The Annual Financial Statement (AFS) is provided under Article 112 of the Constitution of India. It presents the estimated receipts and expenditure of the Government of India for a financial year.

The financial year in India:

• Begins: 1 April
• Ends: 31 March

Generally, a Budget contains:

1. Estimates of revenue receipts
2. Estimates of expenditure
3. Ways and means of raising revenue
4. Taxation proposals
5. Introduction of new schemes
6. Government policies and programmes

Railway Budget – Historical Note

The Railway Budget was separated from the General Budget in 1921 following the recommendations of the Acworth Committee. Historically, India had a separate Railway Budget. It was separated from the General Budget in 1921 and was merged with the Union Budget from 2017.

Constitutional Provisions Regarding Budget

1. The President shall lay the Budget before both the Houses of Parliament every year.
2. No demand for a grant shall be made except on the recommendation of the President.
   Grant → A sum of money given from public funds for a particular purpose.
3. No Money Bill imposing tax shall be introduced in the Parliament except on recommendation of the President and such a bill can’t be introduced in RS.
4. Parliament can reduce or abolish a tax but cannot increase it.
5. A Money Bill or Finance Bill dealing with taxation can’t be introduced in RS, must be only introduced in LS.
6. RS has no power to vote on demand for grants; it is the exclusive privilege of LS.

Few Terms

• Revenue → Income received by the Government, including tax revenue and non-tax revenue.
• Emoluments → Salary or other remuneration payable to an office-holder or employee.
• Allowances → Sums paid regularly or under specified conditions to meet particular expenses or as part of remuneration.
• Appropriation → A sum of money authorised by Parliament for a particular purpose.

Stages in Enactment of Budget

1. Presentation of Budget
2. General Discussion
3. Scrutiny by Departmentally Related Standing Committees
4. Voting on Demands for Grants
5. Passing of Appropriation Bill
6. Passing of Finance Bill

These stages correspond to the parliamentary budget procedure.

1. Presentation of Budget

The Union Budget is presented by the Finance Minister in the Lok Sabha and is laid before the Rajya Sabha soon after the Budget speech. For 2026-27, the Union Budget was presented on 1 February 2026.

General Discussion and Committee Scrutiny

Note

The Finance Minister conducts a Budget speech in Lok Sabha; thereafter the Budget is laid before Rajya Sabha. Rajya Sabha can discuss the Budget but does not vote on Demands for Grants.

This concept is correct. Demands for Grants are voted by the Lok Sabha.

2. General Discussion

• General Discussion takes place in both Houses of Parliament.
• The discussion concerns the Budget as a whole and the principles or policies underlying it.
• No cut motions are moved and no voting on Demands for Grants takes place during General Discussion.
• The Finance Minister has the right to reply to the general discussion.
• General Discussion normally takes 3–4 days(not be treated as a fixed current rule)

3. Scrutiny by Departmentally Related Standing Committees

After General Discussion:

• The Lok Sabha is adjourned for a fixed period/recess.
• Departmentally Related Standing Committees (DRSCs) examine the Demands for Grants of the Ministries/Departments under their jurisdiction.
• They submit reports to Parliament.
• The Demands for Grants are subsequently considered by the House in light of these reports.
• Parliament is adjourned for a fixed period, normally around four weeks, to enable the Departmentally Related Standing Committees to examine the Demands for Grants. The exact period can vary.
• 24 Departmentally Related Standing Committees

4. Voting on Demand for Grants

A Demand for Grant becomes a Grant after it has been duly voted by the Lok Sabha.

Important points
Voting on Demands for Grants is an exclusive power of the Lok Sabha.
Rajya Sabha does not vote on Demands for Grants.
The Lok Sabha may: assent to a demand, reject a demand, or assent to a demand subject to a reduction.
Expenditure charged on the Consolidated Fund of India is not submitted to vote, although it can be discussed in either House.

Expenditure charged on the Consolidated Fund of India includes:

• Emoluments and allowances of the President and other expenditure relating to the President’s office.
• Salaries and allowances of the Chairman and Deputy Chairman of Rajya Sabha and Speaker and Deputy Speaker of Lok Sabha.
• Debt charges of the Government of India, including interest and related charges.
• Salaries, allowances and pensions of Supreme Court judges, and specified pensions of High Court judges.
• Salary, allowances and pension of the Comptroller and Auditor-General of India (CAG).
• Sums required to satisfy judgments, decrees or awards of courts or arbitral tribunals.
• Other expenditure declared chargeable by the Constitution or by Parliament by law.

