Appropriation Act and Finance Act
An Appropriation Act in India is an act of Parliament which allows the withdrawal of funds from Consolidated Fund of India or Consolidated Funds of States (in case of state budgets). Similarly, the Finance Act of Central Government gives effect to the taxation proposals in the beginning of every financial year. For taxation proposals at state levels, State Finance Acts are enacted every year.
Constitution says that no money shall be withdrawn from the consolidated fund of India except under the appropriation made by law. Thus, the Appropriation Bill authorizes the amount which can be drawn out of the Consolidated Fund of India for meeting the expenditures. This bill is required to be passed for votable as well as non-votable expenditures and also any vote on account.
Further, kindly note that once the Lok Sabha has passed the Appropriation Bill, no amendments in its amounts can be proposed in either house of Parliament. Once the bill gets President’s assent, it becomes Appropriation Act. The Appropriation Act authorises the government to withdraw funds from Consolidated Fund of India.
The Constitution (Article 265) says that no tax shall be levied or collected except by authority of law. Consequently, a Finance Bill dealing with such law is introduced to authorize the government to raise funds through taxation. This bill must become an act within 75 days of introduction.
Difference between Appropriation and Finance Bills / Acts
- While Appropriation act legalizes the expenditure side of the budget, Finance act legalizes the income side (Taxes) of budget.
- While no amendments can be moved or passed in case of appropriation bill, amendments seeking to reject or reduce a tax can be moved in the case of finance bill.