Interim Budget: How Is It Different From a Union Budget

Every year, the finance minister on February 1 presents the budget for the next financial year and gives a structure of the receipt and expenditure of the government for the upcoming fiscal year.  However, in certain years, the government presents an interim budget instead of a full one. There are specific reasons for the same.

The finance minister of India presented the last interim budget in 2019, a few months before the Lok Sabha elections. Similarly, the upcoming budget that will be announced on February 1, 2024, will be an interim budget, as the elections will be held in April or May.

In this blog, you will learn about the interim budget, how it differs from a union budget and more.

What is an Interim Budget

The Interim Budget provides a comprehensive record of anticipated expenses and tax revenues for the upcoming months until the new government comes into power. During this transitional phase, parliamentary approval is essential for accessing funds from the Consolidated Fund of India, where the government pools its revenue.

As elections approach, it becomes impractical for the ruling government to present a standard Annual Budget. Instead, an Interim Budget is incorporated, comprising detailed projections of revenue, expenditure, and certain policy measures. 

What is a Vote of Account

A vote-on-account, typically facilitated by an interim Budget, is a conventionally passed step that enables the government to manage expenses temporarily leading up to elections. Valid for two months, a vote-on-account operates as an advance grant to ensure the government’s smooth functioning. It is specifically passed to address essential expenditures such as salaries and ongoing costs across various sectors.

When is an Interim Budget Applicable

The ruling government typically presents the Interim Budget before the General Lok Sabha Elections every 5 years. Like any Union Budget, this provisional budget is a progress report presenting expenses and income from the past year.

In the future, it can only propose potential expenditures for the months leading up to the Election, limited to a period not exceeding 6 months. The ruling government typically refrains from announcing major tax reforms that might burden the succeeding government financially. Careful spending and revenue collection are crucial in the months leading to the end of their term. Any significant policy changes or tax reforms may or may not prove advantageous for the government in the upcoming elections.

How is an Interim Budget Different from a Union Budget

The Interim Budget outlines the government’s expected receipts and expenditures until the formation of a new government. In contrast, a union Budget includes all aspects of government finances, covering earnings, spending, allocations, and policy declarations.

A full-year Budget serves as a strategic blueprint, presenting the nation’s economic plan for an entire fiscal year, while the interim budget provides financial details for the transitional period.

With Lok Sabha elections expected around April-May 2024, the new government is set to present a complete Budget in July 2024. On February 1, the Financial Minister will present an interim budget for 2024-25 in Parliament, effective from April 1, 2024.

Traditionally, significant policy announcements have been avoided during a vote on account, although there is no constitutional prohibition against making substantial announcements.

Final Words

An Interim Budget shares similarities with a Union Budget in that the ruling government presents estimates of its expenditure, revenue, fiscal deficit, financial performance, and projections for the upcoming financial year in Parliament. The necessity for an interim budget arises because fresh approval is needed from the Parliament to withdraw funds from the Consolidated Fund of India for running the government, as the existing 2023-24 Budget is valid only until March 31 this year.

Frequently Asked Questions