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Government Accounts and their accounting

Chapter I of Part XII of the Constitution of India deals with Finance. Said Chapter I starts with Article 264 and ends with Article 290A. Article 266 deals with Consolidated Funds and public accounts of India and of the States and Article 267 deals with Contingency Fund.

Government accounts are kept in the following three parts:-

Consolidated Fund of India

All tax revenues like corporation tax, income tax, custom duty, central excise duty, service tax as well as non-tax revenue like license fees, dividends and profits from public sector undertakings, receipts from Railways, Posts received by the Government of India and all loans raised by issue of Public notifications, treasury bills, all loans both raised from within the country and loans obtained from foreign governments and international institutions from outside the country or ways and means advances and all money received in repayment of such loans and interest thereon by the Government of India shall form one consolidated fund known as “the Consolidated Fund of India”. All expenditure of the Government of India is incurred for the conduct of its business including repayment of internal and external debt and release of loans to State Governments/ Union Territories are made from this fund and no amount can be withdrawn from the Consolidated Fund of India without authorization from the Parliament.

Similarly all state tax revenues like Agricultural Income tax, Sales Tax/VAT, Stamp Duty and state non-tax revenue like user charges received by the Government of a State, all loans raised by that Government by the issue of treasury bills, loans or ways and means advances and all moneys received by that Government in repayment of loans shall form one consolidated fund to be entitled “the Consolidated Fund of the State”. Each State has its Consolidated Fund of the State.

Contingency Fund of India

Advances from the Contingency Fund of India are made for the purposes of meeting unforeseen expenditure. The corpus of the fund is Rs 50 crores. This fund is in the nature of an imprest and it is placed at the disposal of the President of India and on behalf of the President of India the fund is held by the Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs. Generally the advance money from out of this fund is to be used to provide immediate relief to victims of natural calamities and at times to meet the expenses to implement any new policy decision taken, by the Government pending its approval by the Parliament. Any amount spent out of this fund is resumed to the Fund, to the full extent, as soon as Parliament authorizes additional expenditure so that the corpus of the fund is maintained. After the Parliament meets, and votes the bill presented before it, the money already spent out of the Contingency Fund of India is recouped by debiting the expenditure to the concerned functional Major Head etc. in the Consolidated Fund of India.

Similarly State Governments may have Contingency Fund of the State in the same line. It is kept at the disposal of the Governor of the State and role of the Parliament is played by the State Legislatures.

Public Account of India

All other public moneys (other than those which relate to the Consolidated Fund of India) received by or on behalf of the Government of India shall be credited to the public account of India. The transactions under Debt, Deposits and Advances in this part are those in respect of which Government of India incurs a liability to repay the money received and the Government of India acts as a Banker or Trustee and refunds the money after completion of the contract/event. Receipts from contributions to General Provident Fund, Public Provident Fund, Security Deposits and Earnest Money Deposits received by the Government of India, other small savings, other deposits are some of the examples of transactions which constitute Public Account of India.

Similarly State Governments have Public Accounts of the States.

While dealing with Government Accounts one need to know the following concepts:-

1) The Reserve Bank of India is the main banker of the Government and other authorised Banks function as RBI’s agents while handling Government Accounts.
2) Government Account is kept on Cash Basis
3) In all transactions the terms ‘debit’ and ‘credit’ are inevitably used and they refer to ‘expenditure’ and ‘receipt’ of cash respectively.
4) Consolidated Fund of India is divided into three Sections namely i) Revenue Section, ii) Capital Section and) Public Debt and Loans and Advances Sections.
i) Revenue Section has two sub-divisions namely Revenue Receipts (both Tax and Non-tax) [Major Head 0020 to 1606] and Revenue Expenditure [Major Head 2011 to 3606]
ii) Capital Section has two sub-divisions namely Capital Receipts [Major Head 4000] and Capital Expenditure [Major Head 4046 to 5475]
iii) Public Debt and Loads and Advances etc. [Major Head 6001 to 7999]
5) Contingency Fund of India is accounted for under a single Major Head [Major Head 8000]
6) Public Account of India is divided into six sub-divisions namely i) Small Savings, Provident Fund etc. [Major Head 8001 to 8013], ii) Reserve Funds [Major Heads 8115 to 8235], iii) Deposits and Advances [Major Head 8336 to 8554], iv) Suspense and Miscellaneous [Major Head 8656 to 8680, v) Remittances, [Major Head 8781 to 8797] and Cash Balance [Major Head 8999]
7) There are certain intermediary or adjusting heads where transactions through Banks are posted and finally these transactions are posted in respective Major Heads and Government Accounts are finalized. These intermediary heads are i) Cheques and Bills [Major Head 8670], ii) Suspense Accounts – 108 PSB Suspense [Major Head 8658] and Deposits and Reserve Bank – 101 Central-Civil [Major Head 8675]
8) Ways and means advances (as mentioned in Consolidated Fund of India above) is a temporary advances (overdrafts) extended by Reserve Bank of India to Government of India and State Governments to bridge the interval between expenditure and receipts. They are not a source of finance but are meant to provide support for purely temporary difficulties that arise on account of mismatch/shortfall in revenue or other receipts for meeting the govt. liabilities.
9) Major Heads of Direct Taxes are Corporation Tax [0020], Income Tax other than Corporation Tax [0021], Hotel Receipts Tax [0023], Interest Tax [0024], Fringe Benefits Tax [0026], Expenditure/Other Tax [0028], Estate Duty [0031], Wealth Tax [0032], Gift Tax [0033], Securities Transaction Tax [0034] and Banking Cash Transaction Tax [0036].

avnair on May 05 2015 10:21:52

Sorry sir... Just gone through this article. Am speechless...

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