Union Budget 2025:
As Finance Minister Nirmala Sitharaman gets ready to present the Union Budget for the fiscal year 2025-26 on February 1, people all across India are eagerly waiting to see how their needs, hopes, and expectations will be addressed. But let’s be honest—no matter how carefully planned or well-intended the budget is, it will always face some criticism. Often, we react emotionally, without truly understanding the complexities of economic policies, technical terms, or the financial priorities that shape the country’s growth path.
To help bridge this gap in understanding, let’s take a look at some important terms and concepts that make up the Union Budget. Familiarizing yourself with these will not only help you follow what’s being presented but also allow you to judge it more thoughtfully before jumping to conclusions.
Here are some key terms you need to know:
1. Annual Financial Statement (AFS)
The Annual Financial Statement, as required by Article 112 of the Indian Constitution, is essentially the government’s financial report. It lays out the expected earnings and expenses for the upcoming fiscal year and compares them with previous years. Think of it as the core of the budget—it showcases the nation’s economic priorities and plans, ranging from infrastructure projects to welfare initiatives.
2. Budget Estimate
A Budget Estimate refers to the expected amount of money the government plans to earn and spend in a fiscal year. It includes projected revenues from taxes, loans, and other sources. These estimates act as a financial forecast, though they may not always be accurate. However, they give us a glimpse into the government’s fiscal approach.
3. Capital Expenditure (Capex)
Capital expenditure refers to the funds spent on building long-term assets, like roads, railways, airports, and power plants. Unlike revenue expenditure (which we’ll talk about later), capex aims to enhance productivity and create lasting infrastructure. Many people judge the success of a budget based on how much focus it places on capex, as it reflects the government’s commitment to development.
4. Capital Receipts
Capital receipts are the funds the government receives from sources like loans, selling off public assets, or recovering loans. For example, when the government sells a stake in a public sector company, the money raised falls under capital receipts.
5. Cess
A cess is an extra tax imposed for a specific purpose, such as education, healthcare, or infrastructure development. Unlike regular taxes, cesses are not shared with state governments and are used solely by the central government. While many people feel burdened by cesses, they are often intended for important social benefits.
6. Consolidated Fund
The Consolidated Fund is the main account where all government revenues are deposited and from which most of the government’s expenses are paid. You can think of it as the government’s primary wallet. Any withdrawal from this fund requires approval from Parliament.
7. Contingency Fund
The Contingency Fund serves as an emergency reserve for unforeseen expenses, such as natural disasters or financial crises. Managed by the President of India, it ensures that the government can act quickly during urgent situations.
8. Direct Taxes
Direct taxes are taxes paid directly by individuals or businesses to the government, such as income tax or corporate tax. People often pay close attention to changes in direct taxes to understand how their personal finances will be affected.
9. Divestment
Divestment refers to the government selling its stake in public sector enterprises. This is usually done to raise funds or reduce inefficiencies in these companies. While some people see divestment as a practical move, others view it as the privatization of national assets.
10. Economic Survey
The Economic Survey, released a day before the budget, provides a review of the country’s economic performance over the past year. It serves as a preview of the budget, offering insights into the country’s key challenges and opportunities.
11. Finance Bill
The Finance Bill is a draft law that turns the government’s fiscal policies, including changes to taxes, into actionable laws. In simple terms, it’s the tool that implements the budget’s announcements.
12. Fiscal Deficit
A fiscal deficit occurs when the government’s total expenditure exceeds its total revenue (excluding borrowings). A large fiscal deficit often worries economists as it means the government is borrowing more to cover its expenses, which could lead to inflation and rising debt.
13. Fiscal Policy
Fiscal policy refers to the government’s strategy for managing its revenue, expenditure, and debt. It’s a balancing act—too much spending can lead to deficits, while too little spending can slow down economic growth.
14. Indirect Taxes
Unlike direct taxes, indirect taxes are taxes placed on goods and services rather than on income. Examples include GST and customs duties. These taxes are often controversial because they impact everyone, no matter their income level.
15. Inflation
Inflation is the rate at which the prices of goods and services increase. While a moderate level of inflation is a sign of economic growth, high inflation reduces purchasing power, making life harder for the average citizen.
16. New Tax Regime & 17. Old Tax Regime
The new tax regime, introduced a few years ago, offers lower tax rates but removes most exemptions. On the other hand, the old tax regime provides various deductions but comes with higher rates. People often debate which regime benefits them more, based on their financial situation.
18. Public Account
The Public Account includes funds such as small savings schemes, provident funds, and other deposits. Unlike the Consolidated Fund, this account doesn’t require parliamentary approval for withdrawals.
19. Rebate
A rebate reduces the amount of tax you need to pay. For example, under Section 87A, taxpayers earning below a certain threshold are eligible for a rebate, which effectively reduces their tax liability to zero.
20. Revenue Deficit
A revenue deficit happens when the government’s revenue expenditure exceeds its revenue receipts. It means the government cannot cover its regular expenses without borrowing more money.
21. Revenue Expenditure
Revenue expenditure includes recurring costs, such as salaries, subsidies, and interest payments. These are necessary for running the government, but they don’t create long-term assets.
22. Revenue Receipts
Revenue receipts are the funds the government receives from taxes and other sources, such as interest on loans. These receipts form the foundation of the government’s finances.
23. Tax Collected at Source (TCS)
TCS refers to the tax collected by sellers from buyers during specific transactions, like the purchase of foreign tour packages or high-value goods.
24. Tax Deduction
Tax deductions reduce your taxable income. For example, investing in schemes like PPF or paying for health insurance premiums can qualify for deductions under various sections of the Income Tax Act.
25. Tax Surcharge
A tax surcharge is an additional tax imposed on individuals or entities that earn above a certain income threshold. For instance, high-income earners often pay a surcharge on their income tax.
Public Reaction: More Than Just Numbers
Every year, the Union Budget sparks a lot of discussion in homes, offices, and on social media. While some people focus on tax relief, others highlight the need for better healthcare, education, and infrastructure. The real challenge is balancing these diverse expectations with fiscal discipline.
As the Finance Minister steps up to deliver her speech on February 1, let’s approach the Union Budget with a thoughtful perspective. Instead of only focusing on immediate benefits or drawbacks, it’s important to look at the broader vision it presents for India’s future. After all, the budget is more than just numbers; it reflects the aspirations, priorities, and long-term goals of the nation.
