Union Budget and its types. All you need to know

Budget 2021: Before the release of the much-awaited budget, here’s what you need to know about the financial statement.

Union finance minister Nirmala Sitharaman is scheduled to release the Union Budget 2021 on Monday at 11am. All eyes are on Sitharaman’s third budget as the government is looking to boost the economy hit by the coronavirus pandemic. Various economic sectors have their hopes pinned on the upcoming budget.

All eyes are on Sitharaman’s third budget as the government is looking to boost the economy hit by the coronavirus pandemic. (Reuters file photo)

Before the release of the much-awaited budget, here’s what you need to know about the financial statement.

What is the Union Budget?

Union Budget is a financial statement released by the government every year detailing the expenditure and revenue receipts anticipated for the following fiscal. A government budget informs about the current status of the economy. The Union Budget is released by the finance minister of the country. RK Shanmukham Chetty presented the first budget of Independent India on November 26, 1947.

The date of the release of the budget has varied throughout the history of independent India. Since 2017, the annual union budget has been released by the government on February 1. The implementation of the proposals in the budget starts from April 1, which is the date when the financial year begins.

The budget is classified under three main categories based on the difference between the anticipated expenditure and revenue.

1. Balanced Budget: The budget is categorised as balanced when the estimated expenditure is equal to the expected revenue of the financial year. The type of budget is founded from the classical economist idea that the expenditure should not exceed the revenue.

2. Surplus Budget: When the revenue receipts in the financial year are greater than the anticipated expenses then it is classified at Surplus as the income exceeds the expenditure. Experts believe this type of budget can be used to control demand during inflation.

3. Deficit Budget: In the case of expenditure being greater than the revenue, it is categorised as the Deficit Budget. Analysts believe this type of budget benefits developing economies.

The Union Budget also comprises two main parts: the Revenue Budget and Capital Budget. The Revenue Budget includes revenue receipts and expenditures from tax revenue and non-tax revenue. The Capital Budget includes capital borrowings, interest, disinvestment, corporate assets and investments.