Finance Bill: About, Features, Article 117, Financial Bills 1 and 2| UPSC

By Aarna Tiwari|Updated : November 7th, 2022

Finance Bill is an integral constituent of the Budget of India that incorporates all legislative changes required for the Finance Minister's proposed tax change. Government spending and revenue are fiscal issues that fall under the purview of the Finance Bill. It details the sum of money the government will spend and how it will be spent. The union budget and the constitution both include Finance Bills. It suggests all the legal modifications needed to implement the suggested tax adjustments. When the question arises, the Speaker of the House decides whether a bill qualifies as a money bill. The Finance Bill is covered under Article 117 of the Indian Constitution.

The topic of the Finance Bill, along with its features and types, is covered in this article. The topic is extremely relevant for the upcoming UPSC Exam and is covered under the Economy section.

Table of Content

Finance Bill: About

A Finance Bill is a Bill that is typically introduced each year to give effect to the Government of India's financial proposals for the upcoming fiscal year as well as a Bill to give effect to supplementary financial proposals for any period, as defined by Rule 219 of the Lok Sabha's Rules of Procedure. 

The Finance Bill is a money bill presented by the government to impose new taxes, change the current tax system, or make proposals to maintain the current tax system beyond the period originally approved by the Parliament. "Act for Appropriation of Funds for Appropriations" is another name for Finance Bill. 

  • A country's government can effectively manage and control its economy by enacting finance laws. 
  • The Annual Financial Statement, also known as the Union Budget of India, is a financial report made public by the Indian government that lists the estimated expenses and revenue for a specific fiscal year. 
  • This is in contrast to money bills, known as finance bills. Article 110(a) of the Indian Constitution mandates that a finance bill be submitted together with the budget.

Finance Bill Article

Special provisions to Finance Bills are:

  • Article 117(1): A Bill or amendment that makes provisions for any of the things listed in subclauses (a) to (f) of clause (1) of article 110 may not be introduced or moved without the President's recommendation and a Bill that does so may not be introduced in the Council of States. However, this clause does not require the President's recommendation for the motion to move an amendment that eliminates or reduces taxes.
  • Article 117(2): The mere fact that a bill or amendment calls for the imposition of fines or other monetary penalties, the demand or payment of fees for licenses or fees for services rendered, or the imposition, abolition, remission, alteration, or regulation of any tax by any local authority or body for local purposes shall not be deemed to be a provision for any of the matters mentioned above.
  • Article 117(3): A Bill requiring spending from the Consolidated Fund of India, if passed and put into effect, cannot be approved by either House of Parliament unless the President has that it be taken up for discussion.

Finance Bill: Features

The feature of the Finance Bill are as follows:

  • A Finance Bill is an account of what is paid and what is received, which is a very good representation of a country's finances.
  • This is a receipt showing the exchange between the two parties, in this case, the international trade of each country.
  • This is a written order sent by one party to another that promises to receive goods in an amount paid or to be paid by a date.

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Types of Finance Bills

A Finance Bill can be termed a Money Bill, but the same does not apply vice versa. Money bills include regulations and borrowing, changes to federal and state tax laws, and withdrawal of funds from emergency and integrated funds.

Finance Bills in both categories include provisions for costs, taxes, and more. Finance Bills can only be introduced in the House of Representatives of the Parliament or Lok Sabha. Finance Bill falls into three categories:

Finance Bill category I (Financial Bill 1)

In addition to any or all of the items specified in the Money Bill, a Financial Bill 1 also includes other pieces of general law. Article 117 (1) of the Constitution governs how it is handled.

  • It is comparable to a money bill in two ways: both can be introduced only in the Lok Sabha and not the Rajya Sabha.
  • Only on the President's recommendation may either of them be introduced.

A Financial Bill 1 is considered an ordinary bill in all other regards. i.e., 

  • The Rajya Sabha has the option of rejecting it or amending it.
  • If there is a dispute over such a law between the two Houses, the President may call a joint session of both Houses to break the impasse.
  • The President has three options after being presented with the bill: he may either sign it, refuse to sign it, or send it back to the Houses for further deliberation.

