Budget Basics: 15 terms that will help you understand Union Budget 2017 betterUnion Budget 2017 Basics: Know these 15 accounting and budgeting terms might make it easier to understand the union budget 2017. Balanced budget , Budgetary deficit, Finance bill , Indirect taxes , Customs duties.
The government plans to present the Union Budget on February 1 this year where the Finance Minister will present the documents before the Parliament besides a speech where he might highlight key points.
Finance Minister Arun Jaitley will use words like Finance bill, Fiscal deficit, Balance of payments and Current Account Deficit which not everyone necessarily understands.
These are just a few of the technical terms use in Economics. Understanding the meaning of these words might make it easier to understand the budget.
Here are some of the words which Finance Minister will use recurrently in his speech:
1. Balance of payments:
The term is used to denote the difference in total value between payments into and out of a country over a period.
2. Balanced budget:
Budgets in which revenues are equal to expenditures are referred to as "balanced budget". It means there is neither a budget deficit nor a budget surplus.
3. Budgetary deficit:
Budgetary deficit is the difference between all receipts and expenses in both revenue and capital account of the government. It means the government has spent more money that it earned in a financial year.
Central Value Added Tax or CENVAT is a type of tax which is imposed by the Centre on manufacturer of final product.
5. Corporate tax:
A corporate tax is a direct tax imposed by CBDT on the profit of a firm. The tax is levied on the profit after earnings is calculated by deducting all expenses.
6. Current account deficit:
This is difference of value of the goods and services imported and the value of the goods and services exported.
7. Income tax:
This is the tax levied on individual incomes. Excise duty, sales tax and service tax come under this category.
8. Indirect taxes:
This is the tax levied on goods and services rather than on income or profits. This is paid to the government by one entity in the supply chain, but it is passed on to the consumer as part of the price of a good or service.
9. Direct taxes:
This is levied on the income or profits of the person or entities. Income tax, corporate tax fall under this category.
10. Excise duties:
Excise duty is an indirect tax levied on goods which are manufactured in the country and are meant for home consumption.
11. Customs duties:
Customs Duty is a tax imposed on imports and exports of goods.
Disinvestment is the action of government selling or liquidating an asset or subsidiary. In most cases, it typically refers to sale from the government, partly or fully, of a government-owned enterprise.
13. Fiscal deficit:
It is the difference between total revenue and total expenditure of the government and indicates the total borrowings needed by the government.
The gross domestic product (GDP) represents the total value of all goods and services produced in a financial year.
15. Finance bill:
Through Finance Bill, the government proposes new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament.