What is Union Budget

The Union Budget is the Government of India’s annual financial plan that outlines how public money will be raised and spent during a financial year. It presents expected revenues, planned expenditures, fiscal targets, and key policy initiatives. The budget reflects the government’s economic priorities, covering areas such as taxation, infrastructure, welfare, and growth-oriented reforms. For individuals and businesses, the Union Budget plays a crucial role in shaping financial decisions related to savings, investments, borrowing, and overall economic confidence.

The Union Budget matters because it directly influences the country’s economic direction and financial stability. It determines tax policies, government spending, subsidies, and investment priorities. For citizens, it affects disposable income, cost of living, and access to credit. For businesses, it impacts operating costs, expansion plans, and profitability. The budget also signals how the government plans to manage inflation, fiscal deficit, and growth, making it a key document for long-term financial planning.

The Union Budget follows a structured process and timeline.

1. Usually presented on 1 February each year
2. Delivered by the Finance Minister in Parliament

3. Accompanied by detailed budget documents

   
   

After the presentation, Parliament debates the proposals, followed by approvals and implementation. This process ensures transparency and allows policymakers to review how proposed measures align with economic goals and public interest.

Major tax proposals in Union Budget 2026–27 are expected to focus on making the tax system simpler, fairer, and more growth-oriented. The government may rationalise income tax slabs to reduce the burden on middle-income taxpayers and improve disposable income. Higher deductions or exemptions could encourage savings, insurance, and long-term investments. Simplified compliance measures may make filing returns easier and reduce errors. Changes in indirect taxes could help manage inflation, support consumption, and ensure steady revenue while promoting overall economic stability.

The Union Budget is divided into two primary components:

1. Revenue Budget

The Revenue Budget includes:

• Revenue Receipts: Income from taxes (e.g., income tax, GST) and non-tax sources (e.g., dividends, interest).
• Revenue Expenditure: Day-to-day government expenses, such as salaries, subsidies, and interest payments.

2. Capital Budget

The Capital Budget focuses on:

• Capital Receipts: Borrowings, loans, and disinvestment proceeds.
• Capital Expenditure: Investments in infrastructure, technology, and other long-term assets.

Understanding these components helps individuals and businesses gauge the government's financial health and priorities.

The Union Budget is a meticulous process involving multiple stages:

1. Consultation: The Finance Ministry consults with ministries, state governments, economists, and industry leaders to gather inputs.
2. Estimation: Departments submit their financial requirements, and revenue projections are made.
3. Drafting: The Budget Division of the Ministry of Finance prepares the draft Budget.
4. Approval: The draft Budget is reviewed and approved by the Prime Minister and the Cabinet.
5. Presentation: The approved Budget is presented in Parliament, followed by discussions and voting.

This structured process ensures that the Budget aligns with national priorities and economic goals.

The Union Budget does not directly determine the interest rates for personal loans. Policies related to fiscal deficit, government borrowing, and inflation control announced in the Budget can influence the Reserve Bank of India's (RBI) monetary policy decisions, in turn influencing the interest rates offered by banks and NBFCs to borrowers.

For example, if the Budget focuses on increased government spending without adequate revenue generation, it could possibly lead to higher inflation. In response, the RBI may increase repo rates, which would lead to higher personal loan interest rates. Conversely, a focus on fiscal discipline could keep interest rates stable or even reduce them, making borrowing more affordable for individuals.

The Union Budget is a vital financial roadmap that defines the government’s economic priorities and policy direction. Key takeaways include its influence on taxation, public spending, and borrowing, along with its impact on income, investments, and access to credit. By outlining growth strategies and fiscal discipline, the budget supports economic stability. Understanding the Union Budget helps individuals and businesses make informed financial decisions and align their planning with national economic objectives.