Money Bill vs Finance Bill vs Financial Bill

There is a lot of confusion between a Finance Bill, a Money Bill and the Financial Bill. Lets discuss one by one what these bills actually are:

✅Finance Bill vs Financial Bill

The main difference is, a Finance Bill (Art 110 (1)(a)) is income side of Consolidated Fund of India (CFI), compared to Appropriation bill (Art 114), which is expenditure side of Consolidated Fund of India. Both Finance Bill and Appropriation bill are Money bills (Article 110).
Whereas, Financial bills are separate bills mentioned under Article 117 of the constitution of India, that include Money Bill as well. Thus, both Finance bills and Financial Bills are different contexts in the pecuniary business of the Parliament.

 ✅A Money Bill

➡️ A Money Bill is introduced in a current year Budget, also called Annual Financial Statement (Article 112), as a Demand for Grant (Article 113). The term Budget is not mentioned in the Constitution of India but as Annual Financial Statement under Article 112.
➡️First, the President of India introduces an Annual Financial Statement in both the houses as mentioned under article 112, just a month after introducing Economic Survey of India, in the end of February of the current year; however it is first introduced in Lok Sabha, as it is a Money Bill.

Budgetary particulars contain:–

1. Actual Estimates (AE) from the previous year.
2. Budgetary Estimates (BE) and Revised Estimates (RE) from current year, and
3. Budgetary Estimates for upcoming year.

The Budget is further divided into:
A. Zero Base Budgeting: demands without any savings from previous year
B. Income budget: expenditure on developmental projects and schemes
C. Gender budget: a special budget for women development and welfare.

➡️ After introduction of a Budget or Annual Financial Statement, the Finance Minister seeks “leave of the house” for Demand for Grants, under Article 113, from the Speaker of Lok Sabha.
➡️ A Demand for Grants contains departmental or ministerial wise allocation of funds from the Consolidated Fund of India (Article 266). A general Budget contains 109 demands with 103 civil and 6 defense expenditures. Railway ministry budget has 32 demands, a separate Budget for Railways used to be introduced since 1921 on the recommendation of Acworth Committee, until 2016 when then union government merged the two.

➡️ Discussion and voting on Demand for Grants take place within 26 days of introduction, called Guillotine. A cut motion can be passed if proper appropriation of grants does not take place. The speaker decides whether a cut motion should be accepted or not. If a cut motion is passed the ruling government may have to appear for ‘No-Confidence Motion’.

➡️ After passing of Demand for Grants, Appropriation Bill (Article 114) is introduced in Lok Sabha as Money Bill (cannot be introduced in Rajya Sabha). Appropriation Bill is sought as an expenditure exercised on the Consolidated Fund of India (CFI).

➡️ An Appropriation Bill is introduced separately as Charged upon CFI and Expenditure made on CFI, as mentioned in Article 112 for the Demands for Grant.
➡️ Charged upon CFI is Non-Votable and should passed by the parliament without any motion. It includes enrollement, allowances and other expenditures related to the office of the President, Vice-President, Speaker and deputy speaker, salaries and pensions of the judges of supreme court, high courts, CAG, ECIs, pecuniary decrees by court or tribunals or any expenses declared by the parliament. As mentioned in Schedule II of the Constitution of India.

➡️ On the other hand, Expenditure made on CFI is bound to be discussed (without any amendment) and voted in the Lok Sabha only, before it is passed to Rajya Sabha for any suggestions or alteration.
The suggestions of Rajya Sabha are non-binding and non-votable and shall be returned within 14 days with or without recommendation.

▶️Finance Bill

➡️ After Appropriation Bill is passed, it becomes an Act after the assent of the President.
This is followed by the passing of Finance Bill, which is the revenue or income side of the Budget.
It contains the revenues, receipts, tax collections and all the income of the government.
Thus, Finance Bill is a type of Money Bill.

➡️ One thing to note that a Finance bill, according to Provisional collection of tax act. 1931, has to be passed by 75 days, to avoid any delay in net proceeds of tax.

🌐Points to Note:

➡️ Both Appropriation Bill and Finance Bill are Money bills and can only be introduced in Lok Sabha.

➡️ A money bill includes imposition, abolition, alteration, remission and regulation of tax; Appropriation and Finance bill; interest paid on Public Account of India (Article 266) through the Consolidated Fund of India; withdrawal or payment of money to the Contingency fund (article 267) from the Consolidated Fund of India; other borrowings such as supplementary grants, additional grants, Excess grant, vote on credit, etc.

➡️ The President can only assent or reject a Money Bill but can not use Pocket Veto to return the bill for reconsideration.

➡️ If a Money Bill is not passed, such as Demand for Grants or Appropriation Bill, or a cut motion is applied to the government, the ruling government can not draw funds for its expenses thus it is liable to resign.

➡️ If there is delay in approving expenditure or Appropriation Bill for 2-3 months, or the budget year is an election year, an Interim Budget, called Vote on Account (Article 116), can be introduced for the duration with one-sixth of the total estimation.

➡️ A Money Bill is not eligible for Joint sittings and any recommendation or discretion of the Lok Sabha is final.

▶️Financial Bill

Now here we discuss about what Financial Bill is:

A financial bill is mentioned in the Article 117 of the Constitution of India.

🔰 Financial Bill (Article 117)–

Any bill related to finance or national income, including money bill. These are two types:

⚠️Financial Bill type 1 [Article 117 (1)]:

Any bill related to tax, income and borrowings. Thus, this bill includes matter related to money bill, also beyond money bills.

➡️ A financial Bill-1 is declared money bill by the Speaker of the Lok Sabha and his discretion is final. Eg. GST bill was introduced as money bill. If not, the Financial bill becomes an Ordinary bill, which may contain fines and penalties, license fees, or taxation in local bodies.

➡️ Once it is considered an Ordinary Bill, it follows same procedure as a regular bill and can be amended and rejected by Rajya Sabha and can also be resolved in joint sittings, which is not in the case of a money bill. However, it can only be introduced in Lok Sabha with the recommendation of the President before declared an ordinary bill.
Ex. The Digital Personal Data Protection (DPDP) Bill, 2023 was declared as an ordinary Bill and not a money bill.

⚠️Financial Bill type 2 [Article 117(3)]:

➡️ Any pecuniary matter or expenditure from CFI other than mentioned in Money bill, such as statutory grants and discretionary grants or net proceeds of tax to states, etc. It is legislated as an ordinary bill and can be introduced in Rajya Sabha, unlike the other two- Money Bill and Financial Bill type 1 that can only be introduced in Lok Sabha, and no recommendation of the President is needed. The Rajya sabha can amend and reject the bill which is binding, and can also be summoned by the President for a Joint sitting of the bill.

➡️ In short, a Finance bill is part of Money bill, where as a Financial bill is not.
“Every Money Bill is Financial Bill but every Financial Bill is not Money Bill”
On the contrary, “Every Finance Bill is Money Bill but every Money Bill is not a Finance Bill”, as a Money Bill includes both Finance as well as Appropriation Bill.

FAQ on Money Bill, Finance Bill, Financial Bill