Know your budget: Terms you should know

As the country is heading for yet another budget in the build-up to 2019 election, DH brings to you some terminologies that you should be aware of during the Finance Minister’s Budget Speech.

Union Budget has two parts -- Part A and Part B. Part A deals with the broad outlay of money for various sectors and new schemes, along with focus areas of the government. Part B deals with taxation proposals – direct and indirect taxes.

Direct Taxes

The impact of direct taxes is directly borne by individuals and corporations. For example, income tax, corporation tax, wealth tax.

Income Tax

Income Tax is paid by an individual, whose income exceeds the basic exemption limit of Rs 2,50,000 in a given financial year. Under the Income Tax Act, the term ‘individual’ includes Hindu Undivided Families (HUFs), Co-operative Societies, Trusts and any artificial judicial person.

Corporate Tax

Corporate tax, also called corporation tax or company tax is paid by companies operating in India on the income earned worldwide. The rate of taxation varies based on whether the company is incorporated in India or abroad.

Indirect Taxes

Indirect taxes are imposed on goods and services. They are paid by consumers indirectly at the time of buying goods and services. These are of two kinds, Goods and Services Tax (GST) and customs duty. GST Council is the decision-making body for GST and the Union Budget has nothing to do about it.

Customs Duty

Customs Duty is the only indirect tax that is not under the GST and therefore it is a part of the Union Budget. These are levies charged when goods are imported into, or exported from, the country, and they are paid by the importer or exporter. Usually, these are also passed on to the consumer.

Capital Budget

Capital Budget includes a plan for raising long-term money for investment in plant and machinery. It consists of capital receipts and payments and includes investments in shares, loans and advances granted by the Centre and state governments to companies and corporations.

Revenue Budget

Revenue budget involves receipts and expenditures related to the day-to-day functioning of the government. Revenue receipts are divided into tax and non-tax revenue. Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the government levies. The non-tax revenue sources include interest on loans, dividend on investments.

Fiscal Policy

Fiscal policy is implemented through the budget. It is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is a corollary to monetary policy through which the Reserve Bank of India influences the country's money supply. These two policies are used in different combinations to determine economic policy.