commission.
• Role — Think Tank: Serves as a Think Tank of the Government — provides Central and State Governments with relevant strategic and technical advice across the spectrum of key policy elements.
• Budget Specific Role: Also helps in the specific task of finalizing the Output Outcome Monitoring Framework (OOMF) — which brings out measurable outputs and outcomes of outlays made to different schemes.

• Role in Budget: Based on recommendations of the Finance Commission, the budget provisions for a year are made after earmarking the States' share to work out the Net Tax Revenues of the Union Government from Gross Tax Revenues.

• Banker to Government: As the banker to the Government, RBI has a crucial role in:

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    Monetary and Credit Policy Measures
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    Government Securities Market
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    Strengthening of Capital Market
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    Technology and Payment System
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    Development of Commercial and Co-operative Banking, Financial Institutions and Non-Banking Finance Companies
• Manages Public Debt: The public debt raised by Government by issue of securities is managed by the Reserve Bank. Also manages securities created under any other law or rule — provided such law specifically provides for their management by RBI.
• Public Debt Management Cell: Created in the Ministry of Finance — its role is advisory in Public Debt Management.

• Crucial Role: C&AG plays a crucial role in parliamentary financial control. Audited Appropriation and Finance Accounts along with audit reports submitted to the President under Art. 151 → then laid before Parliament.
• Primary Audit Function — Two Aspects:

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    (i) Expenditure Audit: Whether moneys shown as disbursed were legally available for and applicable to the service/purpose to which applied or charged, and whether expenditure conforms to governing authority
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    (ii) Receipt Audit: Whether assessment, collection and allocation of revenue have been properly done
• Additional Functions: C&AG also examines accounts relating to grants and loans given by Government to other bodies. Enabling provision in the Act passed by Parliament in 1971 — allows audit of any other bodies or authorities.

• Scope: Parliamentary Control over public expenditure is not limited to voting of money — it also extends to ensuring prudent expenditure.
• Constitutional Basis: Art. 118 — each House may make rules for regulating, subject to Constitution, its procedure and conduct of business.
• Three Financial Committees of Lok Sabha:

  📊

  Public Accounts Committee (PAC)

  Examines Appropriation Accounts, Finance Accounts and C&AG reports

  📋

  Estimates Committee

  Scrutinizes estimates; suggests economies, efficiencies, alternative policies

  🏭

  Committee on Public Undertakings (COPU)

  Examines PSU accounts and C&AG reports on PSUs

  Also: Department Related Standing Committees (DRSCs) — introduced in 1993 to strengthen parliamentary oversight of administration and scrutiny of budgetary proposals and Bills.

• Functions (4 Functions):

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    (a) Report what economies, improvements in organizational efficiency or administrative reform, consistent with the policy underlying the estimates, may be effected
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    (b) Suggest alternative policies in order to bring about efficiency and economy in administration
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    (c) Examine whether the money is well laid out within the limits of the policy implied in the estimates
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    (d) Suggest the form in which the estimates shall be presented to Parliament
• May continue examination throughout the financial year and report as examination proceeds.

• Introduction: Full-fledged Committee system introduced in 1993 to strengthen parliamentary oversight, ensure executive accountability, and enable Parliament and the people to know about Government's final replies to Committee's specific recommendations.
• Four Functions (as per Rule 270, Rules of Rajya Sabha):

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    (a) Consider Demands for Grants of related Ministries/Departments and report thereon — report shall NOT suggest anything of the nature of cut motions
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    (b) Examine Bills pertaining to Ministries/Departments referred by Chairman or Speaker, and present report thereon
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    (c) Consider annual reports of Ministries/Departments and make report thereon
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    (d) Consider national basic long-term policy documents referred by Chairman or Speaker, and make report thereon

• Three Duties in Scrutinizing Appropriation Accounts:

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    (a) Moneys shown as disbursed were legally available for and applicable to the service/purpose to which applied or charged
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    (b) Expenditure conforms to the authority which governs it
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    (c) Every re-appropriation has been made in accordance with provisions under rules framed by competent authority
• Also to Examine:

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    (a) Accounts of State Corporations, trading/manufacturing schemes together with balance sheets, P&L accounts and C&AG report thereon
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    (b) Accounts of autonomous and semi-autonomous bodies audited by C&AG under Presidential direction or statute of Parliament
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    (c) C&AG Report where President required audit of any receipts or examination of accounts of stores and stocks
• Excess Expenditure: If money spent on any service in a financial year in excess of the amount granted — Committee shall examine circumstances leading to such excess and make such recommendation as it may deem fit. ❗ Post-facto review of excess

• Timeline: Though Union Budget is presented on 1st February (or other suitable date), the process commences in mid-August of the previous year and continues till the end of March.
• Budget Division's Schedule: Budget Division prepares a comprehensive Schedule for Budget preparation activities — clearly indicating roles and responsibilities of all stakeholders involved in the Budget preparation process.
• Election Year: In the year of General Elections to Lok Sabha:

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    Interim Budget is presented before elections
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    Regular Budget is presented after elections and assumption of office by the new Government — on a date as decided by the new Government
• Two Types of Budget Activities:

  ⚙️ Administrative Process

  Budget and documents prepared in consultation with stakeholders. This chapter discusses this process.

  🏛️ Legislative Process

  Budget passed by Parliament after discussion. (Covered in Chapter 2.)

• Basis of Budget Preparation: Budget Division prepares the Budget broadly on the basis of detailed estimates of expenditure and receipts from Ministries/Departments and its own subordinate estimating authorities — keeping in view actual past requirements, current year trends, and Government decisions with financial implications.

• Commencement of Budget Process: Budget process formally commences with the issue of the Budget Circular — normally in the month of September each year. ⭐ September = Start of formal Budget process
• Purpose: Provides guidance to Ministries/Departments for framing:

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    Revised Estimates (RE) for the current year
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    Budget Estimates (BE) for the ensuing financial year
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    Detailed instructions on preparation of estimates of various types of receipts and expenditure, including formats and statements in which estimates are to be furnished

• (i) Taxes, duties and receipts in relation to Union Territories without legislature
• (ii) Interest receipts — on loans/advances to State Govts., UT Govts., Foreign Govts., PSEs and others incl. Govt. servants; interest charged to working expenses of departmental commercial undertakings ❗ Not in Budget Circular form
• (iii) Revenue receipts adjustable under Major Head '1605 — External Grant Assistance' and '1606 — Aid Material and Equipment' ❗ Not in Budget Circular form
• (iv) All other Revenue receipts including cess — excluding cess collected by CBEC and CBDT. (Furnished in Budget Circular form)

• Furnished to Budget Division by Department of Revenue — via CBDT (Direct Taxes) and CBIC (Indirect Taxes & Customs) as per prescribed timelines.
• Direct Tax estimates — based on tax rate decisions and growth assumptions; provided by Tax Policy Legislation (TPL) Division of CBDT.
• Indirect Tax estimates — provided by Tax Research Unit (TRU) of CBIC in required format.
• UT Administrations: Estimates of taxes, duties and other revenue receipts for UT administrations furnished to Finance Ministry by various authorities as detailed in Budget Circular.

• Responsibility: Chief Controllers of Accounts prepare interest receipt estimates — with reference to loans outstanding in their books including loans expected to be sanctioned during the ensuing year. Based on books — not on what companies propose. Requires approval of Financial Adviser.
• Realistic Assessment: Realistic assessment of interest due from PSUs and loan repayments — ensuring current obligations are discharged and outstanding dues cleared within a practical timeframe. NIL information must also be submitted in writing without fail. Prescribed form covers both interest receipts and loan repayments. ❗ NIL info mandatory — cannot be skipped
• Interest on Capital Outlay of Departmental Commercial Undertakings: Should correspond to expenditure provisions. CCA/Controller of Accounts must ensure this correspondence. Average rate of interest advised separately by Ministry of Finance.
• Write-off and Waiver: Reliefs/concessions to PSUs (write-off of loans, waiver of interest/guarantee fee) must be reflected in Expenditure Budget as distinct items of expenditure with equivalent receipts assumed thereunder. Even though non-cash, assumed receipts must be included in receipt estimates to Budget Division.

• What Capital Receipts Include:

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    Receipts by way of loan repayments
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    Disinvestment of equity holdings in PSEs
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    Issue of bonus shares by PSEs in favour of Central Government
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    Net receipts under Public Account transactions
• Loan Repayment Estimates: Furnished in forms prescribed in Budget Circular. If receipts are notional (due to write-off, re-financing or conversion into equity) — highlighted in the 'Remarks' column. Any modification in repayment terms (extension of moratorium/repayment) to be clearly mentioned. Estimates should fully reflect endeavours to realize amounts due.
• Bonus Shares: Classifiable under Major Head '4000 — Miscellaneous Capital Receipts'. Furnished by Chief Controller of Accounts — with company-wise estimates. Must correspond with provisions for related investments on the expenditure side.
• Disinvestment & Dividend Receipts: Furnished by Department of Investment and Public Asset Management (DIPAM).

