Union Finance Minister Nirmala Sitharaman will present the Union Budget 2026 on February 1. Ahead of the Budget, let’s decode some of the key terms/ budget jargons that the Finance Minister will use in her Budget speech. The Union Budget 2026 will be crucial in shaping public spending as well as revenue.
Appropriation Bill: Introduced in Parliament, Appropriation Bill is a bill that requires approval of government expenditure for the financial year. It becomes law after getting Parliament’s approval.
Allocation: It is the money set aside for spending. The way we set aside a chunk of our money on certain things, similarly, Budget allocation is the process through which financial resources are distributed among departments or projects. The main aim is to bring in line with goals, ensure efficiency, and prevent overspending.
Assets: As the word suggests, it refers to the resources owned by the government. In other words, it means sources that have value; they bring benefit to the government such as infrastructure, financial investments, etc.
Borrowings: The way we take loans or borrow money to buy a house, government also raises funds, which in budgetary terms is called as borrowing. Government does it through loans or bonds. Borrowing is usually done to bridge the fiscal deficit.
Capital Expenditure (Capex): In simple words, Capital Expenditure or Capex refers to the spending by the government to create long-term assets for the future.
Deficit Financing: Ever wondered why some people prefer to use credit card instead of cash? One of the reasons is when a person’s salary is not enough and needs to spend on certain things, he/she tends to buy time by using the credit card. That’s basically deficit financing. In Budgetary terminology, it is the practice of funding a fiscal deficit by borrowing money or printing currency.
Direct Taxes: The taxes that are paid directly to the government by organisations or individuals come under direct tax. Income tax from your and corporate tax are good examples of direct taxes.
Disinvestment: To raise funds, government sells its stakes in public sector enterprises. That process is called disinvestment.
Excise Duty: It is a tax levied on the production or manufacture of goods within the country.
Fiscal deficit: When the government spends more than the income, it’s called fiscal deficit. In other words, it is a gap between government income and spending. It arises when the government’s total expenditure exceeds its total revenue, excluding the money borrowed.
Indirect taxes: These taxes are collected by the government indirectly through goods and services, such as GST or customs duty. For instance, when we pay GST on clothes or mobile recharge or restaurant bills, we are indirectly paying government.
Non-Tax Revenue: An important component of generating revenue, non-tax revenue refers to the earnings earned by the government from sources other than taxes, like fees, fines, dividends, or interest income.
Public Account: When an account system is managed by the government to take care of transactions such as provident funds, savings schemes, small savings deposits, etc., that account is called public account.
Revenue deficit
When the government’s regular income is less than its regular expenses, it’s called revenue deficit. It explains the shortfall of the government’s current receipts over current expenditure. Government generates revenue receipts through taxes, fees, interest, etc. It expends through salaries, pensions, subsidies, interests, etc. However, if the expenses out par income, then it’s a case of revenue deficit.
Tax-to-GDP Ratio: In simple terms, it means the amount of tax collected by the government compared to the total size of the economy. For example, if India’s GDP is equal to ₹300 lakh crore
and the tax collected is ₹30 lakh crore, then the tax to GDP ratio will be 10 per cent.
Ways and Means Advances (WMA): These are temporary loans provided by the RBI to the government to manage short-term cash flow mismatches.
There are certain other terms related to Budget:
Money Bill: According to Article 110 of the Constitution of India, a Money Bill is a law that deals only with government money — how it is earned, spent, or borrowed. This Bill can only be introduced in the Lok Sabha with the President’s recommendation. Speaker of the Lok Sabha certifies a Bill as ‘Money Bill’. The Rajya Sabha has limited powers on Money Bill. Once passed in the Lok Sabha, it is sent to the Rajya Sabha, but the Upper House has 14 days to give its recommendation. However, it is not mandatory for the Lower House to accept its recommendations.
Guillotine
Since Parliament has limited time to discuss each aspect of the Budget (MPs debate and discuss spending department wise), Speaker of the Lok Sabha has the power of Guillotine. It is a fast-track method to pass pending budget demands without discussion when time runs out. It is done to save time.
Consolidated Fund of India
One of the most important government accounts, the Consolidated Fund of India includes the revenues received and expenses made by the government. The government meets most of its expenditure through this fund. However, it requires the approval of Parliament to withdraw money from this fund.
Also read: Union Budget and its role in shaping Indian economy since Independence