Finance Bill category II (Financial Bill 2)

A Financial Bill 2 does not include any of the items listed in Article 110, but it does contain provisions regarding expenditures from the Consolidated Fund of India. The Constitution's Article 117 (3) governs how it is handled.

  • The same legislative process that applies to a regular bill also applies to this one.
  • Any House of Parliament may introduce such bills. 
  • However, for either House to examine these Bills, the President's advice is required; in the absence of this recommendation, neither House can enact the Bill.

Money Bills

Article 110 of the Indian Constitution defines a money bill. Money bills deal with money-related issues like taxation, government spending, etc. Even while money bills are a type of financial bill, not all financial bills are money bills.

  • A bill's status as a money bill is determined by the speaker.
  • A money bill must be introduced with the President's suggestion; the President may accept or reject it, but he or she may not send it back for revision.

Finance Bills are most beneficial in international trade because they can easily adapt to the risks and fluctuations associated with international trade. Since these transactions are made between countries and are of great value, only banks and other financial institutions process these transactions.

Finance Bill: Important Facts

As the name implies, a finance bill deals with the nation's finances; it may be about taxes, spending, borrowing, revenues, etc. These topics are covered by the Union Budget, passed as a finance bill.

  • The Rajya Sabha can make suggestions within 14 days. If there is no recommendation or modification suggested from their side, it will be considered accepted.
  • Even if the invoice is returned with the recommendations, Lok Sabha has the authority to accept or reject such recommendations and notify Rajya Sabha of the same.
  • Regardless of whether Lok Sabha accepts all recommendations, the bill is considered passed by both homes.
  • For all other Bills, the final passage of that bill will take place in Rajya Sabha. However, for money bills, the final delivery will be at Lok Sabha, which will be sent to the President of India for approval.
  • The President cannot return a willing recommendation to Lok Sabha for any purpose.

The Finance Bill is a substantial part of the Indian Budget System. Any law or rule related to any financial amendment, taxation, or the increase or decrease in commodity prices must first be presented through this Finance Bill. The conditions will be met only after it has been thoroughly reviewed and approved by the authorities as specified above.

Finance Bill UPSC

The Finance Bill is an integral part of the Economy section of the UPSC Syllabus. The topic must be studied well, and concepts should be clarified from the UPSC Economy Notes. A conceptual understanding of the topic is crucial for the IAS Exam.

Finance Bill UPSC Questions

Question: Consider the following statements:

  1. Since the sums required to meet expenditure described by the Constitution of India as expenditure charged upon the Consolidated Fund of India are not submitted to the vote of Parliament, no House is competent to discuss these estimates.
  2. The annual Finance Bill provides the legal authority for withdrawing sums from the Consolidated Fund of India.

Which of the statement(s) given above is/are correct?

  1. Only 1
  2. Only 2
  3. Both 1 and 2
  4. Neither 1 nor 2

Answer: Option D

Question: Pending the passage of the Finance Bill in the Parliament, the Provisional Collection of Taxes Act, 1931 empowers the government to collect taxes for a period of:

  1. 50 days
  2. 60 days
  3. 75 days
  4. 90 days

Answer: Option C

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Finance Bill FAQs

  • Finance Bill is one that, as its name implies, deals with the nation's finances; it may be about taxes, government spending, borrowing, revenues, etc. The Union Budget is enacted as a Finance Bill since it deals with these issues.

  • The President's approval and recommendation are required to pass Finance Bill. Rajya Sabha has the authority to amend or reject Finance Bill 1. This law does not require speaker consent to be classified as Finance Bill 1.

  • Financial Bill 1 can only be introduced in Lok Sabha, and Finance Bill 2 can be deployed in both the Lok Sabha and the Rajya Sabha.

  • Finance Bill 1 is dealt with in Article 117 (1) of the Constitution, and Finance Bill 2 is dealt with in Article 117 (3) of the Constitution. Finance Bill 1 deals with other general legal issues and the provisions of Article 110. Finance Bill 2 deals with provisions on the costs of India's Integrated Fund but is not included in Article 110. Both bills are considered Ordinary Bills.

  • The Lok Sabha amended the Finance Bill 2022, which had been presented to the Lok Sabha on February 1st, and passed on March 25th, 2022. To know more about the Finance Bill, click here.

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