This article throws light upon the three steps involved in the framing of budget. The steps are: 1. Preparation of the Budget 2. Legis­lation of the Budget 3. Execution of the Budget.

Framing of Budget: Step # 1. Preparation of the Budget:

The Budget is prepared usually for a year. The selection of the finan­cial year and fixing a date for the presentation of the budget will be determined according to administrative convenience. The Indian fi­nancial year commences on 1st of April, since 1866, following the English model and ends on 31st March. The responsibility for fram­ing the budget is entrusted with the Finance Ministry.

In this endeavor the Finance Ministry is assisted by Administrative Minis­ters and Departments, Audit Departments, Planning Commission, Central Board of Direct Taxes, Central Board of Excise and Cus­toms etc.

The figures relating to expenditure and revenue are based upon details submitted by the various heads of departments. The budget estimates are prepare in the month of August or September and sent to the heads of department.


The heads departments are asked to prepare the estimate in a prescribed form supplied by the Finance Department. This prescribed form has four different columns.

They are:

(1) Actual of previous year,

(2) Sanctioned estimates for the current year, and


(3) revised estimates for the current year and budget estimate for the coming year.

These estimates are then consoli­dated by the Ministry of Finance and the budget is prepared and presented before the parliament.

Under the Indian Constitution the budget in India Consist of two parts:

(1) Revenue Budget, and


(2) Capital Budget.

Revenue budget includes revenue receipts of the government (tax and non-tax rev­enue) and expenditure met from this revenue.

Capital budget con­sist of capital receipts and capital payments. Capital receipts in­clude loans raised by the government from the public (market loans) government borrowings from Reserve Bank of India, loans received from foreign governments and bodies and repayment of loans granted by the central government to state governments and other parties.

Capital payments includes capital expenditure on acquisition of as­sets like land, buildings, machinery, equipment and also invest­ment in shares, loans and advances granted by the central govern­ment to state governments, government companies, corporation etc. Capital expenditure in met out of capital receipts. Any surplus or deficit in the revenue budget is carried over to capital budget.

Framing of Budget: Step # 2. Legalization of the Budget:

This means enactment of the budget by the parliament. When the budget estimates have been prepared by the executive, it is pre­sented by the Finance Minister to the legislature. The budget is an instrument of parliamentary control over the financial activities of the government.


No tax can be levied and no expenditure incurred by the central government without the prior approval of the parliament. The finance minister presents the budget in parliament usually on the last day of February called the budget day.

In the budget speech the Finance Minister gives a review of the economic condition of the country and justification for financial proposals of government.

The budget undergoes the following steps before it is passed by the parliament:


(a) Presentation to the parliament,

(b) General discus­sion,

(c) Voting of demands for grants,

(d) Passing of appropriation Bill, and


(e) Passing of the Finance Bill.

(a) Presentation of Budget in Parliament:

This is done by the Finance Minister usually on the last day of Feb­ruary called the Budget day. In his budget speech the Finance Min­ister, gives an overall picture of the economic scenario of the country and reasons for financial proposal of the government.

(b) General Discussion:

After the presentation of the budget the time and day for general discussion is fixed by the speaker in consultation with the leader of the House. During general discussion the members of the parlia­ment have a right to criticize the various proposals and estimates shown in the budget document.

When the general discussion is completed, the Finance Minister replies to all criticisms objections raised, clarification sought regarding the budget proposals. The gen­eral discussion will be concluded with the reply of the Finance Min­ister.

(c) Voting of Demands for Grants:


Following the general discussions and the reply of the Finance Min­ister, the next step is voting on the budget. Here the demands for grants are brought up for sanction one after another. A distinction is drawn between votable and non-votable expenditure. The votable expenditure refers to the demand of various ministers or departments for grants. Votable items are subject to the approval of parliament.

Non-votable expenditure include items such as the salary and allow­ance of the president of India, the debt charges of the government of India, salaries and allowance of the chairman of Rajya Sabha, sala­ries and pension of Judges of supreme court and comptroller and Audit general of India.

Non-votable items are not to be discussed, reduced or revised by the parliament. The demands for grants are voted only in the Loka Sabha. The legislature has the power to re­duce or refuse the demand for grants. A member has the privilege to move a motion for the reduction of the votable expenditure. Such a motion is called “Cut Motion”.

(d) Passing of the Appropriation Bill:

In the constitution of India it has been laid down that no money can be appropriated out of the consolidated fund, except in accordance with the law. Hence appropriation bill has to be passed by the parlia­ment.

The appropriation bill includes all the grants for the year whether votable or non-votable. It is moved when demand, for grants have been voted in the house. After passing the appropriation bill, the government is empowered to withdraw from the consolidated fund, the amounts voted by the parliament, so as to meet both the votable and non-votable expenditure.

(e) Passing of the Finance Bill:

After the passing of the appropriation bill, Finance Bill is presented before the parliament. The Finance bill when passed becomes the Act which authorizes the government to collect money, levy new taxes, effect modification in the existing tax structure beyond the period approved by the parliament.


The budget is said to be passed when appropriation bill and Finance Bill are passed by the Loka Sabha. After the budget is passed by Loka Sabha it goes to Rajya Sabha. After passing the budget in both houses, it goes to the presi­dent for assent; generally the president gives his assent, on account of his very limited powers.

Framing of Budget: Step # 3. Execution of the Budget:

When the budget has been passed by the legislature the execution of the budget begins. Execution means realization or collection of revenues and the incurring of expenditure. The collec­tion of revenue and the spending of it will be entrusted to separate administrative bodies within the control of the Finance Department of the government.

Execution of the budget has three aspects:

(1) Collection of revenue,

(2) Proper custody of collected funds, and

(3) Distribution of grants of different administrative ministry or depart­ments.

1. Collection of Revenue:

Proper revenue collection involves two kinds of operation. That is assessment of revenue and collection of revenue. The Central Board of Direct Taxes and the Central Board of Indirect Taxes like Excise and customs are in charge of proper collection of funds.

2. Proper Custody of Collected Funds:

Receipts and disbursement of money takes place daily in treasuries and Sub-treasuries on behalf of state government and central gov­ernment. In India the district treasury is acting as the unit of fiscal system which is in charge of receipts and disbursement of funds.

3. Distribution of Grants:

Distribution of grant is done by the controlling officer. After passing the Appropriation Bill, the Finance Ministry distributes the sanc­tioned funds among various controlling officers.

The controlling offic­ers in turn distribute the funds to the concerned ministers and de­partments. The controlling officers ensure that the work is done according to the plan contained in the budget and no overspending by any department is entertained.

The controlling officer dispatch a copy of the distribution of grants to the Accountant General who in turn sends it to the treasuries. The allotted grant is to be utilized before the expiry of financial year. Unspent balance of any will be lapsed.

In democratic countries like India, the ultimate control over pub­lic expenditure is vested with the parliament.

Accordingly in India, three specific committees are constituted by the parliament to en­sure proper control over public expenditure:

They are:

(a) The Esti­mate Committee,

(b) Public Accounts Committee,

(c) The Committee on Public undertakings, and

(d) Audit and Accounts department. The auditing of public money is controlled by the constitutionally ap­pointed independent Comptroller and Audit General.

The accounts prepared by the comptroller and Audit General are submitted to the president who is turn place them before the house. From this, it is clear that Parliament is the supreme authority in financial matters.