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A budget is one of the most important economic activity for a nation. The article would provide an understanding of Union Budget of India.

Union Budget of India

Union Budget: A Brief Summary
Budget is a systematic plan for the expenditure of a usually fixed resource during a financial year. It is a detailed plan of the government’s finances and it is the most important economic and financial event in India.

The budget is usually anteceded by an economic survey which gives the general course for the budget and gives an outlook for the economic performance of the country.

The budget is a detailed account of the Governments finances, in which revenues from various sources and expenses of all activities undertaken are aggregated. It consists of revenue budget and capital budget and the budget estimates, which is a financial projection for the next fiscal year.

The Union Budget of India is presented on the last working day of February by the Finance Minister of India in the parliament. The Budget has to be passed by both the houses of the Parliament before it can come to effect on April 1st.The Union Budget is also known as the general budget.

The first budget of independent India was presented by R.K Shanmukham Chetty on November 26, 1947. Morarji Desai has presented the Union Budget for the maximum number of times (8 times).

Revenue Budget
Revenue Budget consists of revenues from tax and other sources and the expenditure covered by these revenues.

Revenue receipts are divided into tax and non tax revenue. Tax revenues are made up of taxes such as income tax, corporate tax, excise, customs and other duties which the government levies. Non tax revenues are made up of interest and dividend on investments made by government, fees and other receipts for services rendered by Government.

Revenue expenditure is the payment incurred for the normal day to day running of government departments and various services that it offers to its citizens. The other expenditure for the government would be interest on its borrowings, subsidies etc.

Capital Budget
It consists of capital receipts and payments. Under capital receipts the main subject would be loans by Government from public, which can also be termed as Market Loans, borrowing from Reserve Bank and other lenders through the sale of treasury bills, loans received from foreign governments and recovery loans granted by Central government to State and Union Territory, corporations and other parties.

Contents of the Union Budget
The Union Budget highlights the receipts and payments of the government under three accounts:-

Consolidated Fund: It is the main bank account of the government.

Contingency Fund: It is the amount kept in reserve to guard against losses.

Public Account: Accounts which have funds provided by the entities of government.

The union budget also announces policies and it tells about the government's economic thinking. It also determines activities such as exports and foreign direct investment. The Union Budget has both short and long term effect. Short term effect is due to the taxes levied and prices determined. The announcement of Income Tax has a big impact on the salaried people, who have fixed income. In the long run, the main factor is inflation. If the government goes on printing notes to pay off its debts then it will assist inflation.

Highlights of Union Budget 2008 - 2009
Recently Mr. P Chidambaram presented the union budget 2008-09. Some of the highlights of the budget were:
  • Changes in Income Tax slab. Threshold of exemption for all Income Tax assesses raised from Rs 1, 10,000 to Rs 1, 50,000.
  • Every income tax assesses to get relief of minimum of Rs 4,000.
  • No change in rate of surcharge.
  • New tax slabs will be: 10 per cent for Rs 150,000 to Rs 300,000, 20 per cent for Rs 300,000 to Rs 500,000 and 30 % above Rs 500,000.
  • For women, the income tax limit goes up from Rs 1.45 lakh to Rs 1.80 lakh. In case of senior women citizens, it increases from Rs 1.95 lakh to Rs 2.25 lakh.
  • Fresh facilities, encouragement to sports and guest houses exempted from Fringe Benefit Tax.
  • Five year tax holiday for setting up hospitals in tier II and tier III regions for providing healthcare in rural areas from April 1, 2008.
  • Five year tax holiday for promoting cultural tourism.
  • Short-term capital gains increases to 15 %.
  • Commodities Transaction Tax to be introduced on the lines of Securities Transaction Tax.
  • Banking cash transaction tax withdrawn from April one, 2009.
  • Direct tax proposals to be revenue neutral. Indirect tax proposals to result in loss of Rs 5,000 crore.
  • Customs duty on specified life saving drugs reduced from ten per cent to five per cent.
  • Special Countervailing Duty on power imports.
  • Customs duty on specified sports goods machinery down from 7.5 per cent to five per cent.
  • Duty withdrawn on naphtha for production of polymers.
  • Duty on crude and unrefined sulphur reduced from five to 2 per cent to help raise domestic fertilizer production.
  • Excise duty reduced from 16 % to 8% on all pharmaceutical goods manufacture.
  • Excise duty on small cars reduced to 12 % from 16 % and hybrid cars to 14 per cent.
  • Excise duty reduced from 16 to 8 % on water purification items.
  • Duty on non filter cigarettes to be raised.
  • Asset management service under mutual funds, services by stock exchanges to be brought under Services Tax net.

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