The Budget and Money Bills are central to the financial governance of India, making them key topics for UPSC CSE and other competitive exams. The Union Budget, presented annually, lays out the government’s revenue and expenditure plans, while Money Bills are essential for the approval of financial matters in Parliament. Understanding how these bills are passed, the roles of the Finance Minister, and the constitutional provisions related to these matters is critical for exam success.
In this post, we provide a set of well-researched Multiple Choice Questions (MCQs) on Budget and Money Bills, accompanied by correct answers and detailed explanations. These questions will help you strengthen your understanding of the financial processes in India and enhance your performance in the Polity section of exams like UPSC CSE.
Budget and Money Bills MCQs and Answers
1. Which article of the Indian Constitution mandates the laying of the Annual Financial Statement (Budget) before both Houses of Parliament?
(a) Article 109
(b) Article 110
(c) Article 112
(d) Article 117
Answer: (c)
Explanation: Article 112 of the Constitution requires the President to cause to be laid before both the Houses of Parliament the estimated receipts and expenditure of the Government of India in respect of every financial year, which is known as the Annual Financial Statement or the Budget.
2. The Annual Financial Statement (Budget) shows the estimated receipts and expenditure of the Government of India for:
(a) The previous financial year.
(b) The current financial year.
(c) The ensuing financial year.
(d) A period of five years.
Answer: (c)
Explanation: The Budget presented to Parliament pertains to the estimated receipts and expenditure of the Government of India for the financial year that is about to begin (the ensuing financial year). India’s financial year runs from April 1st to March 31st.
3. The Budget in India is presented to the Parliament by the:
(a) Prime Minister.
(b) Finance Minister.
(c) President.
(d) Governor of the Reserve Bank of India.
Answer: (b)
Explanation: Traditionally, the Union Finance Minister presents the Annual Financial Statement (Budget) to the Parliament on behalf of the government.
4. The term “Budget” is explicitly mentioned in which article of the Indian Constitution?
(a) Article 110
(b) Article 112
(c) Article 113
(d) The term “Budget” is not explicitly mentioned in the Constitution; it is referred to as the “Annual Financial Statement.”
Answer: (d)
Explanation: The Constitution of India does not use the word “Budget.” Instead, Article 112 refers to it as the “Annual Financial Statement.”
5. Which of the following is NOT a part of the Budget documents presented to the Parliament?
(a) Annual Financial Statement.
(b) Demands for Grants.
(c) Appropriation Bill.
(d) Economic Survey.
Answer: (d)
Explanation: While the Economic Survey is an important document related to the economy and is usually presented before the Budget, it is not formally a part of the Budget documents mandated under Article 112. The other options are core components of the Budget presentation.
6. “Demands for Grants” relate to:
(a) The estimated revenue of the government.
(b) The estimated expenditure of each ministry or department.
(c) Proposals for new taxes.
(d) Borrowing plans of the government.
Answer: (b)
Explanation: Article 113 deals with the procedure in Parliament with respect to estimates. The estimated expenditure of the Government of India is presented to the Lok Sabha in the form of Demands for Grants for each ministry or department.
7. No Demand for a Grant shall be made except on the recommendation of the:
(a) Prime Minister.
(b) President.
(c) Finance Minister.
(d) Speaker of the Lok Sabha.
Answer: (b)
Explanation: Article 113(3) clearly states that no Demand for a Grant shall be made except on the recommendation of the President. This underscores the executive’s role in proposing expenditure.
8. The Lok Sabha has the power to:
(a) Sanction a Demand for Grant.
(b) Refuse to assent to any Demand.
(c) Reduce the amount of a Demand.
(d) All of the above.
Answer: (d)
Explanation: Article 113(2) provides that the Lok Sabha shall have power to assent, or to refuse to assent, to any Demand for a Grant, or to assent to any Demand subject to a reduction of the amount specified therein.
9. The Rajya Sabha has the power to:
(a) Amend the Demands for Grants.
(b) Reject the Demands for Grants.
(c) Discuss the Demands for Grants but does not have the power to vote on them.
(d) Sanction the Demands for Grants with amendments.
Answer: (c)
Explanation: The Rajya Sabha can discuss the Budget, including the Demands for Grants, but the power to vote on the Demands for Grants is exclusively vested in the Lok Sabha (Article 113(2)).
10. To authorize the withdrawal of money from the Consolidated Fund of India for the services for which Grants have been made by the Lok Sabha, a/an ___________ Bill is introduced and enacted.
