What is the Union Budget?

The Union Budget is the Government of India's statement of what it expects to receive and what it plans to spend in a financial year running from 1 April to 31 March. The Constitution never uses the word "budget": Article 112 calls it the Annual Financial Statement and requires that it be laid before both Houses of Parliament every year. Around that single document sits a larger process — months of estimation inside the Ministry of Finance, a speech on 1 February, weeks of parliamentary scrutiny, and two Acts of Parliament without which no rupee may lawfully leave the Consolidated Fund of India.

This guide covers where the exercise came from, who actually writes it, which documents carry legal force, how Parliament approves them, and where the Budget touches ordinary life. Figures for 2026-27 are the Budget Estimates presented on 1 February 2026.

History of the Union Budget in India

The Union Budget predates the Republic. On 7 April 1860, two years after the Crown took over from the East India Company, James Wilson — a Scottish economist appointed finance member of the Viceroy's council — presented the first Indian budget and introduced income tax to India. The practice of an annual financial statement to the legislature continued through the colonial period, and from 1924 railway finances were presented separately in a Railway Budget.

The first budget of independent India was presented on 26 November 1947 by R. K. Shanmukham Chetty, the first Finance Minister, against the disruption of Partition. When the Constitution came into force on 26 January 1950 the exercise acquired its present legal form: Article 112 obliges the President to have an Annual Financial Statement laid before both Houses each year, and Articles 113 to 116 govern how Parliament grants the money.

Several inherited conventions have since been discarded. Until 1999 the Budget was presented at 5 pm on the last working day of February, a British-era timing that suited London rather than Delhi; Yashwant Sinha moved it to 11 am in 1999. In 2017 three changes took effect together: presentation was advanced to 1 February so that Parliament could finish approving the Budget before the financial year began, the Railway Budget was merged into the Union Budget, and the plan/non-plan classification of expenditure was abolished in favour of a revenue/capital split. In 2021 the Budget went paperless, delivered from a tablet and published through a mobile application built by the National Informatics Centre. The 2026-27 Budget was presented on Sunday, 1 February 2026 — the first time budget day has fallen on a Sunday.

Who prepares the Budget and how

The Budget is drafted by the Budget Division of the Department of Economic Affairs in the Ministry of Finance. Its role is coordination rather than authorship: the division fixes the format and the timetable, scrutinises the estimates, and assembles the documents, while every ministry and department supplies its own numbers.

Work begins with the budget circular, issued around late August or September, which directs ministries to prepare Revised Estimates for the year under way and Budget Estimates for the year ahead and to file them through the Union Budget Information System. The Department of Expenditure then examines spending demands with the financial advisers attached to each ministry. The Department of Revenue works on the tax side with the Central Board of Direct Taxes and the Central Board of Indirect Taxes and Customs. NITI Aayog and line ministries press the case for schemes, and the Finance Minister holds pre-budget consultations with industry bodies, farmer organisations, trade unions, economists and state finance ministers. Questions unresolved at official level go to the Finance Minister and the Prime Minister.

Two limits are worth naming. First, under Article 113(3) no demand for a grant may be made except on the recommendation of the President: in practice only the government can propose spending, and Parliament may reduce or refuse a demand but never increase it. Second, the Budget no longer sets indirect tax rates across the board. Goods and Services Tax rates are decided by the GST Council under Article 279A, which is why the current structure took effect on 22 September 2025 rather than on a budget day. The Budget Division also manages market borrowing and public debt, so the financing of the deficit is settled alongside the spending plan.

Key documents: Annual Financial Statement, Demands for Grants, Finance Bill

The Annual Financial Statement is the constitutional core. Required by Article 112, it sets out estimated receipts and expenditure under three accounts: the Consolidated Fund of India (Article 266), into which all revenues and borrowings flow and out of which nothing may be spent without parliamentary authority; the Contingency Fund (Article 267), an imprest of Rs 30,000 crore since the Finance Act 2021, placed at the disposal of the President for urgent unforeseen spending and recouped afterwards; and the Public Account, where the government merely holds money belonging to others, such as small savings and provident fund balances. The statement also separates expenditure charged on the Consolidated Fund, which Parliament may debate but not vote — interest payments of Rs 14.04 lakh crore in 2026-27, the salaries of Supreme Court judges and of the Comptroller and Auditor General — from voted expenditure.

