TERMINOLOGYONEMUSTKNOWTOUNDERSTANDTHEBUDGET

Whataredirecttaxes?
These are the taxes that are levied on the income of individuals or organisations. Income tax,
corporate tax, inheritance tax are some instances of direct taxation.
Incometaxisthetaxleviedonindividualincomefromvarioussourceslikesalaries,investments,
interestetc.
Corporatetaxisthetaxpaidbycompaniesorfirmsontheincomestheyearn.

Whatareindirecttaxes?
Indirecttaxesarethosepaidbyconsumerswhentheybuygoodsandservices.Theseincludeexcise
andcustomsduties.Customsdutyisthechargeleviedwhengoodsareimportedintothecountry,and
ispaidbytheimporterorexporter.
Excisedutyisalevypaidbythemanufactureronitemsmanufacturedwithinthecountry.Usually,
thesechargesarepassedontotheconsumer.
WhatimpactdoestheBudgethaveonthemarketandeconomy?
TheBudgetimpactstheeconomy,theinterestrateandthestockmarkets.Howthefinanceminister
spends and invests money affects the fiscal deficit. The extent of the deficit and the means of
financingitinfluencethemoneysupplyandtheinterestrateintheeconomy.Highinterestrates
mean higher cost of capital for the industry, lower profits and hence lower stock prices.
The fiscal measures undertaken by the government affect public expenditure. For instance, an
increaseindirecttaxeswoulddecreasedisposableincome(incomeremainingtoanindividualtouse),
thus reducing demand for goods. This decrease in demand will translate into a decrease in
production,thereforeaffectingeconomicgrowth.

Whatisacapitalbudget?
Thecapitalbudgetisdifferentfromtherevenuebudgetasitscomponentsareofalongtermnature.
The capital budget consists of capital receipts and payments.
Capital receiptsare government loans raised from the public, government borrowings from the
ReserveBankandtreasurybills,loansreceivedfromforeignbodiesandgovernments,divestmentof
equityholdinginpublicsectorenterprises,securitiesagainstsmallsavings,stateprovidentfunds,and
specialdeposits.
Capitalpaymentsarecapitalexpenditureonacquisitionofassetslikeland,buildings,machinery,
andequipment.Investmentsinshares,loansandadvancesgrantedbythecentralgovernmenttostate
andunionterritorygovernments,governmentcompanies,corporationsandotherparties.

Whatisafiscaldeficit?

Thisisthegapbetweenthegovernment'stotalspendingandthesumofitsrevenuereceiptsand
nondebt capital receipts. It represents the total amount of borrowed funds required by the
governmenttocompletelymeetitsexpenditure.

Whatisarevenuebudget?
Therevenuebudgetconsistsofrevenuereceiptsofthegovernment(revenuesfromtaxandother
sources), and its expenditure.Revenue receipts are divided into tax and nontax revenue. Tax
revenuesaremadeupoftaxessuchasincometax,corporatetax,excise,customsandotherduties
thatthegovernmentlevies.
Innontaxrevenue,thegovernment'ssourcesareinterestonloansanddividendoninvestmentslike
PSUs, fees, and other receipts for services that it renders. Revenue expenditure is the payment
incurredforthenormaldaytodayrunningofgovernmentdepartmentsandvariousservicesthatit
offerstoitscitizens.
Whatisplanandnonplanexpenditure?
There are two components of expenditure plan and nonplan.
Ofthese,planexpendituresareestimatedafterdiscussionsbetweeneachoftheministriesconcerned
andthePlanningCommission.Nonplanrevenueexpenditureisaccountedforbyinterestpayments,
subsidies (mainly on food andfertilizers), wage and salary payments to government employees,
grantstoStatesandUnionTerritoriesgovernments,pensions,police,economicservicesinvarious
sectors, other general services such as tax collection, social services,and grants to foreign
governments.Nonplancapitalexpendituremainlyincludesdefense,loanstopublicenterprises,loans
toStates,UnionTerritoriesandforeigngovernments.
WhatistheCentralPlanOutlay?
Itisthedivisionofmonetaryresourcesamongthedifferentsectorsintheeconomyandtheministries
ofthegovernment.
After understanding these terms which has been referred from various sites it will be easy to
understand the budget in a more efficient way. Also the intention to provide different
related terms is to just to provide all the information under the same head at one page. Part
two will focus more on budget details.