(a) Finance Bill
(b) Appropriation Bill
(c) Money Bill
(d) Constitution Amendment Bill
Answer: (b)
Explanation: Article 114 deals with Appropriation Bills. After the Demands for Grants are voted by the Lok Sabha, an Appropriation Bill is introduced and enacted to provide legal authority for the government to withdraw funds from the Consolidated Fund of India to meet the approved expenditure.
11. No amendment shall be proposed to an Appropriation Bill in either House which will have the effect of:
(a) Varying the amount or altering the destination of any grant so made.
(b) Varying the amount of any expenditure charged on the Consolidated Fund of India.
(c) Increasing the amount of any grant.
(d) All of the above.
Answer: (d)
Explanation: Article 114(2) imposes significant restrictions on amendments to an Appropriation Bill to ensure that the financial decisions of the Lok Sabha regarding the quantum and allocation of grants are respected.
12. A Bill is considered a Money Bill if it contains only provisions dealing with:
- The imposition, abolition, remission, alteration or regulation of any tax.
- The regulation of the borrowing of money or the giving of any guarantee by the Government of India, or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the Government of India.
- The custody of the Consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such Fund.
Select the correct answer using the code below:
(a) Only 1 and 2
(b) Only 2 and 3
(c) Only 1 and 3
(d) 1, 2, and 3, along with other matters specified in Article 110.
Answer: (d)
Explanation: Article 110(1) provides a comprehensive definition of a Money Bill, encompassing the aspects listed, as well as other financial matters like the appropriation of moneys out of the Consolidated Fund of India, the declaring of any expenditure to be expenditure charged on the Consolidated Fund of India, the receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or any matter incidental to any of the matters specified above.
13. Which of the following Bills can originate only in the Lok Sabha?
(a) Constitution Amendment Bill
(b) Ordinary Bill
(c) Money Bill
(d) Appropriation Bill (although it typically follows the Demands for Grants which are voted in Lok Sabha)
Answer: (c)
Explanation: Article 109(1) explicitly states that a Money Bill shall not be introduced in the Council of States (Rajya Sabha); it can only originate in the House of the People (Lok Sabha).
14. The Speaker of the Lok Sabha has the sole authority to certify whether a Bill is a:
(a) Finance Bill.
(b) Money Bill.
(c) Appropriation Bill.
(d) Constitution Amendment Bill.
Answer: (b)
Explanation: Article 110(3) states that if any question arises whether a Bill is a Money Bill or not, the decision of the Speaker of the House of the People shall be final.
15. A Money Bill passed by the Lok Sabha and transmitted to the Rajya Sabha for its recommendations must be returned to the Lok Sabha within:
(a) 7 days.
(b) 14 days.
(c) 30 days.
(d) 60 days.
Answer: (b)
Explanation: Article 109(4) mandates that the Rajya Sabha shall return a Money Bill to the Lok Sabha within fourteen days from the date of its receipt with its recommendations, if any.
16. The Lok Sabha is:
(a) Bound to accept the recommendations of the Rajya Sabha on a Money Bill.
(b) Not bound to accept the recommendations of the Rajya Sabha on a Money Bill.
(c) Required to refer the Money Bill to a Joint Committee if it disagrees with the Rajya Sabha’s recommendations.
(d) Empowered to amend the Money Bill based on the Rajya Sabha’s recommendations and then send it back for final approval.
Answer: (b)
Explanation: Article 109(5) clarifies that if the Lok Sabha does not accept any of the recommendations made by the Rajya Sabha on a Money Bill, the Bill is deemed to have been passed by both Houses in the form in which it was passed by the Lok Sabha originally.
17. A Finance Bill (I) under Article 117(1) contains, in addition to provisions of the nature of a Money Bill, provisions dealing with:
(a) Expenditure charged on the Consolidated Fund of India.
(b) Any of the matters specified in clauses (a) to (g) of Article 110.
(c) Both (a) and (b).
(d) Neither (a) nor (b).
Answer: (c)
Explanation: Article 117(1) deals with Finance Bills that contain not only matters referred to in Article 110 (definition of Money Bill) but also provisions for any of the matters specified in clauses (a) to (g) of Article 110 and also for the expenditure charged on the Consolidated Fund of India. Such a Bill can only be introduced in the Lok Sabha on the recommendation of the President.
18. A Finance Bill (II) under Article 117(3) contains provisions for expenditure from the Consolidated Fund of India but does NOT contain any of the matters enumerated in:
(a) Article 110.