General Budget has 109 demands (2015-16): 106 Civil Expenditure + 03 Defence Expenditure. The number of Demands for Grants may vary from year to year. In Union Budget 2026-27, there are 102 Demands for Grants.

Cut Motions:

The Lok Sabha can move motions seeking a reduction in the amount of a Demand for Grant. There are three types:

1. Disapproval of Policy Cut:
   It represents disapproval of the policy underlying the demand.
   The amount of the demand is proposed to be reduced to Re. 1.
2. Economy Cut
   It proposes a reduction in expenditure.
   The amount of the demand is proposed to be reduced by a specified amount.
   The proposed reduction may be a lump-sum reduction or relate to a particular item.
3. Token Cut
   It is used to ventilate a specific grievance within the sphere of responsibility of the Government of India.
   The demand is proposed to be reduced by ₹100.

Guillotine is the parliamentary procedure under which, on the last allotted day/time for discussion and voting on Demands for Grants, the Speaker puts the remaining outstanding Demands for Grants to vote without further discussion.

• Parliamentary control over public expenditure.
• Accountability of the Executive to Parliament.
• Opportunity to discuss government expenditure and policies.
• Financial control over the Executive.

5. Passing of Appropriation Bill

1. No money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law.
   • After the Demands for Grants have been voted by the Lok Sabha, the Appropriation Bill is introduced. The Appropriation Bill authorises withdrawal from the Consolidated Fund of India for:
     • The grants voted by the Lok Sabha; and
     • Expenditure charged on the Consolidated Fund of India.
2. No amendment can be proposed to an Appropriation Bill if it would vary the amount or alter the destination of a grant made by the Lok Sabha, or vary the amount of charged expenditure.
3. The Appropriation Bill becomes an Appropriation Act after receiving the President’s assent, authorising withdrawal of money from the Consolidated Fund of India for the purposes specified in the Act.

6. Passing of Finance Bill

The Finance Bill is presented along with the Budget. It gives effect to the Government’s taxation proposals contained in the Budget. The Union Budget documents explain that the Finance Bill deals with the imposition, abolition, remission, alteration or regulation of taxes proposed in the Budget.

• The Finance Bill is a Money Bill when it falls within Article 110’s definition.
• It is introduced in the Lok Sabha.
• Rajya Sabha cannot introduce a Money Bill.
• The Finance Bill may be amended during parliamentary consideration, subject to the constitutional rules applicable to Money Bills.
• After Parliament passes it and the President gives assent, it becomes the Finance Act.

For example, the Finance Bill, 2026 was introduced in Lok Sabha on 1 February 2026, and its enacted form is the Finance Act, 2026.

Other Grants

Apart from the regular Budget, Parliament may approve various grants under special circumstances. The handwritten list is:

1. Supplementary Grant: A Supplementary Grant is made when the amount authorised by Parliament for a particular service for the current financial year is found to be insufficient. This is provided for under Article 115.
2. Additional Grant: An Additional Grant is made when, during the current financial year, a need arises for additional expenditure on a new service not contemplated in the Annual Financial Statement for that year.
3. Excess Grant: An Excess Grant is required when money has actually been spent on a service during a financial year in excess of the amount granted for that service. The demand for an Excess Grant is dealt with after the expenditure has occurred, and the constitutional procedure is provided under Article 115.
4. Vote of Credit: A Vote of Credit is granted to meet an unexpected demand upon the resources of India when, because of the magnitude or indefinite character of the service, the demand cannot be stated with the details ordinarily given in an Annual Financial Statement. It is provided under Article 116.
5. Exceptional Grant: An Exceptional Grant is a grant that forms no part of the current service of any financial year. It is provided under Article 116.
6. Token Grant: A Token Grant is made when funds required for a proposed expenditure on a new service can be made available by reappropriation. A demand for a token sum may then be submitted to the vote of the House; if approved, the funds may be made available.
   • Token Grant → New service + funds available through reappropriation.

Funds of India

The Constitution of India provides 3 kinds of Funds.

1. Consolidated Fund of India (CFI)

Article 266(1)

• All revenues received by the Government of India.
• All loans raised by the Government of India.
• Money received by the Government in repayment of loans.
• No money can be withdrawn from the Consolidated Fund of India except under appropriation made by law, subject to the constitutional provisions relating to Articles 115 and 116.

2. Public Account of India

Article 266(2): All other public money received by or on behalf of the Government of India, which is not credited to the Consolidated Fund or Contingency Fund, is credited to the Public Account of India.

3. Contingency Fund of India

Article 267: The Contingency Fund is established by Parliament by law. It is placed at the disposal of the President so that advances can be made to meet unforeseen expenditure, pending authorisation of that expenditure by Parliament.