During an election year, it is not practical for the ruling Government to prepare or debate on the full budget. Here’s why.
Every year in February, the Government of India presents an annual budget for the next financial year. You get all those sops for saving on taxes which can include your Home Loan, Fixed Deposits, and Provident Fund. However if it is an election year just like it is now in 2019, the Government would instead present a ‘vote on account’ (VOA) or an interim budget. So what is the VOA/interim budget all about? How is it different from a full budget? What is the time gap between VOA and full budget? Read on to find out.
What is an annual budget?
An annual budget has two parts: part one is the summary of income and expenses made by the Government in the previous year while part two is the announcement of proposed ways to raise money from taxes and spending them on welfare measures across the country in the various segments.
Once the annual budget speech is presented by the Finance Minister, it goes through elaborate debates in the Parliament before a vote for or against the proposals is made. After this, the finance bill is said to be passed. This process usually goes on till the 31st of March.
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What is interim budget?
During an election year, it is not practical for the ruling Government or for the new Government taking charge after the elections to prepare or debate on the full budget and pass the bill before the new financial year begins. Hence, the ruling Government would announce an interim budget or vote on account in February which will be followed by a full budget by the new Government in a few months’ time after the elections.
The interim budget will include a report card on the income and expenses made last year and the proposed expenses likely to be made in the next few months until the new government takes over. There is no proposal on the income part of the budget through the collection of taxes. This procedure called VOA would seek the approval of the Parliament. Once the approval is obtained, the funds for these expenses are then debited to the Consolidated Fund of India.
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An interim budget or VOA is also presented just before a few months in the pre-election period during which a code of conduct is put in place. This would gag the central and state governments from announcing any major sops as this could swing the voting pattern in favour of the ruling government. Moreover, a ruling Government cannot present a full budget as the outlook and approach of the new Government after elections might not suit it. Sometimes a new government after the elections might present a VOA as they might not have enough time to table a full annual budget.
Difference between interim and full budget
As mentioned, a VOA/interim budget is only about the ruling Government’s income and expenses made during the last year and also to seek the Parliament’s nod for the expenses proposed to be made in the next few months.
A full budget, on the other hand, is a full annual budget and will include the report card for the last year, income and expenses to be made in the next financial year through taxes and welfare measures and also any sector wise sops.
The time gap between VOA and full budget
If it is an election year the ruling government presents a vote on account and the full budget is presented only after the new Government is sworn in. Usually, the time gap between the two does not exceed six months.
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We will have to wait to see what sops what full budget will offer. In the meanwhile, finish your tax planning for this year. Don’t wait till March! Invest now in tax-saver Fixed Deposits and ELSS Mutual Funds.