The Demands for Grants present that voted expenditure ministry by ministry to the Lok Sabha alone. The Finance Bill carries the tax proposals, since Article 265 permits no tax to be levied or collected except by authority of law.

Document	Basis	What it does
Annual Financial Statement	Article 112	Shows all estimated receipts and expenditure
Demands for Grants	Article 113	Seeks the Lok Sabha's assent, ministry by ministry
Appropriation Bill	Article 114	Authorises withdrawal from the Consolidated Fund
Finance Bill	Articles 110 and 265	Gives legal force to tax changes

Supporting papers include Budget at a Glance, the Receipt and Expenditure Budgets, the Memorandum explaining the Finance Bill, and the fiscal policy statements required by the Fiscal Responsibility and Budget Management Act, 2003, which came into force on 5 July 2004 and was substantially amended in 2018 to add a debt anchor.

Budget calendar: from preparation to Parliament approval

Preparation runs for roughly six months. The budget circular goes out around late August or September; ministries file their estimates through October and November while pre-budget meetings settle spending ceilings; tax proposals are finalised in January. The halwa ceremony in North Block — held on 27 January for the 2026-27 Budget — marks the start of the lock-in period, after which the officials handling the documents remain cut off from the outside world until the speech ends.

Presentation is at 11 am on 1 February in the Lok Sabha, with the Economic Survey normally tabled the previous day. The Budget session then runs in two parts. The first closes after a general discussion, and the Houses adjourn for a recess of about three to four weeks so that the departmentally related standing committees can examine the Demands for Grants of their ministries and report. When the House reassembles in March, the demands of a few selected ministries are debated in detail and members may move cut motions; on the last allotted day the Speaker applies the guillotine, putting all remaining demands to the vote together without discussion.

The Appropriation Bill follows, then the Finance Bill. Both are money bills: they originate in the Lok Sabha, and the Rajya Sabha must return them within 14 days and may only recommend changes. With the President's assent both become Acts, ideally before 1 April. Customs and excise changes need not wait — the Provisional Collection of Taxes Act, 2023 gives declared provisions immediate effect for up to 75 days. If approval cannot be completed in time, most often in a general election year, the Lok Sabha passes a vote on account under Article 116. Later the government may seek supplementary grants under Article 115, and the accounts are audited by the Comptroller and Auditor General, whose reports reach Parliament under Article 151 and are examined by the Public Accounts Committee.

How the Budget affects everyday life

Tax is the most direct channel. The Finance Bill fixes income tax slabs, rates, deductions and rules on capital gains, and it adjusts customs duties, which feed through to the price of imported goods from midnight on budget day. What the Budget does not do is set GST rates: those are decided by the GST Council. Since 22 September 2025 the structure has had two main slabs of 5 per cent and 18 per cent, alongside a nil rate and a 40 per cent rate on luxury and sin goods; the 12 per cent and 28 per cent slabs were withdrawn.

Spending decisions reach people more slowly but more widely. Of the Rs 53.47 lakh crore the Union government plans to spend in 2026-27, Rs 12.22 lakh crore is capital expenditure — roads, railways, ports, power and housing — which shapes construction employment and freight costs. The rest covers salaries and pensions, food and fertiliser subsidies, and centrally sponsored schemes in health, education and rural employment.

The borrowing arithmetic matters too. Receipts other than borrowings are estimated at Rs 36.52 lakh crore against expenditure of Rs 53.47 lakh crore, leaving a fiscal deficit of Rs 16.96 lakh crore, or 4.3 per cent of GDP, to be financed by borrowing. That borrowing competes with private borrowers and influences interest rates on home and business loans; it also accumulates, which is why interest payments of Rs 14.04 lakh crore now exceed the entire capital budget.

Finally, the Budget determines much of what state governments have to spend. Following the Sixteenth Finance Commission's report for 2026-31, tabled in Parliament on 1 February 2026, states receive 41 per cent of the divisible pool of central taxes — so Union tax collections shape schools, police and hospitals run by states.