Essay, Paragraph or Speech on “Union Budget” Complete Essay, Speech for Class 10, Class 12 and Graduation and other classes.

The Union Budget

Essay No. 01

Budget making is the process of projecting the expenditure of public money. Individuals are free to spend their own money as and when they like, and in any manner they like. They are also not accountable to anyone regarding this expenditure, except to themselves. However, in the case of public money, all expenses incurred by the authorities, authorized to do so, has to be done in accordance with certain laid down rules and regulations, and they have to be in the best interests of the country’s public, to whom the money really belongs.

The Union of India presents a budget every year in the month of February. This budget projects the collection of the revenues of the government under various heads, through a variety of taxes. These taxes are collected from the individuals of the public, organizations, products manufacturers, and imports and exports. This money is collected by the government, and, is intended to be spent for the welfare of the people. This is done by the government in the form of providing civic services, expansion of civic services, maintenance of the public and the country. The internal security and defense of the country and several other allied works are also the responsibility of the government, for which it collects taxes.

Various ministries of the government looking after the different aspects of government functioning draw out a revenue collection and its expenditure program for the coming financial year which is from April of the current year to March of the next year. Some wings of the government collect more money than they can spend, and some public service wings, spend more than what they are able to collect.

The budget proposal submitted by the different ministries is consolidated by the Ministry of Finance, which also does some modifications, in consultations with the concerned Ministries. After doing this, the Ministry of Finance tries to strike a workable balance between the revenue collections and the expenditure. A surplus budget shows more revenue collection than the expenditure incurred and a deficit budget shows more expenditure than the collection of money made in the year. All the money collected by way of different categories of the revenue goes to the Consolidated Funds of India, and then the expenditure is planned out of this fund. For any expenditure that has to be made, approval of the Parliament is required. It is for this purpose the budget proposals are put before a specially convened session of the Parliament, called the Budget Session of the Parliament. This is normally done at the end of February, for the approval of the budget.

The proposals are discussed in every detail in the Parliament, modified on the basis of views of the members of Parliament. When the budget is finally approved by the Parliament, the government starts spending and collecting as per the approved budget. These budget proposals are kept as a closely guarded secret till the budget is presented to the Parliament. This is done in order to avoid individuals and industries from taking any advantage of advanced information.

In the year 1998, a special situation arose due to the change in the government just at the time of the budget session, thus, the regular budget for the year 1998-99 could not be passed in time by the Parliament, which led to a special situation. When grants had to be sanctioned in lump sums, and the approval of the Parliament was missing, a special situation had arisen. The budget that is usually passed and approved by the Parliament by February, had to be presented only as late as June when the new government took up the task of working. This budget was thus approved and passed late after stormy discussions and some modifications.

This budget of the current year, 1998-99 lays special stress on the infrastructure growth in the industrial sector, primary education, health care, and other basic civic amenities. Since massive funds are required for all the above-mentioned programs, and these, the government neither has nor is able to collect through a variety of taxes, the government has started private sector investments and is also encouraging an inflow of money from outside India, for investment here. The result of this has been a liberalized and competitive economy at the global level, instead of state-controlled economy, practiced earlier, and which also failed to give the desired results. It is now expected that, with a greater flow of money from the private sector from within, and from outside, the country’s economy should improve and that, it will be able to provide better basic services to the common man.

In India, the state governments also follow the same method of budget proposals and sanctions. Their budgets are approved by their respective State Legislatures. However, if the state is under the central rule then, its budget is approved by the Parliament.

The budget is thus the picture of the revenues and expenditures of the year gone by, and the proposals for the ensuing year.

Union Budget

Essay No. 02

Finance Minister Pranab Mukherjee presented the Union Budget 2009-10 on July 6, 2009. He pointed out the following three challenges of the budget—

(1) The first challenge is to lead the economy back to the high GDP growth rate of 9% per annum at the earliest.

(2) The second challenge is to deepen and broaden the agenda for inclusive development and to ensure that no individual, community, or region is denied the opportunity to participate in and benefit from the development process.

