Union Budget 2021 | What is Finance Bill?

Finance Minister Nirmala Sitharaman is set to present a crucial Budget on February 1, 2021. The Budget will outline the economy's road to recovery in the post-Covid-19 world.

The Budget comes against the backdrop of an expected economic contraction of 7.7 per cent - the first time in the history of independent India.

With the upcoming Budget just around the corner, let us understand some of the terms related to the annual exercise.

Also Read: Budget 2021 | What is fiscal deficit?

What is a Finance Bill?

Every year, the Finance Minister proposes many changes in taxes for the upcoming financial year. These proposed changes pertain to several existing laws such as Income Tax law, the Stamp Act, Money Laundering law, dealing with various taxes in the country.

The Finance Bill helps the government insert amendments with all the proposed changed into all those laws concerned, without having to bring out a separate amendment law for each of those Acts.

The Bill, therefore, includes all the changes proposed in various laws pertaining to tax in the following year. These include changes in the tax proposals in the Union Budget pertaining to personal income tax. The Bill would list details such as the revised minimum income threshold, changes in income tax slabs, or other exemptions. Any changes in the rules, procedures, deadlines for filing tax returns or the payment of the tax itself would also be included in the Bill.

Read: Budget 2021 | What is Appropriation Bill?

After the presentation of the annual Budget in the Parliament, the Finance Bill is introduced in the Lok Sabha. After the Lok Sabha’s approval, the Finance Bill becomes the Finance Act.

A Finance Bill is also a Money Bill but they are not the same.

So, what is Money Bill?

Only those Financial Bills that contain provisions on matters listed in Article 110 of the Constitution are called Money Bills.

Article 110 says a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely

A. The imposition, abolition, remission, alteration or regulation of any tax;

B. The regulation of the borrowing of money or the giving of any guarantee by the Government of India, or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of India;

C. The custody of the consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund;

D. The appropriation of moneys out of the consolidated Fund of India;

E. The declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure;

F. The receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or

Any matter incidental to any of the matters specified in sub clause (a) to (f).

Who decides if a Bill is a Finance Bill?

The decision on whether a Bill is a Finance or a Money Bill is made by the Speaker. The Speaker’s decision shall be deemed to be final. Article 110 says, "If any question arises whether a Bill is a Money Bill or not, the decision of the Speaker of the House of the People thereon shall be final."

Therefore, all Finance Bills are Money Bills, but all Money Bills may not necessarily be Finance Bills.