(b) Article 112.
(c) Article 114.
(d) Article 117(1).
Answer: (a)
Explanation: Article 117(3) concerns Finance Bills that, if enacted and brought into operation, would involve expenditure from the Consolidated Fund of India. Such Bills can be introduced in either House of Parliament but cannot be passed by either House unless recommended by the President. They do not contain any of the matters specified in Article 110.
19. Which of the following requires the recommendation of the President for introduction in the Parliament?
- A Money Bill.
- A Bill which, if enacted and brought into operation, would involve expenditure from the Consolidated Fund of India.
- A Bill for the imposition of new taxes.
Select the correct answer using the code below:
(a) Only 1
(b) Only 2
(c) Only 1 and 2
(d) 1, 2, and 3
Answer: (d)
Explanation: Article 117(1) and Article 117(3), along with the general principle that Demands for Grants (related to expenditure and often necessitating taxation) require the President’s recommendation (Article 113(3)), imply that all the listed categories generally require the President’s recommendation for introduction. Money Bills (Article 110 read with Article 109) also implicitly require this due to their financial nature and the President’s role in recommending expenditure.
20. The “Vote on Account” is usually granted for:
(a) The entire financial year.
(b) A period of one month.
(c) A period of two months to cover the initial expenditure until the budget is passed.
(d) A period of six months during a financial emergency.
Answer: (c)
Explanation: Vote on Account is a special provision under Article 116(1)(a) that allows the Lok Sabha to make an advance grant to the government to meet the estimated expenditure for a part of the financial year (typically two months) while the detailed Budget is being discussed and passed.
21. “Vote of Credit” is granted by the Lok Sabha for:
(a) Meeting the full expenditure of a financial year.
(b) Meeting an unexpected demand when the details of the expenditure cannot be precisely stated.
(c) Providing funds for a specific project.
(d) Covering excess expenditure incurred in the previous financial year.
Answer: (b)
Explanation: Article 116(1)(b) provides for a Vote of Credit, which is a grant made by the Lok Sabha for meeting an unexpected demand upon the resources of India when on account of the magnitude or the indefinite character of the service the demand cannot be stated with the detail ordinarily given in an annual financial statement.
22. “Exceptional Grants” are made by the Lok Sabha for:
(a) Routine administrative expenses.
(b) A specific purpose which does not form part of the ordinary service of the year.
(c) Covering deficits from the previous financial year.
(d) Funding international obligations.
Answer: (b)
Explanation: Article 116(1)(c) allows the Lok Sabha to make Exceptional Grants which form no part of the ordinary service of the financial year.
23. “Token Grant” involves the voting of a nominal sum, usually one rupee, to:
(a) Express disapproval of a government policy.
(b) Meet the expenditure on a completely new service.
(c) Reappropriate funds from one head of expenditure to another.
(d) Cover unforeseen expenditure.
Answer: (c)
Explanation: A Token Grant is sought when funds can be made available by reappropriation from savings in other grants but a formal vote of the Lok Sabha is required for the transfer of funds to a new head of expenditure. A nominal amount (₹1) is voted.
24. The “Finance Bill” is introduced in the Parliament:
(a) After the Appropriation Bill.
(b) Along with the presentation of the Budget.
(c) Before the general discussion on the Budget.
(d) After the voting on Demands for Grants.
Answer: (b)
Explanation: The Finance Bill, which contains the government’s proposals for taxation and related financial matters, is usually introduced in the Lok Sabha immediately after the presentation of the Annual Financial Statement (Budget).
25. The primary purpose of the Finance Bill is to:
(a) Authorize the withdrawal of money from the Consolidated Fund of India.
(b) Give effect to the financial proposals of the Government of India for the ensuing financial year.
(c) Seek a vote of confidence in the government’s economic policies.
(d) Amend the Constitution regarding financial matters.
Answer: (b)
Explanation: The Finance Bill is crucial as it seeks to enact the tax proposals and other financial measures announced in the Budget, providing the legal framework for the government’s revenue collection for the upcoming financial year.
26. Amendments can be proposed to the Finance Bill by:
(a) Any member of either House of Parliament.
(b) Only members of the Lok Sabha.
(c) Only Ministers.
(d) Only with the prior sanction of the President.
Answer: (a)
Explanation: While a Finance Bill (like a Money Bill) can only originate in the Lok Sabha, once introduced and under consideration, members of both Houses can move amendments, although the Rajya Sabha’s powers are limited to suggesting amendments in the case of matters strictly falling under Article 110. For other financial matters in a Finance Bill under Article 117, the Rajya Sabha has more substantial powers of amendment.
