Finance Bill

GS II – Polity

The Finance Bill is a crucial legislative proposal that outlines the government’s taxation and financial policies for the upcoming fiscal year. It is introduced annually in Lok Sabha as part of the Union Budget and includes all necessary legal amendments required for implementing tax proposals.

Key Features of the Finance Bill

• Defines tax proposals: It contains the government’s tax policies, including new taxes, changes in tax rates, and exemptions.
• Mandated by the Constitution: As per Article 110(a), the Finance Bill must be introduced along with the Union Budget.
• Legally enforces tax adjustments: It provides the necessary legislative backing to implement taxation changes.
• Introduced only in Lok Sabha: It cannot be introduced in Rajya Sabha and requires the President’s recommendation.
• Accompanied by a Memorandum: This document explains the provisions included in the Bill.

Types of Financial Bills

1. Financial Bill (I) – Article 117(1)

• Contains both Money Bill provisions (Article 110) and other legislative provisions.
• Introduced only in Lok Sabha and requires the President’s approval.
• Follows the same parliamentary process as an Ordinary Bill in all other aspects.

2. Financial Bill (II) – Article 117(3)

• Does not include Money Bill provisions, but contains measures affecting Consolidated Fund of India spending.
• Can be introduced in either Lok Sabha or Rajya Sabha.
• Requires the President’s recommendation but follows the procedure of an Ordinary Bill.

Money Bill vs. Financial Bill

Feature	Money Bill	Financial Bill (I)	Financial Bill (II)
Defined Under	Article 110(1)	Article 117(1)	Article 117(3)
Scope	Only financial matters like taxation, borrowing, and expenditure from the Consolidated Fund of India	Includes Money Bill provisions + other legislative provisions	Deals with expenditure from the Consolidated Fund of India but not Money Bill provisions
Introduction in Parliament	Only in Lok Sabha	Only in Lok Sabha	Can be introduced in either House
President’s Recommendation	Required	Required	Required
Rajya Sabha’s Role	Can only recommend changes; Lok Sabha can reject them	Can amend or reject the Bill	Can amend or reject the Bill
Joint Sitting Provision	Not applicable	Applicable	Applicable

 

Passage of a Money Bill

1. Introduced in Lok Sabha with the President’s recommendation.
2. Passed in Lok Sabha by a simple majority.
3. Sent to Rajya Sabha, which can only recommend amendments within 14 days.
4. Lok Sabha may accept or reject Rajya Sabha’s suggestions.
5. If Rajya Sabha does not return the Bill in 14 days, it is deemed passed.

Unlike a Financial Bill, a Money Bill cannot be amended or rejected by Rajya Sabha.

What is an Appropriation Bill?

• The Appropriation Bill grants the government the authority to withdraw funds from the Consolidated Fund of India for meeting expenses in a financial year.
• It is introduced after the Union Budget is passed and is crucial for the government to legally spend money.
• Without passing the Appropriation Bill, the government cannot withdraw funds for expenditure.

The Finance Bill is a vital component of India’s fiscal framework, ensuring that tax proposals and revenue allocations have a legal foundation. While all Money Bills are Financial Bills, not all Financial Bills are Money Bills. The distinction is crucial as it determines Rajya Sabha’s power and the bill’s passage process.