Vote on Account
The Budget to be presented by Finance Minister ArunJaitley on February 1 is likely to be a vote on account or an interim Budget.
Vote on Account
Discussion on Budget takes place after a few days of the presentation of the Budget. The Parliament can’t vote the entire budget before the beginning of the new financial year. This creates the requirement to keep enough finance at the disposal of Government so that it could run the administration of the country. Therefore, there is a special provision named “Vote on Account” by which Government obtains the Vote of Parliament for a sum adequate to incur expenditure on various items for a part of the year.
Vote on Account is a grant in advance to enable the government to carry on until the voting of demands for grants and the passing of the Appropriation Bill and Finance Bill.
The sum of the grant would be equivalent to one sixth of the estimated expenditure for the entire year under various demands for grants.
As a convention, a vote-on-account is treated as a formal matter and passed by Lok Sabha without discussion.
Most importantly, a ‘Vote on Account’ cannot alter direct taxes since they need to be passed through a Finance Bill.
Can Vote on Account be granted for more than 2 months?
Yes. During election year or when it is anticipated that the main Demands and Appropriation Bill will take longer time than two months, the Vote on Account may be for a period exceeding two months.
Difference between Full Budget and Vote on Account:
Full Budget deals with both expenditure and revenue side but Vote-on-account deals only with the expenditure side of the government’s budget.
The vote-on-account is normally valid for for two months but full budget is valid for 12 months (a financial year).
As a convention, a vote-on-account is treated as a formal matter and passed by Lok Sabha without discussion. But passing for budget happens only after discussions and voting on demand for grants.
What is an interim budget then?
An interim budget in all practical sense is a full budget, but made by the government during the last year of its term – ie. just before election. An interim Budget is a complete set of accounts, including both expenditure and receipts. But it may not contain big policy proposals.
Is it mandatory for the government to present vote on account instead of full budget in an election year?
During an election year, the ruling government generally opts for a vote-on-account or interim budget instead of a full budget. While technically, it is not mandatory for the government to present a vote-on-account, but it would be inappropriate to impose policies that may or may not be acceptable to the incoming government taking over in the same year.
Why is important?
Despite the hype around it, the Union Budget is nothing but a projected income and expenditure statement from the Central government for the coming year. Usually, the Budget has to be approved by Parliament before the commencement of the new financial year. Over the years though, Indian Budgets have become major events, doubling up as major policy statements of the government.
But in the years where Lok Sabha elections are due, it would be improper for the outgoing government to impose policy changes or budgetary constraints on its successor who may or may not accept them. However, it is still necessary to keep enough money at its disposal to allow it to run the administration, requiring a vote on account.
Though vote-on-account is a temporary measure, it does need the approval of Parliament and it is usually passed without much discussion. It is usually valid for two months, until the new government presents a full Budget. Ministries and departments can utilise the funds available for non-Plan expenditure which includes payments of salary to government employees, loan interest payments, subsidies, pension payments, based on the vote on account.
The vote on account typically does not seek funds for major projects or new initiatives. This usually awaits the presentation of the full Budget. The new government elected may have different ideas in mind for the allocation of resources.
Therefore, the incumbent government usually restrains itself from making any new financial commitments. However, on the downside, the country may lose crucial time on developmental projects during the hiatus after the vote on account.
The constitution says that no money can be withdrawn by the government from the Consolidated Fund of India except under appropriation made by law. For that an appropriation bill is passed during the Budget process. However, the appropriation bill may take time to pass through the Parliament and become a law. Meanwhile, the government would need permission to spend even a single penny from April 1 when the new financial year starts. Vote on account is the permission to withdraw money from the Consolidated Fund of India in that period, usually two months.
According to the Article 266 of the Constitution, it is mandatory for the government to seek approval from the parliament before raising any funds from the consolidated funds of India.
Why should I care?
One of the key features of a vote on account is that it usually does not contain any direct tax proposals that would impact you, as that requires amendments to the Finance Bill.
Therefore, any decrease/increase or exemption/inclusion related to income tax will be on hold if there’s a vote on account. On indirect taxes though, there could be clarifications or minor tweaks.
A vote on account could be used as an opportunity to highlight the achievements of the government during its years in office. This may help you understand the effectiveness of the government and make up your mind for voting.
But no matter when the new government is elected, it has to pick up from where the previous one left off to reboot the economy.