27. The enactment of the Finance Bill by the Parliament is usually completed by:
(a) The end of the financial year.
(b) The beginning of the financial year.
(c) Mid-financial year.
(d) Whenever Parliament finds time.
Answer: (b)
Explanation: It is crucial for the government to have the Finance Bill enacted before the beginning of the new financial year (April 1st) to ensure that it has the legal authority to collect taxes and manage its finances from the start of the year.
28. The Contingency Fund of India is at the disposal of the:
(a) Parliament.
(b) President of India.
(c) Prime Minister.
(d) Finance Minister.
Answer: (b)
Explanation: Article 267 establishes the Contingency Fund of India, which is placed at the disposal of the President to enable the government to meet unforeseen or urgent expenditure pending its authorization by Parliament.
29. Expenditure charged on the Consolidated Fund of India:
(a) Is subject to the vote of Parliament.
(b) Is not subject to the vote of Parliament but can be discussed by either House.
(c) Can be amended by the Rajya Sabha.
(d) Requires the President’s prior approval before being incurred.
Answer: (b)
Explanation: Article 113(1) specifies that certain expenditures are “charged on the Consolidated Fund of India” and are not subject to the vote of Parliament, although they can be discussed in either House. These include items like the emoluments and allowances of the President, the salaries and allowances of the Judges of the Supreme Court, etc.
30. The process of “reappropriation of funds” involves:
(a) Seeking additional grants from Parliament.
(b) Transferring funds from one head of expenditure to another within the same grant.
(c) Returning unspent funds to the Consolidated Fund of India.
(d) Borrowing money to meet budget deficits.
Answer: (b)
Explanation: Reappropriation involves the transfer of funds that have been sanctioned under one head of expenditure to another head within the same Demand for Grant. This requires the approval of the Finance Ministry and, in some cases, parliamentary approval.
31. The “Outcome Budget” presented to Parliament provides:
(a) The financial allocations for various schemes and projects.
(b) The intended physical outcomes and performance targets of government programs.
(c) A review of the government’s fiscal performance in the previous year.
(d) The macroeconomic framework underlying the Budget.
Answer: (b)
Explanation: The Outcome Budget is a document presented to Parliament that outlines the intended outcomes and measurable targets of the various programs and schemes implemented by different ministries and departments. It focuses on performance and accountability.
32. The “Gender Budget Statement” is presented to Parliament to:
(a) Allocate funds specifically for women’s welfare schemes.
(b) Analyze the impact of government budgets on women and promote gender mainstreaming.
(c) Report on the financial independence of women in India.
(d) Seek special grants for programs exclusively for women.
Answer: (b)
Explanation: The Gender Budget Statement is a part of the Budget documents that examines the budgetary allocations from a gender perspective, aiming to analyze how the budget impacts women and to promote gender-sensitive policymaking.
33. The “Fiscal Responsibility and Budget Management (FRBM) Act” primarily aims to:
(a) Increase government spending on social welfare programs.
(b) Reduce the fiscal deficit and promote fiscal stability.
(c) Enhance the transparency of the budget process.
(d) Increase the borrowing capacity of the government.
Answer: (b)
Explanation: The FRBM Act, enacted by the Indian Parliament, sets targets for fiscal deficit and public debt to ensure fiscal discipline and macroeconomic stability.
34. Which of the following is a key feature of the FRBM Act?
(a) Mandating a balanced budget every year.
(b) Setting targets for the reduction of fiscal deficit and revenue deficit.
(c) Requiring the government to borrow only from domestic sources.
(d) Establishing a Fiscal Council with binding recommendations.
Answer: (b)
Explanation: A key feature of the FRBM Act is the setting of targets for the gradual reduction of fiscal deficit and revenue deficit to achieve fiscal sustainability.
35. The “Contingency Fund of India” can be used by the executive to meet unforeseen expenditure pending parliamentary approval through:
(a) An Act of Parliament.
(b) An ordinance issued by the President.
(c) Advances from the Fund authorized by the President.
(d) A resolution passed by the Cabinet.
Answer: (c)
Explanation: Article 267(1) states that Parliament may by law establish a Contingency Fund in the nature of an imprest which shall be placed at the disposal of the President to enable advances to be made by him out of such Fund for the purposes of meeting unforeseen expenditure pending the authorization of such expenditure by Parliament by law under Article 115 or Article 116.
