Union Budget: 25 key terms you must know before Nirmala Sitharaman’s speech

Union Budget 2025: Finance minister Nirmala Sitharaman is scheduled to present the Union Budget 2025, or the second full budget of Modi 3.0, marking her eighth presentation.

However, it is important to understand some key terms before the budget gets presented on February 1.

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25 key terms you must know in Budget 2025

1) Annual Financial Statement (AF)

The Annual Financial Statement (AF) is a document, which highlights the receipts and expenditures of the government during the financial year.

2) Budget estimate

The Budget Estimate refers to the estimated funds to be allotted to ministries, departments, sectors, and schemes. It is also used to determine how and where the money will be used and what costs will be incurred in that period.

3) Capital expenditure (capex)

Capital expenditure, also known as “capex,” is the total amount of money that the Centre is planning to use for the development and acquisition of assets that can help boost the economy.

4) Capital receipts

Capital receipts for the government refer to the funds it receives from borrowing, asset sales, or equity investments.

5) Cess

Cess is an additional tax added to income tax with the objective of funding specific aspects like health and education. It is charged to the total tax liability, which includes the surcharge.

6) Consolidated fund

The Consolidated Fund of India refers to the entire revenue raised by the government, market borrowings, and loan receipts. The government’s expenditures come from this fund except for those met using the Contingency Fund.

7) Contingency fund

The contingency fund is set aside for unforeseen events and is at the president’s disposal. With the prior approval of Parliament, any money withdrawn from this fund is also repaid from the Consolidated Fund later.

8) Direct taxes

Direct taxes are those levied directly from taxpayers, such as income and corporate tax.

9) Divestment

Divestment is the process of the government selling its existing assets.

10) Economic survey

The Economic Survey is presented during the Budget session. The flagship document summarises the economy’s performance during the upcoming financial year and sets the stage for the new budget.

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11) Finance bill

The finance bill is a document that introduces the policy of levying new taxes, changing the tax structure, or continuing with the existing tax structure.

12) Fiscal deficit

Fiscal Deficit is the difference between the government’s total spending and revenue receipts for the previous financial year. This difference is filled by borrowing funds from the Reserve Bank of India (RBI), among other measures. It is calculated as a percentage of the GDP.

13) Fiscal policy

Fiscal policy is an instrument for monitoring the domestic economic position. It estimates taxation and government spending.

14) Indirect taxes

Indirect taxes are those levied indirectly from taxpayers, such as GST, VAT, customs and excise duties, and service tax. These usually tax consumption, rather than income.

15) Inflation

Inflation refers to the increase in the general prices of goods, services, and commodities in the country. The higher the inflation goes, the weaker the purchasing power of the consumers becomes.

16) New tax regime

The new tax regime, introduced in 2022, has seven tax slabs with concessional rates. During the financial year 2023-24, this became the default regime, with the old tax regime becoming an option.

17) Old tax regime

The old tax regime had just four slabs with the highest tax rate of 30% for incomes above ₹10 lakh.

18) Public account

The public account contains the amount of money used for transactions wherein the government merely acts as a banker. Money received by or on behalf of a central orstate government is credited to this account.

19) Rebate

A Rebate refers to a reduction in total income tax used to stimulate economic activity by lessening the tax burden on taxpayers.

20) Revenue deficit

A revenue deficit occurs when the government’s total revenue expenditure is more than its total revenue receipts.

21) Revenue expenditure

Revenue Expenditure refers to the estimated cost the government incurs on salaries, allowances, as well as other expenses which ae required for government departments and various services to run. It also includes interest on debt taken by the government and the amount it spends on subsidies.

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22) Revenue receipt

The revenue receipt refers to the money the government makes from its operational activities such as through taxation, fines, or through the products and services it offers.

23) Tax collected at source (TCS)

TCS is the tax amount collected by a seller from the buyer on sale of goods or services, so that it can be deposited with the tax authorities.

24) Tax deduction

Tax deduction is like a discount, but for the tax bill, which lowers the taxable amount. Tax deduction can be applicable by using tax saving instruments such as investments in PPF, NSC, and tax-saving fixed deposits (FDs) which can make one eligible for deductions.

25) Tax surcharge

Tax surcharge applies to taxpayers who earn more than ₹50 lakh per annum. A surcharge is an extra tax applied to the existing tax rate. For instance, a 10% surcharge on a 30% tax rate will raise the total tax liability to 33%.