• Furnished by: Chief Controllers of Accounts and concerned Accounts Officers of UT Governments/Administrations (with and without legislatures) — in form prescribed in Budget Circular.
• Basis of Preparation: Detailed review of Public Account transactions, past trends and other information. Receipts and disbursements on separate sheets.

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    Exception — Group Insurance Scheme: For CG employees — furnished by Chief Controller of Accounts, Ministry of Finance in a consolidated manner. For UT Govt. employees — by UT Cell, Ministry of Home Affairs. Ministries/Departments need not include this.
• Footnote Explanations: Adequate explanation for any major variation and nature of transaction to be given through footnotes.
• Special Ministries: Ministry of Railways (Railway Board), Ministry of Defence (Finance Division) and Department of Telecommunications furnish Public Account estimates in their Cash Requirement Estimates.
• General Rule: Ministries/Departments should not have large transactions in Public Account — except in areas like Provident Funds and approved Special Deposits. Ideally no Net debit or credit in a year — will not be accepted without full justification. ❗ Net debit/credit requires full justification

• (3.9.1) When to Submit + Discussions: Estimates to be furnished to Budget Division for pre-Budget discussions — normally commencing around mid-October — chaired by Secretary (Expenditure) to decide net budgetary ceilings of each Ministry/Department. ⭐ Mid-October — Pre-Budget Discussions start
• (3.9.2) Review Existing Budget First: Ministries/Departments should first review existing Expenditure Budget to: prioritize activities and schemes; identify those that can be eliminated, reduced in size or merged. Estimates must conform to projections in MTEF Statement released by Ministry of Finance.
• (3.9.3) Discontinued Schemes:

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    Discontinued schemes must not appear in Revised Estimates of current year
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    Schemes not continuing beyond current year must not be included in BE of ensuing year
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    Discontinued/merged schemes must be mentioned in notes below the SBE
• (3.9.4) Pre-Budget Scrutiny Mandatory: Under standing instructions — no provision shall normally be made in Budget without completion of pre-Budget scrutiny/appraisal of a project/scheme. Where provision made without scrutiny — scrutiny must be completed and approvals obtained before commencement of financial year and passing of Budget. ❗ No provision without pre-Budget scrutiny
• (3.9.5) Factors for Framing Estimates: Due note to be taken of — past performance; stage of formulation/implementation of schemes; institutional capacity of implementing agencies; constraints on spending; and most importantly, quantum of Government assistance lying with recipients unutilized — to minimize scope for surrenders at a later stage.
• (3.9.6) PAC Requirement on Large Savings: PAC requires that savings in a Grant amounting to ₹100 crore and above be explained to the Committee. Other Parliamentary Committees have also repeatedly expressed concern over large savings. ❗ ₹100 crore savings → mandatory PAC explanation
• (3.9.7) Effective Internal Mechanism: Budget Division has issued instructions that each Ministry/Department must put in place an effective mechanism for realistically assessing fund requirements — so that unwarranted surrender of savings is avoided.
• (3.9.8) No Provision for Long-vacant Posts: No provision may be made in establishment budget for posts lying vacant for one year or more. Even for shorter vacancies, provisioning to be made with circumspection to avoid eventual savings. ❗ Posts vacant 1+ year — no budget provision

• (3.10.1) How to Submit: Ministries/Departments submit Budget Proposals as Provisional Statement of Budget Estimates (SBE) — then submit hard copies in proper format to respective sections in Budget Division.

• (i) Three-Level Scheme Depiction (maximum):

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    (a) Umbrella Schemes → (b) Schemes → (c) Sub-Schemes
• (ii) Scheme Categorization: All schemes categorized as either Centrally Sponsored Schemes (CSS) or Central Sector Schemes — including provision for North East and Sikkim.
• (iii) EAP / Public Account Fund — Sub-scheme Level Depiction: If scheme has EAP component and/or funded from Public Account Fund (e.g. cesses) — separately shown at sub-scheme level:

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    (a) Gross Budgetary Support  (b) EAP Component  (c) Amount met from (Name of Fund)
• (iv) Transfer to / Amount from Fund — Two Separate Entries: Entries related to transfer to fund and amount met from fund shown as two separate entries in SBEs below the schemes. If Public Account Fund used for CSS — transfer from Major Head 3601/3602 to ensure transfers to States are not understated.
• (v) Interest Payments & Bond Repayment: Entries for interest payments and repayment of principal of GoI-funded service bonds — shown separately as a line entry under the schemes from which such interest is being paid.

  ⚠️ NE Major Heads (2552, 4552, 6552): Provisions for 'transfers to' and 'amount met from' any reserve fund must NOT be made from these Major Heads — as they are used for transitory provisions which will be re-appropriated to functional heads. Such provisions to be made under relevant functional heads.
• (vi) Major Head-wise Allocation: Scheme allocation continues to be prepared major head-wise — used to generate DG, Part B of SBE and statements in Budget Profile.
• (vii) Six Broad Expenditure Categories in SBE:

  A. Centre's Expenditure

  • (i) Establishment Expenditure of the Centre
  • (ii) Central Sector Schemes
  • (iii) Other Central Expenditure incl. CPSEs and Autonomous Bodies

  B. Centrally Sponsored Schemes & Transfers

  • (iv) Centrally Sponsored Schemes
  • (v) Finance Commission Transfers
  • (vi) Other Transfers to States

  ⭐ All 6 categories — exam must-know
• (viii) All Budget Lines Categorized: All budget lines categorized into one of the six categories. If an existing line/umbrella scheme has items belonging to more than one category — it must be broken up and adjusted suitably under relevant categories.
• (ix) Illustration — Welfare of Children: If 'Welfare of Children' umbrella has Central Sector Scheme + untied GIA to Autonomous Body — broken up as:

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    Central Sector Scheme → Category (ii)
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    Untied GIA to AB → Category (iii) — Other Central Expenditure
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    Exception: If grants to AB are under a scheme for implementing it — need not be broken up; figures under Central Sector Scheme

• (i) Latest actuals of current year + actuals for same period in preceding year
• (ii) Actual expenditures during the previous financial year (entire year — not just H1)
• (iii) Appropriations/re-appropriations ordered/contemplated during remaining part of current FY; any sanction issued/proposed including on new schemes. If EFC/SFC/Cabinet approvals are pending — must be clearly brought out.
• (iv) All pending arrears incorporated in SBE — if any part left out, reasons to be separately submitted
• (v) Any excess expenditure incurred to be specifically highlighted — for taking into account in Revised Estimates
• (vi) Care for including advances from Contingency Fund and the need to recoup the same

• (i) Items of expenditure matched by or linked to receipts — externally aided projects, bonus shares, cesses etc.
• (ii) Provision included in respect of vacant posts
• (iii) Separate statement of committed liabilities as arrears — payments already due but unfulfilled due to lack of budgetary provision; neither paid nor provided in Budget but supported through a valid sanction
• (iv) Unspent balances — released by Ministry but pending utilization by implementing agencies — as on 31st March of previous FY, 30th June and 30th September of current FY — with all grantee/loanee bodies (other than States) that received more than ₹1 crore
• (v) Unspent balances and pending Utilization Certificates — State-wise and scheme-wise — as on 31st March of previous FY, 30th June and 30th September of current FY
• (vi) Explanations for variations between BE and RE (proposed) — scheme-wise separately
• (vii) Measures to increase user charges levied by Ministries/Departments and autonomous bodies to recover costs
• (viii) Efforts to recover arrears of Non-Tax Revenue; whether CPSUs paying dividend as per DIPAM policy (OM No. 5/2/2016-Policy dated 27.05.2016). Actuals of last year and estimates for current year.
• (ix) For subsidies — assumptions regarding subsidy calculations to be clearly indicated
• (x) Details of major/important umbrella schemes
• (xi) For ABs covered under TSA — details of grants-in-aid provided, amount utilized, and amount written back to Consolidated Fund

• (3.11.1) Budget Division prepares briefs for pre-Budget meetings in a prescribed format — with tentative RE and BE ceilings.
• (3.11.2) Detailed discussions on expenditure items based on: trends of expenditure, absorptive capacity, unspent balance, status of appraisal & approval of schemes/projects.
• (3.11.3) Requirements of funds for all expenditure categories (programmes, schemes) and departmental receipts discussed — chaired by Secretary (Expenditure).
• (3.11.4) Receipts of departmentally run commercial undertakings (netted against gross expenditure) discussed in detail. All Ministries required to submit details of autonomous bodies/implementing agencies with dedicated corpus funds — with reasons for continuance, grant-in-aid requirement, and why they should not be wound up.
• (3.11.5) Estimates initially submitted may undergo changes due to scrutiny in Budget Division and deliberations between Secretary (Expenditure) and Secretary or Financial Adviser of the Department.
• (3.11.6) Expenditure estimates provisionally finalized after Secretary (Expenditure) completes discussions with Secretaries and Financial Advisers.
• (3.11.7) Provisional ceilings for expenditure communicated to Ministries/Departments after approval of Finance Minister. ⭐ Finance Minister's approval needed for ceilings
• (3.11.8) Ministries/Departments to indicate actual expenditure (net of recoveries) in SBEs against each scheme for previous year in UBIS.