(3) The third challenge is to re-energize the government and improve delivery mechanisms. It means that our institutions must provide high-quality public services, security, and the rule of law to all citizens with transparency and accountability.

The 2009-10 Union Budget is likely to leave more money in the hands of the aam aadmi through a massive step-up in social sector outlays and a marginal tinkering of personal income tax slabs. Alongside, it has done away with messy imposts such as the Fringe Benefits Tax (FBT) and the Commodity Transaction Tax (CTT), besides the 10% surcharge on taxable personal incomes above Rs. 10 lakh. In addition, the CENVAT excise duty and the service tax rates have been retained at 8% and 10% respectively.

With the economic downturn hugely denting its tax revenues, the budget estimates 2009-10 provide for a total expenditure of Rs. 10,20,838 crore consisting of Rs. 695689 crore towards non-plan and Rs. 325149 crore towards plan expenditure. The increase in non-plan expenditure over 2008-09 (BE) is 37% whereas the increase in plan expenditure is 34%. The total increase in expenditure in 2009-10 over 2008-09 (BE) is 36%.

The increase in non-plan expenditure is mainly on account of the implementation of the Sixth Central Pay Commission recommendations, increased food subsidy, and higher interest payments arising out of the larger fiscal deficit in 2008-09. Interest payments are estimated at Rs. 225,511 crore constituting about 36% of non-plan revenue expenditure in 2009-10 (BE). The total provision for subsidies is up from Rs. 71431 crore in 2008-09 (BE) to Rs. 111,276 crore in 2009-10 (BE). The outlay on defense has gone up from Rs. 105,600 crore in 2008-09 (BE) to Rs. 141,703 crore in 2009-10 (BE).

The center’s total expenditure of Rs. 1020838 crore for 2009-10 will be largely financed through borrowings. The gross tax receipts are budgeted at Rs. 641079 crore in 2009-10 (BE), compared to Rs. 687715 crore in 2008-09 (BE). The non-tax revenue receipts are estimated at Rs. 140279 crore in 2009-10 (BE) compared to Rs. 95785 crore in 2008-09 (BE). The revenue deficit as a percentage of GDP is projected at 4.8% compared to 1.0% in 2008-09 (BE) and 4.4% as per the revised estimate of 2008-09. The fiscal deficit as a percentage of GDP is projected at 6.8% compared to 2.5% in 2008-09 (BE) and 6.0% as per the revised estimate of 2008-09. This level of deficit is a matter of big concern and the government has to take necessary steps to come back to the path of fiscal consolidation at the earliest.

