Union Budget & Fiscal Deficit — Set 19

Correct Answer: B. B. Administration of direct tax laws including Income Tax Act

The Central Board of Direct Taxes (CBDT) is the apex administrative body for direct taxes in India, operating under the Ministry of Finance (Department of Revenue). It administers the Income Tax Act 1961, Corporation Tax, and other direct tax laws. CBDT issues tax guidelines, notifications, and circulars; monitors tax collections; and undertakes tax policy work. It is analogous to CBIC which handles indirect taxes.

Correct Answer: B. B. GST, Customs Duty, and Central Excise

The Central Board of Indirect Taxes and Customs (CBIC), formerly CBEC, administers indirect taxes — Goods and Services Tax (GST) at the central level, Basic Customs Duty on imports and exports, and Central Excise on petroleum products (which are outside GST). CBIC also handles prevention of smuggling and trade facilitation at ports and airports. It operates under the Ministry of Finance.

Correct Answer: B. B. All government departments can begin spending from April 1 without needing Vote on Account

Presenting and passing the Union Budget before April 1 ensures that the Appropriation Act and Finance Act are in place from the start of the financial year, allowing all government departments to begin authorized spending from April 1 itself without requiring a Vote on Account. The shift to February 1 presentation (from 2017) was specifically designed to achieve this goal, ending the situation where departments had to wait until May-June to spend meaningfully.

Correct Answer: B. B. Income Tax, Corporation Tax, Capital Gains Tax

Direct Taxes are levied on the income, wealth, or gains of individuals and entities and are paid directly to the government by the taxpayer. Major direct taxes include Personal Income Tax, Corporation Tax, Capital Gains Tax, Securities Transaction Tax (STT), and Dividend Distribution Tax (now replaced). Direct taxes are progressive in nature and administered by CBDT. They form around 54% of total central tax revenue.

Correct Answer: C. C. GST, Customs Duty, Excise Duty on petroleum

Indirect Taxes are levied on goods and services rather than on income or profits, and the tax burden can be shifted from the producer/seller to the consumer. Major indirect taxes in India include GST (Goods and Services Tax), Basic Customs Duty on imports, and Central Excise on petroleum products (which remain outside GST). Indirect taxes form around 46% of total central tax revenue and are administered by CBIC.

Correct Answer: A. A. Article 110

Article 110 of the Constitution defines a Money Bill — a bill that deals only with taxation, borrowing by the government, expenditure from the Consolidated Fund, or auditing of government accounts. A Money Bill can only be introduced in the Lok Sabha and requires the President's recommendation. The Rajya Sabha cannot amend a Money Bill, only suggest changes, which the Lok Sabha may or may not accept. The Finance Bill is a Money Bill.

Correct Answer: B. B. An Interim Budget presents a full income-expenditure statement; a Vote on Account only seeks funds for a few months

An Interim Budget includes all elements of a regular Union Budget — statement of receipts, expenditure, deficit, and sometimes policy announcements — but without major policy changes or tax reforms by convention. A Vote on Account, by contrast, is simply a request to Parliament to authorize government spending for a few months (usually 2 months) pending presentation of the full budget. An Interim Budget is presented when elections are imminent, as in 2024.

Correct Answer: B. B. Retained entirely by the Central Government and not shared with states

Cess and Surcharge (e.g., Health and Education Cess at 4%, Surcharge on high-income individuals) collected by the Central Government are NOT shared with states — they are retained entirely by the Centre. This is a significant fiscal concern for states, as a larger share of central revenue flowing through cess/surcharge (instead of divisible pool taxes) reduces states' formula-based entitlements. Finance Commissions have flagged this trend.

Correct Answer: B. B. Macro-Economic Framework Statement, MTFP Statement, and Fiscal Policy Strategy Statement

The FRBM Act 2003 and Rules mandate that the government present three key statements along with the Union Budget: (1) Macro-Economic Framework Statement — current and prospective state of the economy; (2) Medium Term Fiscal Policy (MTFP) Statement — three-year rolling fiscal targets; (3) Fiscal Policy Strategy Statement (FPSS) — medium-term policies and long-run sustainability. Together, these promote fiscal transparency and medium-term planning.

Correct Answer: B. B. Up to 0.5% of GDP in case of national calamity, war, or far-reaching structural reforms

The escape clause in the revised FRBM framework (per NK Singh Committee, 2017) allows the government to deviate from the fiscal deficit target by up to 0.5% of GDP in exceptional circumstances: national security/calamity, collapse of agriculture causing agrarian crisis, far-reaching structural reforms with unanticipated revenue impact, or sharp declines in real output growth. This built-in flexibility prevents rigid adherence from worsening economic downturns.