Difference between final and interim budget: All you need to know

NEW DELHI: Union finance minister Nirmala Sitharaman will present her 4th budget on February 1.

Each year, the incumbent finance minister presents the

Union Budget

in the month of February which contains a blueprint of the government's revenue and expenditure for the coming fiscal year.

However, there are times when the government presents an "interim budget" instead of a full one.

Like in February 2019, when then finance minister Piyush Goyal presented an interim budget just a few months before the national election.

What is an interim budget?
An interim budget is presented by the government when it does not have time to present a full budget. Mostly, it is because the general election is around the corner. Thus, as per tradition, the government of the day leaves the task of framing the full budget to the incoming dispensation after the election results.

So why not just let the new government present a full budget?
The Union Budget presented by the government is valid till the end of the fiscal year, i.e. March 31.

In other words, it gives the government spending rights only up to that date. So when the government is unable to present a full budget before the end of the financial year, it needs parliamentary approval to incur expenses from the time the new financial year kicks off until a new budget is passed. Hence the word "interim".

What is vote-on-account?
Through the interim budget, Parliament passes a vote-on-account which basically gives the government temporary permission to meet the expenses of the administration until the elections.

The vote-on-account is normally valid for two months but can be extended.

Are vote-on-account and interim budget different things?
An interim budget is technically just like the full budget, but only for a temporary period. Like the Union Budget, it contains a complete set of accounts, including expenditure and receipts. And like the full budget, the estimates are presented for the whole year.

However, in the election year, the government usually avoids announcing any major tax changes or schemes in the interim budget even though it is not constitutionally prohibited from doing so.

A vote-on-account, on the other hand, deals with only the expenditure side of things. It's passed in Parliament without a formal discussion.

Is interim budget mandatory?
No. The government can choose not to present an interim budget and just get the funds required for spending via the vote on account route. However, as per convention, the governments usually opt for an interim budget in the election year.