Main Features Of The Budget

• The growth rate of GDP dipped from an average of 9% in the previous three fiscal years to 6.7% during 2008-09.
• The structure of India’s economy changed over the last 10 years with the contribution of the service sector to GDP at well over 50% and share of merchandise trade doubling to 38.9% of GDP in 2008-09.
• Fiscal accommodation led to an increase in fiscal deficit from 2.7% in 2007-08 to 6.0% of GDP in 2008-09.
• To stimulate public investment in infrastructure, the government had set up the India Infrastructure Finance Company Limited (IIFCL) as a special purpose vehicle for providing long-term financial assistance to infrastructure projects. IIFCL is to refinance 60% of commercial bank loans for PPP projects in critical sectors over the next 15 to 18 months. IIFCL and Banks are now in a position to support projects involving a total investment of Rs. 100,000 crore.
• Allocation for Railways increased from Rs. 10800 crore in Interim Budget estimate to Rs. 15800 crore in 2009-10 (BE).
• Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) stepped up by 87% to Rs. 12887 crore in 2009-10 (BE) over the year 2008-09 (BE).
• Allocation for housing and provision of basic amenities to urban poor enhanced to Rs. 3973 crore in 2009-10 (BE). This includes provision for Rajiv A was Yojana (RAY), a new scheme announced.
• Allocation under the Accelerated Power Development and Reform Programme (APDRP) increased by 160% to Rs. 2080 crore in 2009-10 (BE) over 2008-09 (BE).
• The target for agriculture credit is now set at Rs. 325000 crone for the year 2009-10. In 2008-09 agriculture credit flow was at Rs. 287000 crone.
• Interest subvention scheme for short-term crop loans upto Rs. 3 lakh per farmer at the interest rate of 7% per annum to be continued. Additional subvention of 1 % to be paid from the current year 2009-10, as an incentive to those farmers who repay short-term crop loans on schedule. Thus the interest rate applicable to such farmers will be 6% per annum.
• Time is given to the farmers having more than two hectares of land to pay 75% of their overdues under the Debt Waiver and Debt Relief Scheme extended from June 30, 2009, to December 31, 2009.
• Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by 75% over 2008-09 (BE).
• Allocation under Rastriya Krishi Vikas Yojana (RKVY) stepped up by 30% in 2009-10 (BE) over 2008-09 (BE).
• In view of the continuing contraction in exports, the Finance Minister extended the period of the ECGC scheme upto March 2010.
• To facilitate the flow of credit at reasonable rates, Rs. 4000 crore provided as a special fund out of RIDF to SIDB!. This fund of Rs. 4000 crore will incentivize Banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises by refinancing 50% of incremental lending to MSEs during the current financial year.
• To ensure the balanced application of fertilizers, the government intends to move towards a nutrient-based subsidy regime instead of the current product pricing regime. The government is also intended to move to a system of direct transfer of subsidy to the farmers.
• The total subsidy amount has been reduced from Rs. 129243 crore in 2008-09 (RE) to Rs. 111275 crore in 2009-10 (BE). Out of Rs. 111275 crore. Interest and other subsidies consist of Rs. 5697 crore, Fertiliser Rs. 49980 crores, Food subsidy Rs. 52489 crore and Petroleum subsidy amount to Rs. 3109 crore.
• SARAL-II forms to be introduced.
• While retaining at least 51% government equity in Public Sector Undertakings, people’s participation in disinvestment programs to be encouraged. The amount of disinvestment targeted for 2009-10 is Rs. 1120 crore.
• PSUs such as banks and insurance companies to remain in the public sector.
• Allocation under NREGS increased by 144% to Rs. 39100 crore in 2009-10 (BE) over 2008-09 (BE).
• National Food Security Act to be brought in to ensure entitlement of 25 kg of rice or wheat per month at Rs. 3 per kilo to every family living below the poverty line in rural or urban areas.
• The flagship program is an important initiative for bridging the gap between the rural and urban areas and improving the quality of life of people, particularly the poor in the rural areas. Under this program, the allocation for the Pradhan Mantri Gram Sadak Yojana (PMGSY) is proposed to be increased to Rs. 12,000 crore; that for the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) to Rs. 7,000 crore; and for the Indira Awas Yojana (IAY) to Rs. 8,800 crore.
• A sum of Rs. 2,000 crore is proposed to be allocated for the Rural Housing Fund in the National Housing Bank (NHB) from the shortfall in the priority sector lending of commercial banks.
• This will boost the resource base of the NHB for their re-finance operations in the rural housing sector. The move will broaden the pace of rural housing.
• The Finance Minister announced the launching of a new scheme called the Pradhan Mantri Adarsh Gram Yojana for the integrated development of 1,000 villages in which the population of Scheduled Castes is above 50 percent. There are 44,000 such villages in the country. The scheme is being launched on a pilot basis with an allocation of Rs. 100 crore. Under the scheme, each village would be able to avail gap funding of Rs. 10 lakh over and above the allocations under Rural Development and poverty alleviation schemes. On successful implementation of the pilot phase, the scheme will be extended in the coming years.
• The Swarna Jayanti Gram Swarozgar Yojana (SGSY) was restructured as National Rural Livelihood Mission to make it universal in application, focused on approach and time-bound for poverty eradication by 2014-15. In addition to capital subsidy at an enhanced rate, interest subsidy to poor households to be provided for loans upto Rs. 1 lakh from banks.
• There are over 22 lakh Women’s Self Help Groups linked with banks. Reach of SHGs to be widened to enroll at least 50 percent of all rural women in India as members of SHGs over the next five years.
• Corpus of Rashtriya Mahila Kosh to be increased from Rs. 100 crore to Rs. 500 crore over the next few years.
• National Mission for Female Literacy to be launched with a focus on minorities, SC, ST, and another marginalized group with the aim to reduce the level of female illiteracy by half in three years.
• All Integrated Child Development Services (ICDS) to be extended to every child under the age of six by March 2012.
• To enable students from economically weaker sections to access higher education, a scheme to provide full interest subsidy during the period of the moratorium was introduced to cover loans taken from scheduled banks to pursue any of the approved courses of study in technical and professional streams from recognized institutions in India.
• Allocation under National Rural Health Mission (NRHM) increased by Rs. 2,057 crores over Interim B.E. 2009-10 of Rs. 12,070 crore.
• All BPL families are to be covered under Rashtriya Swasthya Bima Yojana (RSBY). Allocation under RSBY increased by 40 percent over the previous allocation to Rs. 350 crore in B.E. 2009-10.
• National Ganga River Basin Authority set up. Budgetary allocation under National River and Lake Conservation Plans increased from Rs. 335 crore in RE. 2008-09 to Rs. 562 crore in B.E.2009-10.
• A special one-time grant of Rs. 100 crore given to Indian Council of Forestry Research and Education, Dehradun.
• Rs. 15 crores each to be allocated to Botanical Survey of India and Zoological Survey of India. An additional amount of Rs. 15 crores is to be allocated for the Geological Survey of India.