• (3.12.1) Mandatory 10%: All Ministries/Departments (except those specifically exempted by Ministry of DoNER) are required to spend 10% of Gross Budget Support (GBS) from their allocation under Central Sector Schemes and CSS for the benefit of North Eastern Region & Sikkim. ❗ 10% GBS for NER & Sikkim — mandatory
• (3.12.2) Major Head Classification:

  • →
    Revenue Expenditure → Major Head '2552 — North Eastern Region'
  • →
    Capital Expenditure → '4552 — Capital Outlay on NER' or '6552 — Loans for NER'
  • →
    For eventual re-appropriation to appropriate functional heads at time of expenditure
• (3.12.4) Exemption List by DoNER: DoNER to send list of exempted Ministries/Departments and schemes to Budget Division — by due dates in Budget Circular.

• (i) CPAO Controls: The Demand for Grant 'Pensions' is administered and controlled by the Central Pension Accounting Office (CPAO), Department of Expenditure, New Delhi. CPAO prepares and compiles the Demand 'Pensions' for the ensuing year.
• (ii) Accountant General's Role: Accountant General furnishes to CPAO — estimates of pension payments accounted for and in respect of other sub-heads. Pensionary charges categorized as 'charged' expenditure should be reflected accordingly.
• (iii) Director of Audit, Central Revenues: Furnishes to CPAO — estimates for staff of Indian Audit and Accounts Department retiring during ensuing year. Estimates of Post and Railway Audit Offices (ab-initio debited to working expenses) to be excluded.
• (iv) CPAO Consolidation: All other pensionary estimates from Accounts Offices of Ministries/Departments, UT Administrations and Controller General of Defence Accounts, New Delhi → sent to CPAO → consolidated → furnished to Budget Division.
• (v) Recoveries from States: Separate estimates of recoveries from State Governments — adjustable under Receipt Major Head '0071 — Contributions and Recoveries towards Pension and Other Retirement Benefits' — forwarded by CPAO to Budget Division for incorporation in revenue receipts under Department of Expenditure.

• (3.14.1) Interest Payments: Estimates for interest on provident fund balances of employees, deposits in Public Account including Reserve Funds, deposits of Commissioners of Payments etc. — furnished by Chief Controllers of Accounts / Controllers of Accounts including Ministry of Railways (Railway Board) and Ministry of Defence.
• (3.14.2) Finance Wings' Duty: Finance Wings to ensure estimates of 'Interest Payments' are furnished by Controllers of Accounts to Budget Division. Changes in RE for current year and BE for next year also to be explained by the estimating authority.
• (3.14.3) Loans to Government Servants — Statement Required: Estimates must be accompanied by a Statement showing:

  • →
    Actual disbursements under each category of advance during the preceding three years
  • →
    Actual expenditure in the first 6 months of current financial year
  • →
    Furnished by Budget Section of the concerned Ministry/Department
• (3.14.4) Deadline: Estimates and actual expenditure up to 30th September to be furnished to Budget Division in prescribed form. Ministries to furnish estimates of loans to Govt. servants and recoveries thereof as per prescribed date in Budget Circular.

• (3.15.1) Statement showing items of new service for which provision is made in BE of the ensuing financial year should be furnished to Ministry of Finance.
• (3.15.2) Exact Match Required: Information furnished for inclusion in Demands for Grants must exactly match the information in the Detailed Demand for Grant (DDG) of the respective Ministry/Department. ❗ DG and DDG must match exactly
• (3.15.3) Reference: Revised Guidelines on Financial Limits for "New Service / New Instrument of Service" — DEA O.M. No. F.1(23)-B(AC)/2005 dated 25.05.2006.

• (3.16.1) Who Prepares: Respective Ministries/Departments prepare their DDG — in format given in Budget Circular. Classification (major head, minor head etc.) must be as per List of Major and Minor Heads of Accounts.
• (3.16.2) Reconciliation Mandatory: Totals for each Major Head and Revenue/Capital Sections (charged and voted) in DDG must exactly correspond to provisions in Demands for Grants prepared by Budget Division. Final print order only after reconciliation is completed. ❗ Print only after reconciliation
• (3.16.3) Header Format: Major Head number and description indicated at top right corner of each page under the header line.

• (3.16.5) MEP/QEP Statement: Monthly Expenditure Plan / Quarterly Expenditure Plan as per OM No. 12(13)-B(W&M)/2020 dated 25 May 2022.
• (3.16.6) Major Head Codes: Major Head Codes in DDG must correspond to codes in main Demands for Grants.
• (3.16.7) Codification Rules: Standard numeric codification (December 1994 instructions) to be strictly adhered to. No new sub-head/detailed head to be opened without numeric codes assigned from office of Controller General of Accounts. ❗ New heads → numeric codes from CGA mandatory
• (3.16.8) UBIS Entry Mandatory: DDG shall be mandatorily entered in UBIS. DDG generated from UBIS fed into PFMS for enabling incurring of expenditure. ⭐ UBIS → DDG → PFMS → Expenditure
• (3.16.9) Website Upload: All Ministries/Departments to upload full details of DDG as approved by Parliament on their website — for transparency. (OM No. 15(38)-B(R)/2008 dated 14.8.2008)

• (3.17.1) NITI Aayog Guidelines: Comprehensive guidelines issued vide NITI Aayog OM No. M-11011/8/2017-SJE dated 20.11.2017 (read with OM dated 14.1.2019). Obligated Ministries/Departments to keep required percentage under SCSP and TASP — and endeavour to keep higher percentage where possible. (Guidelines under review; fresh guidelines expected.)
• (3.17.2) Calculation Basis: Total allocation for CSS and Central Sector Schemes of obligated Ministries taken for calculating % of earmarking under SCSP/TASP. Allocation must not be less than BE of previous year. ❗ Cannot reduce SCSP/TASP below previous year's BE
• (3.17.3) Exemption Requests Considered by:

  • →
    SCSP exemptions → Ministry of Social Justice & Empowerment
  • →
    TASP exemptions → Ministry of Tribal Affairs
  • →
    Both with approval of their respective Ministers
• (3.17.4) Pre-Budget Review via UBIS: Comprehensive review of progress of expenditure under:

  • →
    SCSP — Minor Head 789
  • →
    TASP — Minor Head 796

  Data to be fed in UBIS for review and consideration in pre-Budget meeting. ⭐ MH 789 = SCSP | MH 796 = TASP

• (3.18.3) C&AG Observations: C&AG has observed inconsistencies/discrepancies in disclosure statements — relating to arrears of NTR; loans to foreign governments; variation in closing/opening balances of physical and financial assets (when compared to Finance Accounts). All Ministries to ensure utmost accuracy. Variations with previous year to be explained in footnotes.
• (3.18.6) Annuity Projects: GoI approving Annuity projects for infrastructure development:

  • →
    Concessionaire (private sector) meets entire upfront/construction cost (no Government grant) + annual maintenance
  • →
    Recovers entire investment + pre-determined return from annuities payable by Government every year
  • →
    Information to be provided in prescribed format of Budget Circular

• (i) Values shown in crore of rupees — not in lakhs/thousands (e.g. ₹40 lakh = ₹0.40 crore)
• (ii) Consistency between information provided to Budget Division and in C&AG reports on Direct and Indirect Taxes
• (iii) While reporting NTR arrears — guarantee fee arrears should be reconciled
• (iv) Variations with last year's reported information — explained in footnotes or appropriate remark portion
• (v) NTR arrears exceeding ₹500 crore — reasons to be explained in appropriate remark portion
• (vi) Arrears of NTR and Asset Register — submitted in UBIS only. Statements signed by competent authority (with telephone number) forwarded to Department of Economic Affairs

