How India's Union Budget is made and passed

When the Finance Minister announces the Union Budget, has the government already been given permission to spend the money? The answer lies in the steps before and after the speech. Ministries prepare estimates, Parliament examines proposals, and Lok Sabha votes on grants. Legislation gives the government authority to spend and tax. Following these stages helps readers understand what a Budget announcement means.

Preparation begins with estimates

India's financial year runs from 1 April to 31 March of the following calendar year. Work on the Budget begins before it is presented. The Department of Economic Affairs in the Ministry of Finance issues an annual Budget Circular. As PRS Legislative Research explains, the circular sets the timetable for ministries to submit estimates of receipts and expenditure. These feed into the next financial year's Budget Estimates.

Article 112 of the Constitution requires the President to cause an Annual Financial Statement to be laid before both Houses of Parliament. It sets out the Union government's estimated receipts and expenditure for the year. The statement shows estimates rather than money already received or spent. The President's constitutional responsibility is to have the statement laid before Parliament, without having to write or deliver the Budget speech personally.

The speech comes with documents

The Ministry of Finance's guide to the 2026 to 2027 Budget lists the Annual Financial Statement, Demands for Grants and Finance Bill alongside the speech. Supporting material includes the Receipt Budget, Expenditure Budget, Expenditure Profile and Budget at a Glance, as well as fiscal-policy statements and an explanatory memorandum on the Finance Bill. These documents give readers more detail about the proposals than the speech alone. They are not all separately voted into law.

Under Lok Sabha's rules, the President directs the day of presentation. The House cannot discuss the Budget that day. Article 112 does not fix 1 February as a constitutional deadline. Presentation puts the proposals before Parliament. Discussion and authorisation follow in later stages.

Which expenditure is put to a vote?

To follow the spending votes, start with the Consolidated Fund of India. Under Article 266, it includes Union government revenues, borrowings and repayments of loans received by the government, subject to the article's qualifications. It holds more than tax receipts, though some kinds of public money fall outside it.

Article 112 requires expenditure estimates to distinguish amounts charged on this fund from other expenditure. Constitutionally charged items include debt charges and Supreme Court judges' salaries, allowances and pensions. Under Article 113, either House may discuss charged expenditure, but its estimates are not submitted to a parliamentary vote.

The other expenditure estimates come before Lok Sabha as Demands for Grants. Under Article 113, the House may approve, refuse or reduce a demand, but cannot increase it. A demand also requires the President's recommendation. Lok Sabha's rules normally provide a separate demand for each ministry, with exceptions. Each shows a proposed total followed by itemised estimates.

The statement must also distinguish revenue-account expenditure from other expenditure. This classification is separate from the division into charged and voted expenditure.

Discussion and committee scrutiny

The general discussion considers the Budget and its principles. At this stage in Lok Sabha, no motion is moved and the Budget is not put to a vote. The Finance Minister has a general right of reply. The debate concerns the Annual Financial Statement; it does not end by passing that statement as a single Bill.

After general discussion in the Houses, the standing-committee procedure provides for a break. Departmentally Related Standing Committees then examine their ministries' Demands for Grants and produce reports. The House considers the demands in light of those reports.

The reports advise Parliament and can help persuade it. Committees cannot suggest cut motions or approve grants themselves. Their recommendations inform the House's decisions rather than automatically changing allocations.

Cut motions and the guillotine

When Lok Sabha considers demands, members can propose cut motions that meet the rules for admission. Each type proposes a different reduction:

• A policy cut reduces a demand to Re. 1, expressing disapproval of the policy.
• An economy cut reduces a demand by a specified amount.
• A token cut reduces a demand by Rs. 100 to raise a specific grievance within the Union government's responsibility.

Notice the difference between reducing a demand to an amount and reducing it by an amount. A token cut takes Rs. 100 off the demand.

Time for considering demands is limited. When it runs out, the House decides on all remaining demands. PRS describes the guillotine as voting on these demands together without discussion. Each still faces a vote, though without its own detailed debate in the House. Rajya Sabha does not vote on Demands for Grants.

Spending authority and tax law

Once Lok Sabha has made the grants, Article 114 provides for an Appropriation Bill. Once enacted, it authorises withdrawals from the Consolidated Fund for the grants and for charged expenditure. The charged expenditure cannot exceed the amount in the statement previously laid before Parliament. Approval of grants alone does not give the government this authority to withdraw money.

Article 114 limits amendments to this Bill: they cannot change a grant's amount or destination, or the amount of charged expenditure. Appropriation gives permission to spend, rather than showing that the entire allocation has been spent.

The annual Finance Bill has a different purpose. Presented with the Annual Financial Statement, it sets out tax proposals for legislation, including imposing, removing or changing taxes. Under Article 265, levying and collecting a tax requires authority of law; an announcement in the speech alone is insufficient.

Rajya Sabha and presidential assent

The Ministry of Finance's guide describes the annual Finance Bill as a Money Bill. Article 110 sets the test: a Money Bill must contain only provisions dealing with the listed subjects and incidental matters. Taxation and appropriation from the Consolidated Fund are listed subjects. The Speaker certifies a Money Bill. A Bill must meet this test to qualify, even if it deals with money.

Under Article 109, a Money Bill cannot originate in Rajya Sabha. After Lok Sabha passes it, Rajya Sabha has fourteen days from receipt to return it with recommendations. Lok Sabha may accept or reject them. If the Bill is not returned within that period, it is deemed passed by both Houses in Lok Sabha's form.

After Parliament passes a Bill, it goes to the President under Article 111. The President may give or withhold assent. Article 111 also allows the President to return a Bill for reconsideration, except for Money Bills.

How to follow the process

When reading Budget coverage, identify the stage: an estimate, a grant approved by Lok Sabha, spending authority or tax legislation. Financial accountability continues after approval. Article 151 requires the Comptroller and Auditor-General's reports on Union accounts to go to the President and be laid before each House.

The Constitution provides for later needs too. Article 115 covers supplementary or additional provision, as well as demands for spending that has already exceeded a grant. Article 116 allows a vote on account. This is an advance grant for part of a year while the full grants and appropriation process is still pending.

For a related introduction to policy simulation, One Young India's Model NITI Aayog is described by the organisation as a simulation of NITI Aayog.