Article 112 of Indian Constitution: Annual Financial Statement

Article 112 of Indian Constitution

Article 112 of Indian Constitution, commonly referred to as the “Annual Financial Statement”, Mandates the government to present a statement of its estimated receipts and expenditures for each financial year to the Parliament. This Constitutional provision ensures fiscal transparency and accountability, obligating the government to delineate the financial allocations for various sectors, thereby facilitating informed legislative scrutiny and public understanding of governmental fiscal policies.  

Original Text of Article 112 of Indian Constitution:

(1) The President shall, in respect of every financial year, cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year, in this Part, referred to as the “annual financial statement”.

(2) The estimates of expenditure embodied in the annual financial statement shall show separately—

• the sums required to meet expenditure described by this Constitution as expenditure charged upon the Consolidated Fund of India; and
• the sums required to meet other expenditures proposed to be made from the Consolidated Fund of India, and shall distinguish expenditure on revenue account from other expenditure.

(3) The following expenditure shall be expenditure charged on the Consolidated Fund of India—

• the emoluments and allowances of the President and other expenditures relating to his office;
• the salaries and allowances of the Chairman and the Deputy Chairman of the Council of States and the Speaker and the Deputy Speaker of the House of the People;
• debt charges for which the Government of India is liable, including interest, sinking fund charges and redemption charges, and other expenditures relating to the raising of loans and the service and redemption of debt;
• (i) the salaries, allowances and pensions payable to or in respect of Judges of the Supreme Court;

(ii) the pensions payable to or in respect of Judges of the Federal Court;

(iii) the pensions payable to or in respect of Judges of any High Court which exercises jurisdiction in relation to any area included in the territory of India or which at any time before the commencement of this Constitution exercised jurisdiction in relation to any area included in [a Governor’s Province of the Dominion of India];

• the salary, allowances and pension payable to or in respect of the Comptroller and Auditor-General of India;
• any sums required to satisfy any judgment, decree or award of any court or arbitral tribunal;
• any other expenditure declared by this Constitution or by Parliament by law to be so charged.

Article 112 of Indian Constitution:

The Union budget is technically known as the Annual Financial Statement, as addressed in Article 112 of the Constitution. It is a statement of the estimated revenues and expenses of the Government of India, which the President is bound to place before both Houses of Parliament each fiscal as per Article 112.

Thus, for its systematic understanding, we should also break the budget into two parts:

1. Estimated Expenditure
2. Estimated Receipts

Here, it must be noted that all revenue receipts earned by the government through various means, such as taxes, form part of the Consolidated Fund of India, and all expenditure done by the Government of India is appropriated out of the Consolidated Fund of India.

1. Estimated Expenditure:

Article 112 mandates that the government should show two types of expenditure separately in the Annual financial statement:

• Expenditures that are already “charged upon” the consolidated fund of India. It includes the salaries of all the constitutional authorities like the President, Vice-President, Speaker, Judges of the Supreme court, CAG, etc. It can also include grants to the states and expenditure on certain government schemes as declared by Parliamentary law.
• Expenditures that are “proposed to be made” from India’s consolidated fund must be shown separately.

This distinction is important because expenditures that are charged upon India’s consolidated fund, such as salaries of important constitutional offices, their pensions, statutory grants and schemes, etc., should run smoothly without the need for approval every year. However, for all other expenditures, the government must answer to the parliament.

Thus, Article 113(1) says that all the expenditures that are already charged upon the consolidated fund of India shall not be put to the vote of Parliament.

What about other expenditures (For example, for a government scheme not already charged upon the Consolidated Fund)? This appropriation is done in the following manner:

Step 1: The Government puts a Demand for a Grant [Article 113]

Step 2: These demands are introduced in the Parliament as Appropriation bills [Article 114]

Step 3: If passed by the Lok Sabha, these “Appropriation Acts” enable the government to appropriate the said amount out of the consolidated fund.

2. Charged Expenditure

Parliament has limited authority over expenditure charged on India’s consolidated fund, as it can only be discussed but cannot be voted upon. This method of having a ‘consolidated fund’ and charging certain expenditures on it originated in the Westminster (British) model. It includes the expenditure made on important constitutional and statutory offices to ensure their independence from the legislature and the ruling party.

In the Indian constitution, Article 112 mentions the following expenditure to be charged upon the consolidated fund of India:

1. Emoluments of the President;
2. Salaries and allowances of the chairperson and the deputy chairperson of the Rajya Sabha;
3. Salaries and allowances of Speaker and deputy speaker of the Lok Sabha;
4. Salaries, allowances and pensions of Supreme Court judges;
5. Salaries, Allowances and pensions of the Comptroller and Auditor General of India (CAG), Chairman and members of Union Public Service Commission (UPSC);
6. Administrative expenses of the office of Supreme Court, CAG and UPSC, also includes salaries, allowances and pensions of these employees;
7. Interest on and repayment of loans raised by the government;
8. Payments made to satisfy decrees of courts;
9. Any other expenditure declared to be “charged upon” on the Consolidated fund by the Constitution or any Parliamentary law.

The Parliament has, through law, made interest payments and various grants-in-aid given to the states charged upon the consolidated fund. These grants are used to fund even the schemes.

For Further Reference:

• Read the Constitution of India.
• Read Budget in Parliament

Other Related Links:

Indian Constitution: All Articles and schedules	Article 1 of Indian Constitution
Article 2 of Indian Constitution	Article 3 of Indian Constitution
Article 4 of indian Constitution	Article 5 of Indian Constitution
Fundamental Rights	DPSP
Fundamental Duties	Amendments of the Indian Constitution
Article 111 of Indian Constitution	Article 113 of Indian Constitution