• (4.1.1) Three Core Principles: In the entire process of Budget preparation commencing with issue of Budget Circular, there is a need for maintaining secrecy, accuracy and timeliness. ⭐ Three pillars: Secrecy · Accuracy · Timeliness
• (4.1.2) Intensive Checking: All statements, information and inputs require intensive checking — with special attention to manually generated statements, for which an additional level of check is to be ensured. List of such statements allocated/distributed amongst staff and officers is circulated internally every year in Budget Division with the approval of JS/AS (Budget).
• (4.1.3) Follow-up by DDs/USs: Concerned Deputy Directors/Under Secretaries in Budget Division are required to follow up with Ministries/Departments for receipt of information regarding different Statements/Annexures of Budget documents for which they are responsible — ensuring they are received and processed within given timelines.
• (4.1.4) Budget Activity Schedule: Tentative timelines for receiving information/activities associated with Budget preparation/completion of budgetary documents/processes have been brought through Budget Activity Schedule — circulated to all concerned. Draft Budget Activity Schedule is in Annexure 2.
• (4.1.5) Paperless Budget (from 2021-22): Budget documents from 2021-22 have been brought out in digital mode. Tentative activity-wise schedule for paperless Budget is in Annexure 4. Paperless Budget documents provided through e-mail to Lok Sabha and Rajya Sabha Secretariat at the earliest after completion of Budget Speech by Finance Minister. LS/RS Secretariat further sends/distributes Budget documents through online mode to Members of Parliament. ⭐ Paperless Budget from 2021-22

• (4.2.1) Dynamic Allocation: Preparation and finalization of different Budget documents is currently assigned to different sections. However, these allocations are dynamic and may be changed/re-assigned as per requirements with the approval of AS/JS (Budget). Each Director/Deputy Secretary in charge of the concerned Section in Budget Division is responsible for keeping a close watch and personally supervise the preparation of these documents.
• (4.2.2) Acquaintance & Checklist: Staff of Budget Division must fully acquaint themselves with the current year's document in relation to allocated responsibilities (Annexure 5) — and preferably have a check-list for each statement of each document for which they are responsible.

• (4.3.1) Post-Meeting Process: After pre-Budget meetings, approved ceilings for expenditure are communicated — including separate ceilings for Revenue and Capital expenditure — on the basis of which Financial Advisers prepare the SBE (Final) in the form prescribed in Budget Circular and forward it to Budget Division.
• (4.3.2) UBIS — Union Budget Information System: A software — UBIS — created for submission/processing and finalization of SBE and other Budget documents. Available online — accessible by Ministries/Departments for filling details of estimates. ⭐ UBIS = Online system for SBE submission & processing

• (4.3.4) Major Head Expenditure:

  • →
    For Expenditure Type — Charged/Voted/Total: it is the major head under which expenditure is incurred/proposed
  • →
    For Expenditure Type — Receipt: it is the major head against which the receipt is netted
  • →
    For Expenditure Type — Recovery: it is the same as Major Head Receipt/Recovery
• (4.3.5) Major Head Receipt/Recovery: In case of Expenditure Type — Receipt/Recovery, it is the receipt or recovery major head.
• (4.3.6) PSE Category: A PSE Category is a heading which appears by itself without any number preceding it in Part C of SBE and is a grouping for PSEs. All PSEs within a category are totalled at the end of the Category.
• (4.3.7) UBIS Worksheet Structure: The SBE database has one worksheet for each Demand for Grant. Each worksheet identified as Dxx (where xx = demand number, e.g. D10, D25). Both the SBE and Demands for Grant provisions for individual demands are prepared in the same database worksheet. The complete worksheet functions as both input and final output for SBEs and DGs. Additional functional/summary areas defined within worksheet for intermediate calculation and further processing of other output statements.
• (4.3.8) NIC Training: NIC of Ministry of Finance conducts comprehensive training for officers/staff of Ministries/Departments handling Budget work — for proper orientation and understanding of the SBE and the format in which information is required to be sent to Budget Division.

• Various Departments/Divisions in Finance Ministry and other Departments/Ministries are required to provide input related to Budget Speech of the Finance Minister.
• For checking facts and figures in the FM's speech — insofar as they are referred to in other Budget documents — the same is done by the Budget Division.

• (i) Editorial revisions to be carried out wherever required
• (ii) Key to Budget Document to be added/explained as the first document
• (iii) Index to be reviewed/amended as per changes made
• Practice: This document is submitted for approval during the first week of January. ⭐ First week of January deadline

• (i) Contents: Page numbers etc. as given in the list of contents must be checked to ensure they match with those assigned to each Demand for Grant.
• (ii) Introduction: Necessary consequential changes to be carried out in the introduction.
• (iii) Summary: Revenue/Capital and Charged/Voted expenditure to be taken from the approved Statement of Budget Estimates while checking the 'Summary' portion.
• (iv) Demands for Grants — 4 checks by Demands Section: DGs are to be prepared and got approved by concerned sections of Budget Division. Demands Section checks:

  • →
    (a) Correctness of number of Demand for Grant
  • →
    (b) Nomenclature of Ministries/Departments
  • →
    (c) Nomenclature of Heads of Accounts — checked from List of Major and Minor Heads of Accounts (LMMHA)
  • →
    (d) DG summary tallied with individual DGs
• (v) Statement on New Service/New Instrument of Service (NS/NIS): Demands Section has the responsibility to call for information from all Ministries/Departments and prepare the NS/NIS Statement on the basis of information so furnished.

• (i) Source: Figures in Expenditure Budget are as per SBE filled/submitted by Ministries/Departments in UBIS. Estimates and actual expenditure are, generally, net of recoveries.
• (ii) Dedicated Reserve Funds — Negative Entries: As an exception, expenditure met from dedicated reserve funds maintained in Public Account are shown as recoveries and indicated as negative (-) entries. Actual expenditure for previous year are mapped from DDG data furnished by CGA to the line entries appearing in SBE — this exercise carried out in UBIS.
• (iii) RE and BE Entry + Write-up Checking: RE for current year and BE for next year also to be entered into UBIS. Write-up/Notes to Demands together with print proof of SBEs have to be seen/checked by concerned DDs/USs — with reference to final vetted copies of SBEs/DGs received from Ministries/Departments. Additionally, write-ups/Notes will also be checked by all Directors/Deputy Secretaries/Additional Budget Officer in Budget Division.
• (iv) Checks in Expenditure Budget (6 checks): Part C provisions for capital investment in Public Enterprises must match provisions in Part A. Additional checks:

  • →
    (a) Correctness of Number/Nomenclature of Demands for Grants relating to the Ministry/Department
  • →
    (b) Correctness of Number/Nomenclature of Major Heads and Budget provisions
  • →
    (c) If any scheme newly included/deleted in RE/BE — properly inserted/deleted in soft format of SBE through UBIS (important as some statements compiled from final SBEs)
  • →
    (d) Soft data of SBE to be checked properly; matching of figures from one section to another in Spreadsheet to be verified
  • →
    (e) Any correction at a later stage after submission of SBEs to NIC — must be routed through NIC for capturing revised data in all related statements
  • →
    (f) Uniformity in pattern/presentation of write-ups of different Ministries/Departments
• (v) 8 Verifications Required:

  (a) Ceilings verification

  (b) IEBR reflection in SBEs as per PFC-II Division; verification of Charged Expenditure

  (c) RE provisions to be based upon supplementary given/likely to be given

  (d) Verification of Recoveries/Netted receipts

  (e) Verification of provisions for North East Region

  (f) Reviewing the Write-up (Hard & Soft Copy)

  (g) Verification of the CHECK DIGIT

  (h) Deletion of line entries where no expenditure provision or actual expenditure is zero
• (vi) Checks During Lock-in Period in Budget Press (4 checks):

  • →
    (a) Verification of ceilings with detailed break-down
  • →
    (b) Checking provisions for Charged Expenditure (shown in italics)
  • →
    (c) Checking Recoveries/Netted receipts; Review of write-ups
  • →
    (d) Deletion of zero lines

• Expenditure Profile gives an aggregation of various types of expenditure and certain other items across demands through different Statements.
• Important Statements include:

  • →
    Major variations between BE and RE (current year) and between RE and BE (ensuing year) with brief reasons
  • →
    Contributions to International bodies
  • →
    Estimated strength of establishment of various Government Departments and provision thereof
  • →
    Gender Budgeting statement
  • →
    Schemes for Development of SCs and STs including SCSP/SCSS and TSS allocations
  • →
    Schemes for Welfare of Children
  • →
    Expenditure details and budget estimates regarding autonomous bodies
  • →
    Details of certain important funds in Public Account
  • →
    Statements showing externally aided projects
• Expenditure Profile gives total provisions for each Ministry arranged under categories — CSS, Central Sector Schemes, Establishment, Other Central Expenditure, Transfer to States etc. — and highlights Budget provisions for certain important programmes and schemes.

