How budget is prepared : Explained

hello friends welcome to tricks beyond

that every year government presents the

annual financial statement or the budget

in the lokes of how in the month of

February the last working day not only

for exams but also as a concerned

citizen it is very important to

understand how a budget is prepared and

how it is passed in the parliament

though it is a very complex process but

through this video I have tried to make

it very simple for you first of all I

will explain you how budget is prepared

and then in the next video I will

explain how budget is passed in the

parliament so let's begin

first of all what a budget consists of

it consists of first estimates of

revenue in capital receives don't worry

I will explain the difference between

revenue in capitalism I will explain

what is the revenue incapable recipe

second it consists of ways and means to

raise the revenue third estimates of

expenditure put details of actual

receives in expenditure and the reason

if there is any surplus or deficit and

fifth the economic and financial policy

of the coming here any other taxation

policy etc to understand this to make it

simple the example of your own house

what do you do when you make your own

budget firstly you estimate what money

you have what money you are getting then

you take into consideration what are the

ways and means to raise those revenue

which means how you are going to get

that money either from your salary or

your business or you have invested

somewhere or you are going to borrow or

you're going to sell these all things

are ways and means to raise the revenue

similarly government also first

estimates its revenue in capital

received and then ways and means to

raise those revenue raise those revenue

through taxation or through borrowings

etc etc then you make estimates of

expenditure how much you gonna spend in

the month government also estimates how

much it is going to spend in the ear

then details of actual

it's an expenditure the estimates always

vary from the actual receives and

expenditure so the budget comes also

consist of the details of actual

receives in this vintage er for the

previous year and then economic and

financial policy of the coming year

these all are included in the budget

before I explain you how a budget is

made let me explain you what is a

revenue and capital receive or what our

budget receives under budget recipie

have revenue received and capital

received revenue received consists of

tax revenue and none tax revenue again

tax revenue gets divided into direct tax

and indirect tax none tax revenue

consists of such as license fees term

fee interest payment etc these all

consist of non tax revenue and the basic

difference between revenue received in

capital received is that the revenue

receive does not create any liability no

liability is created by revenue received

while capital receives create liability

for example when government borrows it

creates liability so this was them the

budget making process starts in August

and September which means for this

year's budget the process already

started back in August September 2015

there is a budget division called

there is a budget division in Ministry

of Finance which is Department of

Economic Affairs this division is

responsible for budget making the dis

Department of Economic Affairs since a

budget circular this budget circular

consists of all the instruction

informants according to which all the

ministries and departments has to send

their estimated expenditure and the sips

of the year the ministries and

Department need to send three kinds of

figure these three figures are

estimated budget or budget estimates

budget estimates then revised estimates

and actual the budget estimates consist

of the expenditure and recipt

of the coming year

all the department ministries sent to

the ministry what they need for the

coming year those figures are included

in budget estimates revised estimate is

for the current here for this revised

estimate government need not to seek

approval from the Parliament it is for

the reallocation of the fund on the

basis of implementation in the first

half of the year and this actual which

means and the figures included in the

actual which consists of actual

expenditure and received it is for the

previous year which means budget

instigates is for 2016-17 for this

year's budget revised estimate is for

2015-16 1516 sorry 2015 16 and actuals

are for 2014-15 this is how these three

figures are sent to the ministry which

means that the Union budget of 2016-17

will contain budget estimates of 2016-17

device instamate of 2015-16 and actual


actual budget of 2014-15 one thing

important to note is that when there was

Planning Commission it played a very

important role because the ministries

would provide budget estimates for the

next financial year Valley after they

have discussed their respective plan

schemes with the central planning


and the central planning commission

after consultation with the Ministry of

Finance would arrive at the size of the

annual plan and the gross budgetary

support that would be provided to the

respective plans and since Planning

Commission now have been dismantled and

now we have nathie IO in place of that

it is yet to see what role does

neethiyin will play also in the final

stage the revenue earning ministries

provide their estimates of their revenue

receipts for the current ian's which is

revised estimates and budget estimates

which is for the next year or next

fiscal finally the Finance Minister

examines the budget proposals prepared

by the Ministry and makes change changes

in them if required then Finance

Minister consoles the Prime Minister and

also briefs the Union Cabinet about the

budget at this stage and if there is any

conflict between any ministry and the

finance ministry with regard to the

budget the matter is supposed to be

resolved by the Cabinet after this the

budget division of the Finance Ministry

which is Department of Economic Affairs

it consolidates all figures which is to

be presented in the budget and prepares

the final budget outcome the national

informatics centres and I see helps the

budget division in the process of

consolidation of the budget data which

has been fully computerized at the end

of this process the Finance Minister

takes the permission of the President of

India for presenting the Union budget to

Parliament so this was the process of

budget making in the next video I will

explain how the budget is passed in the

parliament hope you understood the

process I have not provided the details

which are not important for exams for

example offices of DEA are quarantined

when the budget is made how high level

of secrecy is maintained these all are

not important with respect to exam I

will if I will get time I will try to

explain these things also in the next

video I will explain

how a budget is passed in the parliament

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