In the current year 2024, India will host its 18th Lok Sabha election. Although the exact date of the election has not yet been announced, it is estimated that the General Elections of 2024 will take place in April and May. On 1st February 2024 Union Budget was presented by Finance Minister Nirmala Sitharaman.
During an election year, the government does not present a full-fledged Budget for the whole year, instead the government prepares a short-term budget which is called vote on account. I will try to explain how vote on account is different than the Union Budget.
As per Article 116 of the Indian Constitution, a vote on account is an advance grant to the government from the Consolidated Fund of India to cover short-term expenditure such as salaries, pensions, debt servicing, and ongoing projects requirements until the new financial year begins. There is a Consolidated Fund of India, defined in Article 266 of the Indian Constitution, which stores all the revenue generated by the central government, including taxes, interest on loans, and a portion of state taxes.
Thus, an outgoing government seeks short-term permission from the Parliament to withdraw funds from the Consolidated Funds of India to spend that on expenditures and important government schemes for a few months until a new government is formed is called vote on account. The sum of this grant is 1/6th of the estimated expenditure for the whole year under various demands for grants. The vote-on-account is valid for two months usually.
Is vote on account passed every year?
A vote-on-account contains only the expenditure of the government’s budget while an Interim Budget is a complete set of accounts i.e. it includes both expenditure and receipts. Vote-on-account is passed every year and is used by both the regular and caretaker government. As per the Act, the Consolidated Fund will not to be withdrawn unless there is an exceptional situation. Under the constitution, money cannot be withdrawn by the government from the Consolidated Fund of India unless it has been annexed by law.
During an outgoing government, a temporary budget is presented, or a vote on account is sought. The next government will be responsible for presenting the full budget. The vote on the account cannot impact the tax regime. Vote on account is the process of withdrawing money from the Consolidated Fund of India during that period, generally two months. A vote on account is a formality and does not require debate. The government seeks a vote on account for four months when elections are scheduled a few months into a new financial year.
As such, a vote on account is merely an interim authorization to spend money, as opposed to a full Budget that includes details of expenditures and receipts, including tax changes and government policies.
During election years, when elections are scheduled a few months into the new fiscal year, the government prefers to request a vote rather than present a full budget because it is unfair to deny the new forthcoming government the right to design its own budget for the rest of the year. The new government comes with its new fiscal plans and objectives. Vote on Account serves as an interim mechanism to ensure the unbroken flow of funds for essential government expenditures until a new government assumes office and presents a full-fledged budget. Please understand that the Vote on Account is narrower in scope. Therefore, we don’t find great changes in it.
Usually, the tax slabs are kept the same. It is tailored in limited framework and in smaller areas. The 2024 budget focuses on fiscal consolidation (a reduction in the underlying fiscal deficit), infrastructure, agriculture, green growth (natural assets continue to provide the resources and environmental benefits), and railways’ several initiatives. However, no changes were made in the income tax slabs, which was a disappointment to salaried individuals.