Tax Proposals

• Centre’s Tax-GDP ratio has increased to 11.5 percent in 2008-09 from a low of 9.2 percent in 2003-04. Share of direct taxes in the Centre’s tax revenues has increased to 57.7 percent in 2008-09 from 41.3 percent in 2003-04, reflecting sharp improvement inequity of our tax system.
• Structural changes indirect taxes to be pursued by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April 2010.
• The Direct Taxes Code, along with a Discussion Paper, is to be released to the public for debate. The Direct Taxes Code Bill will be finalized for introduction in Lok Sabha sometime during the Winter Session based on the inputs received. • The Authorities for Advance Rulings on Direct and Indirect Taxes to be merged by amending the relevant Acts.
• The agreement has been c e on the basic structure of GST in keeping with the principles of fiscal federalism enshrined in the Constitution.

The broad contour of the GST Model envisages dual GST comprising of a Central GST and a State GST. The Centre and the States will each legislate, levy, and administer the Central GST and State GST, respectively.

Direct Taxes

• No changes were made in the Corporate Tax rates.
• Exemption limit in personal income tax raised by Rs. 15,000 from Rs. 2.25 lakh to Rs. 2.40 lakh for senior citizens; by Rs. 10,000 from Rs. 1.80 lakh to Rs. 1.90 lakh for women taxpayers; and by Rs. 10,000 from Rs. 1.50 lakh to Rs. 1.60 lakh for all other categories of individual taxpayers.
• Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with a severe disability being raised from the present limit of Rs. 75,000 to Rs. 11 akh.
• Surcharge on various direct taxes to be phased out; in the first instance, by eliminating the surcharge of 10 percent on personal income tax.
• Sun-set clauses for deduction in respect of export profits under sections 10A and 10B of the Income Tax Act being extended by one more year i.e., for the financial year 2010-11.
• Fringe Benefits Tax (FBT) on the value of certain fringe benefits provided by employers to their employees to be abolished.
• Minimum Alternate Tax (MAT) to be increased to 15 percent of book profits from 10 percent. The period allowed to carry forward the tax credit under MAT to be extended from seven years to ten years.
• New Pension System (NPS) to continue to be subjected to the Exempt-Exempt- Taxed (EET) method of the tax treatment of savings. Income of the NPS Trust to be exempted from income tax and any dividend paid to this Trust from Dividend Distribution Tax. All purchase and sale of equity shares and derivatives by the NPS Trust are also to be exempted from the Securities Transaction Tax (STT). Self-employed persons are to be enabled to participate in the NPS and to avail of the tax benefits available thereto.
• Commodity Transaction Tax (CTT) to be abolished.
• Donations to electoral trusts are to be allowed as a 100 percent deduction in the computation of the income of the donor.
• Deduction under section 80E of the Income Tax Act allowed in respect of interest on loans taken for pursuing higher education in specified fields of study to be extended to cover all ‘fields of study, including vocational studies, pursued after completion of schooling.
• Scope of presumptive taxation to be extended to all small businesses with a turnover upto Rs. 40 lakh. All such taxpayers have the option to declare their income from business at the rate of 8 percent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, they are also to be exempted from advance tax and allowed to pay their entire tax liability from the business at the time of filing their return. This new scheme is to come into effect from the financial year 2010-11.