• (a) Estimates deadline: Department of Revenue (CBDT and CBIC) furnishes estimates for Direct Taxes and Indirect Taxes by 7th January to Budget Division. ❗ 7 January = CBDT/CBIC deadline
• (b) Write-up + States' share: Write-up to be submitted by Revenue Department for Direct/Indirect Taxes. On receipt of estimates from CBDT and CBIC — States' share calculated for RE/BE from the shareable pool as per percentage recommended by Finance Commission after deducting cost of collection, as provided in Expenditure Budget.

• (a) Letters issued to Ministries/Departments (including UTs) calling for NTR estimates by due date in Budget Circular.
• (b) Estimates given to respective sections in Budget Division (Ministry/Department-wise) for getting approved from the designated Director in Budget Division — tentatively by end of December.
• (c) Estimates as approved by Director are consolidated in the form of Statement and submitted for approval of Secretary (DEA) — by first week of January every year — for incorporation in Receipt Budget documents. ⭐ NTR: Director approval by end-Dec → Secretary (DEA) approval by first week of Jan

• Loan repayment receipts from CPSEs — compiled by PD Section; from States — compiled by States Section. Disinvestment receipts estimates — furnished by DIPAM.

• (a) Market Loan: Worked out on basis of Market borrowing requirements of Government. Details of borrowing calendar and periodical notification issuance at Annexure 13.
• (b) National Small Savings Fund (NSSF): Compiled by NS Section — on basis of information from Department of Posts/CGA/Banks. Details at Annexure 14.
• (c) Other Receipts: Figures included on basis of information from concerned Ministry/Department/RBI. E.g. estimates of Funds pertaining to Railways received from Ministry of Railways.
• (d) International Financial Institutions: OMI and BC Division of DEA compile the information and send to Budget Division for incorporation in Receipts Budget — through IFU of DEA.
• (e) Market Stabilization Scheme: Included as per estimates provided by RBI.

• (4.4.7) Annual Financial Statement (AFS): Generated on the basis of information filled by different sections of Budget Division in UBIS. Actuals are on the basis of information provided by CGA.
• (4.4.8) Key Features of Budget: Prepared on the basis of the Finance Minister's speech and the major features of budgetary allocations for Ministries/Departments.
• (4.4.9) Fiscal Policy Statements under FRBM: Two Fiscal Policy Statements under the provisions of the FRBM Act are presented with the Budget — prepared on the basis of guidelines in the FRBM Act/Rules. Details discussed in Annexure 7 of the Manual. ⭐ Two FRBM Fiscal Policy Statements presented with Budget

• (4.5.1) Finance Ministry has its own press to print the entire set of Budget papers. Entry to Budget Press is restricted in the months before the Budget is presented.
• (4.5.2) Lock-in: Employees of the press stay in the Press along with other staff and officers who are also locked-in for the last few days — as a security measure to ensure foolproof secrecy for Budget papers. ❗ Staff locked in at Budget Press for last few days
• (4.5.3) Manager (Press) Responsibilities — 5 duties:

  • →
    (i) Timely procurement and receipt of items for printing documents
  • →
    (ii) Action to ensure all key personnel are in position
  • →
    (iii) Cleanliness inside/outside Budget Press
  • →
    (iv) Coordination with other agencies — Fire Brigade, Delhi Police, MTNL, IB, Canteen, Hospital, setting up of CCTV etc.
  • →
    (v) Completion of Construction/Maintenance works in and around Budget Press by 30th November latest

  ❗ Construction/Maintenance to be complete by 30 November
• (4.5.4) Security: Security arrangements for the entire Budget period are made by the Intelligence Bureau (IB) — in consultation with Budget Division. IB is responsible for:

  • →
    Screening all officers and staff associated with the Budget
  • →
    Setting up elaborate security arrangement in Budget Division and Budget Press to ensure secrecy

• (4.6.1) Background: Major Expenditure Reforms include simplification of appraisal/approval processes and structural changes — including doing away with Plan and non-Plan. Cost-centres now treated in an integrated manner within the statutory revenue-capital framework. This enables bringing public schemes/projects under a Monitorable Output-Outcome Framework.
• (4.6.2) Since 2017-18: In addition to financial outlays, expected outputs and outcomes of Schemes are also presented in a consolidated Outcome Budget document along with the Budget — presented to Parliament in measurable terms, bringing in greater accountability.

  📌 Three Key Definitions

  OUTLAY
  Amount provided for a given scheme/project in the Budget

  OUTPUT
  Direct and measurable product of program activities — often in physical terms/units

  OUTCOME
  Collective results or qualitative improvements brought about by delivery of services
• (4.6.3) Threshold: Document contains Output-Outcome Framework for major CS Schemes and CSS with outlay of ₹500 crore and more. ❗ ₹500 crore+ outlay → OOMF mandatory
• (4.6.4) OOMF Process Flow:

  📋 Ministries prepare OOMF in prescribed format (Appendix-XLVIII)

  →

  📤 Submit to NITI Aayog (English & Hindi) — timeline communicated by NITI Aayog

  →

  ✅ NITI Aayog finalizes OOMF → forwards to DoE (PFC-II Division)

  →

  🔍 DoE reviews targets w.r.t. budgeted outlay in consultation with DMEO, NITI Aayog

  →

  📄 Final document forwarded to Budget Division

• (4.7.1) Budget Division submits/sends various letters to Parliament — signed by Finance Minister — both before presentation and after presentation of Budget — regarding legislative business. Timeline at Annexure 8.
• (4.7.3) Finance Bill Number: Budget Division (Demands Section) obtains Bill Number for Finance Bill from Ministry of Law and Justice and communicates to Budget Press.

  • →
    If first Bill for the year — no number assigned; title: 'Finance Bill, Year'
  • →
    If second or subsequent Bill — title: 'Finance (Number) Bill, Year'
  • →
    This number appears uniformly on letters signed by Finance Minister. Same procedure followed for Appropriation Bill.

Letters signed by FM are enclosed with the President's recommendations before being submitted to Lok Sabha on 1st February. Immediately after presentation of Budget, the following documents are submitted for FM's approval and signature:

• (i) List of Demands for Grants: Prepared in Budget Press. 800 copies to be provided to Lok Sabha before commencement of 2nd Session of Budget after recess. Prepared in two formats. ❗ 800 copies for Lok Sabha
• (ii) Draft Appropriation Bill: Note — the date appearing in 4th Para (Clause) of the Bill is the date of notification vide which the list of existing Demands has been updated.
• (iii) Statement to the Appropriation Bill — in format showing: No. & Name of Demand | Amount of Demand for Grant (Revenue / Capital) to Vote of the House.
• (iv) Before Parliament Resumption: Draft Appropriation Bill + Statement + Statement of Objects and Reasons (signed by FM) sent to Leg-I Section, Ministry of Law & Justice. Summary for President + letters sent to Lok Sabha Secretariat.
• (v) Vetting by Law Ministry: US (Demand) to visit Leg-I Section of Ministry of Law & Justice for vetting of Appropriation Bill and related Statement — before it is sent to Lok Sabha Secretariat for final vetting.
• (vi) Legislative Section-I, Lok Sabha Secretariat also sends the draft Appropriation Bill for vetting by Demand Section — before it is finally printed in Parliament Press.
• (vii) After vetting, Appropriation Bill is introduced in Lok Sabha on the scheduled date.
• (viii) Immediately after Bill is passed by Lok Sabha — Summary for President seeking recommendations for introduction in Rajya Sabha along with relevant letters sent to RS Secretariat.
• (ix) After Bill is passed by both Houses — President's Assent taken by Ministry of Law & Justice.
• (x) Publication: After President's Assent — corresponding Act published in Gazette of India by Minto Road Government Press — coordinated by Ministry of Law & Justice.
• (xi) Gazette Notification by Demand Section: On the day the Appropriation Act is published in Gazette — a notification issued by Demand Section, Budget Division in both English & Hindi — for distribution among all Financial Advisors and related offices. A copy along with the Act also uploaded on official website of Department of Economic Affairs.

• (4.7.6) Similar exercise done for laying, passing, assenting and notifying approval of Supplementary Demands for Grants.

