When the Union Budget is presented each year, it is accompanied by a crucial legal document, called the Finance Bill. While the Budget presents the financial plans of the government, it is the Finance Bill that gives these plans concrete legal form. Without the Finance Bill, the taxation proposals and revenue measures in the Budget cannot be implemented.
In simple words, the Finance Bill gives the government the authority to impose taxes and implement its financial policies for the next year.
What is a Finance Bill?
The Finance Bill contains proposals to impose new taxes, change the rates of existing taxes, or make temporary provisions on taxation. These proposals are placed before Parliament every year. Once approved and assented to by the President, the Finance Bill becomes the Finance Act, which enables the government to collect taxes as promised in the Budget.
According to the Indian Constitution, the Finance Bill is classified as a Money Bill, primarily under Article 110. Occasionally, it may also be classified under Article 117, which deals with other financial business.
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Why is it presented with the Union Budget?
The Finance Bill and the Union Budget are interlinked. The Budget outlines policy guidelines, while the Finance Bill gives these guidelines a concrete form in the form of laws. This is why changes in income tax rates, customs duties, or other taxes happen only after the Finance Bill is passed.
An important aspect of the Finance Bill is that it applies to only one financial year. Every Budget requires a new Finance Bill.
Where and how the Finance Bill is introduced
The Finance Bill can be introduced only in the Lok Sabha, and this bill is moved by the Union Finance Minister. The Rajya Sabha can discuss the bill and make recommendations, but it cannot reject or modify the bill in any binding manner. These recommendations are not binding on the Lok Sabha.
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The Finance Bill must be passed by Parliament within 75 days of its introduction. This ensures that the flow of taxes and expenditure of money remains smooth. Once the bill is passed by Parliament and signed by the President, it becomes the Finance Act.
What does the Finance Bill contain?
The Finance Bill deals with taxation, borrowing by the government, and public expenditure, and is accompanied by a detailed memorandum that explains the rationale and financial implications of each proposal.
One of the most important and closely watched parts of the Finance Bill deals with income tax rates, which are specified for individuals, senior citizens, and companies, as well as the surcharge rules.