Indirect Taxes

• Proposals on indirect taxes seek to achieve a stable framework by maintaining the overall ratestructure for customs and central excise duties as well as service tax.

Customs Duties

• Customs duty of 5% to be imposed on Set Top Box for television broadcasting.
• Customs duty on LCD Panels for the manufacture of LCD televisions to be reduced from 10% to 5%.
• Full exemption from 4% special CVD on parts for manufacture of mobile phones and accessories to be reintroduced for one year.
• Customs duty on 10 specified life-saving drugs/vaccines and their bulk drugs to be reduced from 10% to 5% with Nil CVD (by way of excise duty exemption).
• Customs duty on specified heart devices, namely the artificial heart and PDA/ ASD occlusion device, to be reduced from 7.5% to 5% with Nil CVD (by way of excise duty exemption).
• Customs duty on bio-diesel to be reduced from 7.5% to 2.5%.
• Concessional customs duty of 5% on specified machinery for tea, coffee, and rubber plantations to be reintroduced for one year, upto 06-07-2010.
• Customs duty on ‘mechanical harvester’ for coffee plantation to be reduced from 7.5% to 5%. CVD on such harvesters has also been reduced from 8% to nil, by way of excise duty exemption.
• Customs duty on serially numbered gold bars (other than tola bars) and gold coins to be increased from Rs. 100 per 10 gram to Rs. 200 per 10 gram. Customs duty on other forms of gold to be increased from Rs. 250 per 10 gram to Rs. 500 per 10 gram. Customs duty on the silver to be increased from Rs. 500 per kg to Rs. 1000 per kg. These increases are also to be applicable when gold and silver (including ornaments) are imported as personal baggage. Central Excise Duties
• The excise duty rate on items currently attracting 4% to be raised to 8% with certain exceptions.
• A specific component of excise duty applicable to large cars/utility vehicles of engine capacity 2000 cc and above to be reduced from Rs. 20,000 per vehicle to Rs. 15,000 per vehicle.
• Excise duty on petrol-driven trucks/lorries to be reduced from 20% to 8%. Excise duty on chassis of such trucks/lorries to be reduced from `20% + Rs. 10000′ to ‘8% + Rs. 10000’.
• Excise duty on naphtha to be reduced to 14%.
• Excise duty on man-made fiber and yarn to be increased from 4% to 8%.
• Excise duty on PTA and DMT to be increased from 4% to 8%.
• Excise duty on acrylonitrile to be increased from 4% to 8%.
• The scheme of optional excise duty of 4% for pure cotton to be restored.
• Excise duty for man-made and natural fibers other than pure cotton, beyond the fiber and yarn stage, to be increased from 4% to 8% under the existing optional scheme.
• On packaged or canned software, excise duty exemption to be provided on the portion of the value which represents the consideration for transfer of the right to use such software, subject to specified conditions.
• Excise duty on branded articles of jewelry to be reduced from 2% to Nil.

Service Tax

Service Tax to be imposed on the following services :

1. Service provided in relation to transport of goods by rail.
2. Service provided in relation to transport of coastal cargo; and goods through inland water including National Waterways.
3. Advice, consultancy, or technical assistance provided in the field of law (this tax would not be applicable in case the service provider or service receiver is an individual).
4. Cosmetic and plastic surgery service.

Tax proposals on direct taxes to be revenue-neutral. On indirect taxes, the estimated net gain to be Rs. 2,000 crore for a full year.