• (i) Constitutional Position: When a State/UT (with legislature) is placed under President's Rule by virtue of proclamation order of President of India — powers of legislature of the State/UT are exercised by or under the authority of Parliament.
• (ii) Money Bills: For States — all Money Bills or other Bills to which Article 207 of the Constitution applies — are to be reserved for the consideration of the President after they are passed by the Legislature of the State.
• (iii) Laying of AFS in Parliament: Laying of the Annual Financial Statement and other Budget Documents of the State/UT (with legislature) is done before both Houses of Parliament — under Articles 202, 239 and 239A of the Constitution read with relevant Sections of the State Act. ⭐ Art. 202, 239, 239A — AFS laid in Parliament under President's Rule
• (iv) MHA's Role: Ministry of Home Affairs (MHA) required to send Budget proposals for RE of current year/Budget/Supplementary Estimates — in consultation with the State under President's Rule. Normally done in November/December after release of expenditure ceilings.
• (v) Ceiling Check: Budget Estimates checked with corresponding expenditure ceilings released by Ministry of Finance pertaining to Demands for Grants of the UT concerned.
• (vi) Examining documents as per requirement of Parliament. Drafting of Appropriation Bills/Statement of Reasons.
• (vii) President's Recommendation: President's Recommendation (as per constitutional requirement) to be sought before laying the Budget Documents in Parliament — for both Supplementary and Budget Estimates — including Statement of Reasons and Appropriation Bills. ❗ President's Recommendation mandatory before laying Budget Documents
• (viii) After obtaining President's Recommendation — Notices duly signed by FM shall be sent to Rajya Sabha for consideration of the Appropriation Bill. Followed by laying in Parliament and passing of Bills as per constitutional mandate.
• (ix) Bill Section of Parliament seeks vetting of the Appropriation Bill and requests sending it directly to the Legislative Section, Ministry of Law & Justice.
• (x) After the Appropriation Bill is returned by Rajya Sabha — Budget Division to keep in touch with Bill Section (LS/RS) and Legislative Branch, Ministry of Law & Justice to get the President's Assent.
• (xi) Finally, the Gazette Notification issued by Ministry of Law & Justice is to be forwarded to the Finance Department of State/UT.

• After the Appropriation Bill relating to Budget is passed, Ministry of Finance notifies/communicates the same to Ministries/Departments.
• Ministries/Departments in turn distribute the same to their subordinate formations. The distribution so made shall also be communicated to the respective Pay and Accounts Officers — who shall exercise check against the allocation to each subordinate authority. ⭐ PAO exercises check against allocation to each subordinate authority

• Ministry or authority on whose behalf a Grant or Appropriation is authorised by Parliament shall distribute, where necessary, among the controlling and disbursing officers subordinate to it.
• All Budget Controlling Officers / Drawing and Disbursing Officers (DDOs) will ensure that expenditure incurred is within the sanctioned amount. ❗ Expenditure must be within sanctioned amount — BCO/DDO responsibility

• Primary Responsibility: Ministries/Departments are responsible for the control of expenditure against the sanctioned grants and appropriations placed at their disposal. Control is exercised through Heads of Departments, other Controlling Officers, and Disbursing Officers subordinate to them.
• Four Conditions to be Ensured:

  (i) Expenditure is incurred for the approved purpose

  (ii) It is within the sums allotted

  (iii) It has been incurred under the authority competent to sanction it

  (iv) Due prudence has been followed in its incurrence

  📌 As Ministries have delegated their powers to lower functionaries — basic responsibility is shifted to the particular functionary concerned, but overall responsibility remains with the administrative Ministry.

• Grant Utilisation Rules:

  • →
    A Grant or Appropriation can be utilised only to cover the charges (including past year liabilities) which are to be paid during the financial year and adjusted in the accounts of the year. No charges against a Grant or Appropriation can be authorized after expiry of the financial year.
  • →
    No expenditure shall be incurred that may have the effect of exceeding the total grant or appropriation authorized by Parliament — except after obtaining a supplementary grant or appropriation or an advance from the Contingency Fund.
  • →
    No public authority can incur any expenditure or enter into any liability involving expenditure or transfer of moneys for investment/deposit from Government account — unless such expenditure/transfer has been sanctioned by general or special orders of the Government or by any authority to which power has been delegated.
• Compliance with Rules: Government authorities must comply with rules prescribed in the General Financial Rules (GFR) and the Delegation of Financial Power Rules (DFPR) in all financial matters.
• Role of Controlling Authorities: Designated controlling authorities must ensure not only that total expenditure is kept within authorised grant limits, but also that funds allotted to spending units are expended in the public interest and on objects for which money was provided. The controlling officer obtains information on:

  • →
    What has actually been spent from the grants
  • →
    What commitments and liabilities have been and will be incurred against them

• CMEC was initially introduced on 1st April 2006. Based on working of the scheme, it was decided to expand and modify it. Modified Cash Management System seeks to achieve the following 5 objectives:

  • →
    (i) Obtain greater evenness in budgeted expenditure within the financial year — especially for items entailing large sums of advance releases and transfers to corpus funds
  • →
    (ii) Reduce rush of expenditure during the last quarter — especially the last month of the financial year
  • →
    (iii) Reduce parking of funds
  • →
    (iv) Effectively monitor the expenditure pattern
  • →
    (v) Better planning of Indicative Market Borrowing Calendar of the Central Government

  ⭐ 5 objectives of CMEC — must remember

• Definition: Revised Estimates are estimates of probable receipts and expenditure arrived at after mid-year review. ⭐ RE = Mid-year review of probable receipts & expenditure
• Not Voted by Parliament: Revised Estimates are not voted by Parliament — and hence by itself does not provide any authority for expenditure. Therefore, any additional projections made in Revised Estimates need to be authorised for expenditure through:

  • →
    Parliament's approval (in case of New Service/New Instrument of Service etc.), OR
  • →
    Re-appropriation order as per Delegation of Financial Power Rules

  ❗ RE alone does not authorise expenditure
• Revised Estimates should be prepared with due care as these are important tools of fiscal management.

• Definition & Timing: Re-appropriation of funds from one primary unit of appropriation to another such unit within a grant or appropriation may be sanctioned by a competent authority at any time before the close of the financial year to which such grant or appropriation relates.
• Power Subject to: Subject to provisions of Rule 10 of Delegation of Financial Powers Rules, 1978 — and also such other general or specific restrictions as may be imposed by the Finance Ministry.
• Condition for Re-appropriation: Shall be made only when it is known or anticipated that the appropriation for the unit from which funds are to be transferred shall not be utilized in full or that savings can be effected in the appropriation for the said unit. ❗ Re-appropriation only from anticipated savings

• (i) To meet expenditure which has not been sanctioned by an authority competent to sanction it
• (ii) From appropriations charged on Consolidated Fund of India to meet expenditure voted by Parliament — or vice versa
• (iii) From one Grant/Appropriation to another Grant/Appropriation
• (iv) To meet expenditure on a new service or new Instrument of Service
• (v) General restriction related to expenditure on Works (Refer DFPR Rule 10)

• (i) Power to augment provisions through re-appropriation of funds below ₹5 crore has been delegated to administrative Ministries/Departments. ⭐ Below ₹5 crore → delegated to Ministries/Departments
• (ii) Full powers for augmenting provisions under primary units — 'Salaries', 'Wages', 'Pensionary Charges', 'Medical Expenses' and 'Rent, Rates and Taxes' — through re-appropriation of funds available within the same section of the Grant. ⭐ 5 primary units with full re-appropriation powers within same section
• (iii) Augmentation under budget heads of establishment-related expenditure (office expenses, travel expenses, OTA etc.) through re-appropriation requires approval of Department of Expenditure (to be processed by Personnel Division).
• (iv) No re-appropriation of funds from savings available under Externally Aided Project (EAP) to non-EAP purpose. ❗ EAP savings cannot be re-appropriated to non-EAP
• (v) No re-appropriation from savings available under 'Salaries' to meet expenditure under 'Non-Salaries'. ❗ Salaries savings cannot go to Non-Salaries

• (i) From and to the provision for Secret Service expenditure
• (ii) So as to augment the provision under the primary units 'Salaries', 'Wages', 'Office Expenses' and 'Other Charges' taken together for the entire Grant or Appropriation — except for the exception for Ministry of Information and Broadcasting (Note under Rule 10(6)(b) of DFPR)
• (iii) From the provisions made for any specified new item of expenditure in a Grant or Appropriation for another purpose

• Procedure for Re-appropriation: Application for re-appropriation should ordinarily be supported by a statement in Form GFR 4 (or any other special form authorized by departmental regulations) showing how the excess is proposed to be met. All orders sanctioning re-appropriation must:

  • →
    State reasons for savings and excess of ₹1 lakh or over
  • →
    State the primary units (and secondary units, wherever necessary) affected
  • →
    The authority sanctioning the re-appropriation should endorse a copy of the order to the Accounts Officer

• Constitutional Basis: Article 115 of the Constitution provides for seeking Supplementary Demands during the Financial Year if the amount authorized by Parliament is found insufficient or a need has arisen for a new service. Number of Supplementary Demands is not prescribed in the Constitution. ⭐ Art. 115 — Supplementary Demands | Number not prescribed

• (i) Need for economy and rationalisation of expenditure
• (ii) Thorough review of expenditure to explore the possibility of meeting requirements for additionality through Token or Technical Supplementary
• (iii) No new schemes and programmes — except those that are part of Budget announcements — should normally be introduced during the course of the financial year
• (iv) Additional expenditure over and above the prescribed approved ceiling for individual schemes may not be ordinarily permitted
• (v) If an amendment to existing scheme leads to requirements for additionality — Ministries/Departments should explore and locate matching savings from other schemes/projects in the Demand
• (vi) Mandatory cuts under austerity instructions should be enforced before determining requirements for additionality
• (vii) Proposal for Supplementary Demand should be made only when the programme/scheme has been approved by competent authority and should be limited to the funding requirements within the relevant financial year

📌 Checklist and legislative procedure related to Supplementary Demands for Grants is at Annexure 9.

• It is the responsibility of the Grant Controlling Authority to ensure that excess expenditure beyond authorized limits is not incurred.
• However, if total expenditure under a Grant exceeds the provision allowed through its original Grant and Supplementary Grant (if any) — the excess requires regularization by obtaining excess Grant from Parliament under Article 115 of the Constitution. ❗ Excess expenditure → regularized via Excess Grant under Art. 115

• Ministries/Departments should surrender the savings to the Finance Ministry — by the dates prescribed by that Ministry before the close of the financial year — along with all anticipated savings noticed in the Grants or Appropriations controlled by them.
• This is needed to ensure that anticipated savings can be reallocated for other unanticipated expenditure requirements.
• The Finance Ministry shall communicate the acceptance of such surrenders as are accepted — to the Accounts Officer — before the close of the year.
• Savings as well as provisions that cannot be properly utilised should be surrendered to Government immediately when they are foreseen — without waiting till the end of the year. No savings should be held in reserve for possible future excesses. ❗ No holding savings in reserve for future excesses
• Rush of expenditure — particularly in the closing months of the Financial Year — is regarded as a breach of financial propriety and shall be avoided. ❗ Rush of expenditure in closing months = breach of financial propriety

📌 Secretary of a Ministry/Department is the Chief Accounting Authority (CAA) of the Ministry/Department.

• Constitutional Basis — Article 270: All taxes and duties referred to in the Union List — except those in Articles 268, 269 and 269A, surcharge on taxes (Article 271), and any cess levied for specific purposes — shall be levied and collected by the Government of India and distributed between the Union and the States.
• Article 279 read with Article 270: Empowers the C&AG to ascertain and certify the net proceeds of taxes and duties levied and collected by the Union — to be distributed between Union and States. 'Net Proceeds' mean — proceeds of tax/duty reduced by the cost of collection. ⭐ Net Proceeds = Gross Proceeds − Cost of Collection
• Calculation Process: Based on receipt estimates from CBDT and CBIC and actuals for previous year from office of CGA (Finance Accounts format). Detailed working sheet showing calculation of Tax Revenue, Net Divisible Pool, non-shareable pool, cost of collection etc. is prepared. After deducting cost of collection and non-shareable elements from Gross Tax Revenue — and applying State-wise/tax-wise distribution formula as per Finance Commission recommendations — the shareable proceeds and Net to Centre portion are arrived at. (This procedure also under implementation in UBIS system.)
• Monthly Devolution Process: After the Budget is passed in Parliament — Devolution of shareable Taxes and Duties is done on a monthly basis to States as per Finance Commission recommendations. Monthly sanctions are issued (Tax-wise/State-wise) through UBIS — to facilitate payment through PFMS / issuance of cheques / advices through Pay & Accounts Office and RBI. Releases are based on estimates of receipts — subject to final adjustment according to the Audit Certificate issued by C&AG. ❗ Date of devolution: 10th of each month (w.e.f. FY 2022-23; earlier it was 20th)

• C&AG Certificate Factored In: Thereafter, the C&AG Certificate issued with respect to Net Proceeds for the previous year is factored in to accommodate the recommended variations in estimates for the current year. Finally, the statements showing State-wise distribution — Annexure 4 (BE), Annexure 4A (RE for current FY) and Annexure 4B (Actuals for previous FY) — are finalized for incorporation in the Receipts Budget. ⭐ Annex 4=BE | Annex 4A=RE | Annex 4B=Actuals

• 📌
  FRBM Act, 2003 stipulates that the Central Government shall lay in each financial year before both Houses of Parliament the following Statements of fiscal policy — along with the Annual Financial Statement and Demands for Grants:
• 📄
  (a) Medium-Term Fiscal Policy Statement (MTFPS) & Fiscal Policy Strategy Statement (FPSS)
• 📄
  (b) Macro-Economic Framework Statement

• ⚖️
  Basis: As per Section 3 of FRBM Act, 2003 — Government is required to lay MTEF before both Houses of Parliament — immediately following the session in which the fiscal policy statements (MTFPS & Macro-Economic Framework Statement) were laid. ⭐ MTEF laid in session immediately following the one in which fiscal policy statements are laid
• 🎯
  MTEF shall provide three-year rolling targets for the prescribed expenditure indicators (under revenue and capital section) with specification of underlying assumptions and risk involved.
• 📌
  Also contains expenditure commitments of major policy changes involving new service, new instrument of service etc.
• 🗺️
  MTEF gives a medium-term perspective to Central Government finances and specifies a path for Government's fiscal consolidation. May also provide closer integration between Budget and FRBM Statements and facilitate expenditure planning with a medium-term perspective.

• 🔁
  As per Section 7(1) of FRBM Act, 2003 — Government monitors trend of receipts and expenditure through a Statement laid in the Parliament during the Winter and Monsoon sessions. ⭐ Laid in Winter and Monsoon sessions

• 📅
  From the fiscal year 2006-07, Outcome Budget has been a part of the budgetary process — wherein every Ministry presents a preliminary Outcome Budget.
• 📅
  Since 2017-18, the expected outputs and outcomes of the schemes are also being presented in a consolidated Outcome Budget document, along with the Budget.
• 🏛️
  These Outlays, Outputs and Outcomes are being presented to Parliament in measurable terms — bringing in greater accountability for the agencies involved in the execution of Government schemes and projects.
• 💰
  The Outcome Budget contains Output-Outcome Framework for major Central Sector (CS) Schemes and Centrally Sponsored Schemes (CSS) with outlay of ₹500 crore and more. ❗ ₹500 crore+ → covered in Outcome Budget

• 🏢
  Development Monitoring and Evaluation Office (DMEO) is the apex Monitoring and Evaluation (M&E) office — supporting the Government to achieve the national development agenda through M&E of Government policies and programs.
• 📅
  DMEO was established on 18th September 2015 as an attached office of the NITI Aayog — by merging the erstwhile Program Evaluation Office and Independent Evaluation Office. ⭐ Merger of Program Evaluation Office + Independent Evaluation Office
• 🔓
  To ensure that DMEO is able to function independently — it has been given separate budgetary allocations and manpower in addition to complete functional autonomy.

• 📈
  (i) Monitoring progress and efficacy of strategic and long-term policy and program frameworks and initiatives to help innovative improvements — including necessary mid-course corrections
• 🔎
  (ii) Actively monitoring and evaluating the implementation of programs and initiatives — including identification of needed resources so as to strengthen the probability of success and scope of delivery
• 🤝
  (iii) Technical advisory to States — under NITI Aayog's mandate of cooperative and competitive federalism

• 🗣️
  The Cabinet Secretary had advised (December 2002) all Ministries/Departments to carry out evaluation of all ongoing schemes/programmes/projects which have not been evaluated so far.
• 🏛️
  While appraising schemes for continuation — Department of Expenditure (DoE) insists for third party independent evaluation. Reference: OM No. 42(02)/PF-II/2014 dated 08.12.2020. ❗ DoE insists on third-party independent evaluation for scheme continuation

• 🏗️
  Concurrent examination of the accounting and financial records, systems and procedures, and compliance with stated management policies are essential elements of public policy.
• 🏢
  Each Ministry and Department of the Union Government has a special unit under the direct control and supervision of Financial Advisers. Important findings of this unit are submitted to the Secretaries of the Ministries concerned for necessary corrective action.
• 📜
  As per the Revised Redefined Charter for Financial Advisers — the following Internal Audit functions are carried out by the Chief Controllers of Accounts (CCA) as per guidelines issued by the Controller General of Accounts (CGA) from time to time:

• 🔎
  Comptroller & Auditor General of India conducts not only an accounting and compliance audit but also evaluation of the end results of the operations of Government — including considerations of economy, efficiency and effectiveness.
• 📜
  C&AG conducts Audit of Union Government Finance and Appropriation and submits audit report in terms of Article 151 of the Constitution. ⭐ Art. 151 — C&AG Audit Report
• ⚖️
  C&AG is also entrusted with the responsibility of auditing compliance with the FRBM Act and Rules by the Central Government. ❗ C&AG audits FRBM compliance too
• 🏛️
  The Public Accounts Committee (PAC) selects the subject for its consideration based on the Audit Report submitted by C&AG.

