How India's Union Budget is made and passed

Every year, normally on 1 February, the Finance Minister stands up in the Lok Sabha and reads out the Budget. Most coverage stops at the speech: what got cheaper, what got taxed. But the speech is only the start. The Budget does not become law until Parliament has worked through it over several weeks, and the rules for that come from a few articles of the Constitution and the rules of the Lok Sabha.

A word the Constitution does not use

The Constitution never uses the word "budget". Article 112 asks the President to "cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year", and calls it the "annual financial statement". The word "Budget" enters through the Lok Sabha's own rules, which say this statement "shall be presented to the House on such day as the President may direct".

The statement has to show two kinds of spending separately. Some expenditure is "charged" on the Consolidated Fund of India: debt charges such as interest, the salaries and allowances of Supreme Court judges, the salary of the Comptroller and Auditor-General, and sums needed to satisfy court judgments, among others. Parliament may discuss these but does not vote on them. Everything else comes before the Lok Sabha as "demands for grants", and the House can agree to a demand, refuse it or reduce it. It cannot increase it. The Budget for 2026-27 had 102 Demands for Grants.

Who prepares it

The Budget is not written by the Finance Minister alone. The Budget Division of the Department of Economic Affairs in the Ministry of Finance is responsible for preparing it and submitting it to Parliament. Months of work go into it, including consultations: on 10 January 2026, for example, the Finance Minister held pre-budget consultations with States and Union Territories that have legislatures.

A familiar ritual marks the final stage. On 27 January 2026, the Halwa ceremony was held at the Budget Press in North Block. It precedes the "lock-in" of the officials involved. It is a tradition, not a constitutional or parliamentary step.

A few days before the Budget comes the Economic Survey, prepared by the Economic Division of the same department under the Chief Economic Adviser. The Survey for 2025-26 was tabled on 29 January 2026. It reviews the economy, but it is not part of the Budget and the Constitution does not require it.

Why 1 February

For decades the Budget was usually presented on the last day of February, and until 2016 India also had a separate Railway Budget, a practice that began in 1924 as a convention. In September 2016 the Cabinet approved merging the Railway Budget with the general Budget and moving the presentation to an earlier date, from the Budget of 2017-18. Presenting it on 1 February gives Parliament time to pass the whole Budget before the financial year begins on 1 April.

Before the change, the Budget often could not be passed by 1 April, so the government needed a "vote on account" to keep spending. Article 116 allows the Lok Sabha to grant money in advance for part of a year "pending the completion" of the full procedure. It is a stopgap, not a replacement for the Budget.

What happens in Parliament

The passage follows a fixed sequence:

• Presentation. There is no discussion on the day the Budget is presented.
• General discussion. On later days, members may discuss the Budget as a whole or any question of principle, but no motion is moved and the Budget is not put to a vote.
• Committee scrutiny. The Houses then adjourn for a fixed period while the departmentally related standing committees examine the Demands for Grants of their ministries. Their reports may not suggest cuts.
• Voting on demands. The Lok Sabha debates and votes on the Demands for Grants.
• Appropriation Bill. The approved demands are combined into an Appropriation Bill, which authorises the withdrawal of money from the Consolidated Fund.
• Finance Bill. The tax proposals are passed in the Finance Bill.

In 2026, according to PRS Legislative Research, the Appropriation (No. 2) Bill, 2026, which covers 2026-27, was passed by the Lok Sabha on 18 March and by the Rajya Sabha on 27 March, and the Finance Bill by the Lok Sabha on 25 March and the Rajya Sabha on 27 March.

Cut motions and the guillotine

While the demands are being discussed, members can move cut motions. The Lok Sabha rules name three kinds: a "Disapproval of Policy Cut", which proposes reducing a demand to Re 1; an "Economy Cut", which proposes reducing it by a specified amount; and a "Token Cut", which proposes reducing it by Rs 100 to raise a particular grievance. Cut motions cannot be moved on charged expenditure. PRS notes that if a cut motion is passed, it signifies a loss of confidence in the government, and the Cabinet is expected to resign.

There is rarely time to debate every demand. The rules provide that on the last allotted day, at a fixed hour, the Speaker puts every outstanding question to the vote at once. This is popularly called the guillotine, though the word is not in the rules. PRS notes that the Lok Sabha typically discusses only four or five Demands for Grants, and that in 2004-05, 2013-14 and 2018-19 all the demands were guillotined. It is a lawful procedure, but it means most of the spending is approved without debate.

Taxes need a law

Article 265 says: "No tax shall be levied or collected except by authority of law." The Budget speech announces tax changes, but they take legal effect through the Finance Bill, which is usually introduced as a Money Bill.

That label matters. Under Article 109, a Money Bill cannot be introduced in the Rajya Sabha. The Rajya Sabha must return it within fourteen days with any recommendations, which the Lok Sabha may accept or reject; if it is not returned in time, it is deemed passed by both Houses. Article 110 says a Bill is a Money Bill only if it contains "only" provisions on matters such as taxes and spending from the Consolidated Fund, and the Speaker's decision on this is final. PRS has pointed out that the Finance Bill, 2017 also changed the composition of 19 quasi-judicial bodies, which shows why the label is sometimes debated.

Reading the numbers

Two distinctions help in reading any Budget. Revenue expenditure is for running government departments and services, paying interest, subsidies and grants. Capital expenditure is spending on assets such as land, buildings and machinery, and investments. A new school building is capital spending; the teachers' salaries are revenue spending.

The figure most often quoted is the fiscal deficit, which the Budget documents define as "the difference between total expenditure and total receipts (excluding Debt Capital Receipts)". In effect, it is the amount the government needs to borrow in the year, not its total debt. For 2026-27 the Budget Estimates put total expenditure at ₹53,47,315 crore, capital expenditure at ₹12,21,821 crore, and the fiscal deficit at ₹16,95,768 crore, or 4.3 per cent of GDP, against a revised 4.4 per cent for 2025-26. These are estimates; the actual figures come later.

Why it is worth knowing

The Budget is the yearly exercise through which Parliament decides how the government raises and spends money on citizens' behalf. Knowing that the Lok Sabha votes on demands but not on charged items, that most demands are passed by the guillotine, and that no tax can be levied or changed without a law passed by Parliament, usually the Finance Bill turns a speech on television into a process a citizen can follow, and question.