• 📋
  Committee on Public Accounts is constituted by Parliament each year for examination of:

  • →
    Accounts showing the appropriation of sums granted by Parliament for expenditure of Government of India
  • →
    Annual Finance Accounts of Government of India
• 📌
  Reports of the C&AG on Revenue Receipts mainly form the basis of the deliberation of the Committee.

• 🔍
  (a) That the money shown as having been disbursed was legally available for and applicable to the service or purpose to which it has been applied or charged
• ⚖️
  (b) That the expenditure conforms to the authority which governs it
• 🔀
  (c) That every re-appropriation has been made in accordance with the provisions made in this behalf under the rules framed by competent authority

• 🏛️
  PAC ascertains that money granted by Parliament has been spent within the scope of the Demand — and considers the justification for spending more or less than the amount originally sanctioned.
• ⚠️
  In the event of excess expenditure — PAC examines the circumstances leading to such excess with reference to the facts of each case and makes such recommendations as it may deem fit.

• 📌
  In accordance with Constitutional requirements, Government accounts are maintained in the following three categories:

• ⚖️
  Constitutional Basis — Article 266(1): All revenues received by the Government of India, all loans raised by the Government by issue of treasury bills, loans or Ways and Means advances and all moneys received by the Government in repayment of loans shall form one consolidated fund titled the "Consolidated Fund of India". ⭐ Art. 266(1) — CFI = revenues received + loans raised + loan repayments received
• 📂
  The Consolidated Fund of India has the following two divisions:

  📗 (i) Revenue Account

  Deals with the proceeds of taxation and other receipts classified as Revenue and expenditure met therefrom.

  📘 (ii) Capital Account

  Deals with expenditure incurred with the purpose of either increasing concrete assets of durable nature or of reducing recurring liabilities. Capital expenditure is logically met from borrowed funds — liabilities spread over many years as benefits also flow over a period of years.

• 📋
  (a) Receipt heads (Capital Account): Deals with receipts of a Capital nature which cannot be applied as a set off to Capital Expenditure
• 🏗️
  (b) Expenditure heads (Capital Account): Deals with expenditure incurred with the object of either increasing concrete assets of a material and permanent character or of reducing recurring liabilities. Also includes receipts of Capital nature intended to be applied as set off to Capital expenditure
• 💳
  (c) Public Debt and Loans & Advances: Comprises of loans raised and their repayments — such as internal debt, external debt and their recoveries

• ⚖️
  Constitutional Basis — Article 267: Provides for constitution of the Contingency Fund — placed at the disposal of the President — to enable advances to be made out of such fund for the purposes of meeting unforeseen expenditure pending authorization of such expenditure by Parliament. ⭐ Art. 267 — at disposal of President | unforeseen expenditure pending Parliament authorization
• 💼
  Contingency Fund is in the nature of an imprest. ❗ Contingency Fund = Imprest in nature
• 📜
  The Central Government established its Contingency Fund under the Contingency Fund of India Act, 1950 and has also framed the 'Contingency Fund of India Rules' under Section 4 of that Act. These rules prescribe the procedure for obtaining advances and their subsequent adjustment. (Rules at Annexure 11.)
• 🏗️
  The corpus of the Contingency Fund is created by debit to the Consolidated Fund of India. When expenditure is incurred out of an advance from the Contingency Fund — the expenditure is booked under the same head under the 'Contingency Fund'.
• ↩️
  Recoupment Process: Subsequently, with the regularization of expenditure by obtaining vote of Parliament — the amount advanced from Contingency Fund is recouped to the corpus of the Contingency Fund by debit to the Consolidated Fund of India. The expenditure is then booked initially under the same head under the Consolidated Fund of India — as revenue or capital expenditure, as the case may be.
• 📊
  In Government accounts, Contingency Fund has a single Major Head to accommodate all transactions of the fund.

• ⚖️
  Constitutional Basis — Article 266(2): All other public moneys received by or on behalf of the Government of India are credited to the Public Account of India. ⭐ Art. 266(2) — Public Account = all other public moneys received by/on behalf of GoI
• 📋
  Part III shows transactions relating to Debt (other than those in Part I), 'Deposits', 'Advances', 'Remittances' and 'Suspense'.
• 🏦
  Such funds remain merged in the cash balance of the Central Government — with the Reserve Bank of India as the bankers to the Government — till payments are made to those to whom the funds pertain, or utilized for general/specific purposes as in the case of Reserve Funds, or necessary adjustments are made (e.g. inter-Government transactions). Net funds in the Public Account are also available for financing the expenditure of Government.
• 📊
  Public Account transactions are grouped according to sectors and sub-sectors which are further sub-divided into Major Heads of Account and further down as per the accounting classification system of Government. (Details of various sectors and sub-sectors at Annexure 12.)

• 📌
  Accounts are a systematic record of various activities and functions expressed in financial terms and maintained.
• ⚖️
  The Constitution envisages that accounts of the Union and the States shall be kept in such form as the President may on the advice of the C&AG prescribe — under Article 150. ⭐ Art. 150 — Form of accounts: President prescribes on C&AG advice
• 📅
  Accounts of the Union Government are prepared annually showing the receipts and disbursements for the year, surplus or deficit generated during the year, and changes in Government liabilities and assets.
• 🔗
  Preparation and submission chain:

  📊 CGA — Prepares Accounts

  →

  ✅ C&AG — Certifies + adds Report

  →

  🏛️ Submitted to President — preferably within 6 months of close of FY

  →

  📋 Laid before each House of Parliament

  ❗ Submitted to President preferably within 6 months of close of financial year

• 🔗
  The Budget of Government is linked to the accounts — and Government transactions are accounted for under the Consolidated Fund, Contingency Fund and the Public Account of India.
• 🎯
  As a general rule, classification of transactions has closer reference to functions, programmes and activities of the Government and the object of revenue or expenditure — rather than the department in which the revenue or expenditure occurs.
• 📊
  Number of classification in the Detailed Demands for Grants (DDG) are not allowed to go beyond the standard six tiers. ❗ Maximum 6 tiers in DDG — cannot exceed

• 📜
  Rule 79 of GFR — Authority to open a new Head of Account: The List of Major and Minor Heads of Accounts of Union and States is maintained by the Ministry of Finance (DoE — Controller General of Accounts) — authorized to open new heads of accounts on the advice of the Comptroller and Auditor General of India under the powers flowing from Article 150 of the Constitution. ⭐ New Major/Minor Heads opened by CGA (DoE) on C&AG advice — Art. 150 | Rule 79 GFR
• 🏗️
  In case of certain post-Budget developments where expenditure provision is required under heads not already available in the Budget — Ministries/Departments are authorized to open new Sub-Heads / Detailed Heads / Object Heads as required — in consultation with the Budget Division of the Ministry of Finance — subject to certain conditions.
• ✅
  Normal Rule: A new head is allowed to be opened only in cases where the Budget provision is available (for re-appropriation to the new head) or has been obtained through a Supplementary Demands for Grant.
• ⚠️
  Exceptional Circumstances: Ministries/Departments may be permitted to open heads in anticipation of obtaining the Budget through Supplementary Demands. However:

  • →
    Proposals for augmentation of funds through additionality or for introduction of 'New Service' may alone be included in Supplementary Demands — not for opening new heads of accounts. Prudent application of authority must be exercised.
  • →
    New heads can be operated only upon obtaining the budget through Supplementary Demands for Grants.

  ❗ Heads opened in anticipation of SDG can only be operated AFTER SDG is actually obtained
• 🏢
  The Principal Accounts Offices may open Sub/Detailed Heads required under the Minor Heads falling within the Public Account of India — subject to the above stipulations.