36. The “Public Account of India” deals with:
(a) Money received by or on behalf of the Government of India other than those credited to the Consolidated Fund.
(b) All receipts and expenditure of the Government of India.
(c) Only the borrowed funds of the government.
(d) Funds specifically allocated for public sector undertakings.
Answer: (a)
Explanation: Article 266(2) establishes the Public Account of India, which includes funds received by or on behalf of the Government of India other than those credited to the Consolidated Fund. These funds are not subject to normal budgetary controls and are often related to specific purposes like provident funds and small savings.
37. Expenditure from the Public Account of India is authorized by:
(a) An Appropriation Act passed by Parliament.
(b) Rules made by the President.
(c) The concerned department without parliamentary approval.
(d) A Finance Act passed by Parliament.
Answer: (a)
Explanation: While the nature of funds in the Public Account differs from the Consolidated Fund, withdrawals still need parliamentary authorization, usually through specific Appropriation Acts related to these expenditures.
38. “Sinking Fund” is related to:
(a) A fund maintained to stabilize the prices of essential commodities.
(b) A fund created for repayment of government debt.
(c) A fund used for financing large infrastructure projects.
(d) A part of the Contingency Fund of India.
Answer: (b)
Explanation: A Sinking Fund is a fund established by the government or a corporation for the purpose of gradually repaying its debt over time. Contributions are made regularly to this fund, which is then used to redeem bonds or other debt instruments.
39. “Ways and Means Advances” are:
(a) Long-term loans raised by the government from the public.
(b) Short-term borrowings by the government from the Reserve Bank of India to tide over temporary mismatches in receipts and payments.
(c) Grants received from international financial institutions.
(d) Profits transferred from public sector undertakings to the government.
Answer: (b)
Explanation: Ways and Means Advances (WMA) are temporary borrowing facilities provided by the RBI to the central and state governments to help them manage their cash flows and meet temporary mismatches between their receipts and expenditures.
40. The “Consolidated Sinking Fund” (CSF) is maintained by:
(a) The Ministry of Finance.
(b) The Reserve Bank of India on behalf of the states.
(c) NITI Aayog.
(d) The Comptroller and Auditor General of India.
Answer: (b)
Explanation: The Consolidated Sinking Fund (CSF) is a mechanism adopted by some states in India to manage their debt. It is generally maintained by the Reserve Bank of India on behalf of these state governments, with regular contributions made to it for the purpose of debt redemption.
41. The “Guarantee Redemption Fund” (GRF) is related to:
(a) A fund to compensate individuals for losses due to government policies.
(b) A fund maintained by state governments to meet the liabilities arising out of guarantees given by them.
(c) A fund to ensure timely payment of salaries to government employees.
(d) A part of the Consolidated Fund used for emergency expenditures.
Answer: (b)
Explanation: The Guarantee Redemption Fund (GRF) is established by some state governments to provide a buffer to meet the financial liabilities arising from the guarantees they have extended on behalf of state-level undertakings or for other purposes.
42. “Off-budget borrowings” by the government refer to:
(a) Borrowings that are not explicitly included in the Union Budget.
(b) Loans raised from international sources.
(c) Borrowings by state governments.
(d) Short-term loans with high interest rates.
Answer: (a)
Explanation: Off-budget borrowings are funds raised by government-owned entities or special purpose vehicles (SPVs) which are not directly reflected in the government’s budget. While they help in financing projects, they still represent a liability for the government in the long run.
43. The “Fiscal Council” as proposed by some economists and committees is intended to:
(a) Advise the government on monetary policy.
(b) Provide an independent assessment of the government’s fiscal policies and forecasts.
(c) Resolve financial disputes between the Union and the States.
(d) Oversee the functioning of public sector banks.
Answer: (b)
Explanation: The idea of a Fiscal Council is to have an independent body that can objectively analyze the government’s fiscal plans, provide forecasts, and assess their adherence to fiscal rules, thereby enhancing transparency and accountability.
44. “Sunset Clause” in a Finance Bill refers to:
(a) A clause that reduces tax rates over time.
(b) A provision that specifies a date after which a particular tax or financial measure will cease to have effect.
(c) A clause that exempts certain sectors from taxation.
(d) A provision that increases government borrowing limits.
Answer: (b)
Explanation: A Sunset Clause in a Finance Bill or any other legislation specifies a date on which a particular provision or the entire law will expire or cease to be in effect unless it is explicitly extended.
45. “Contingent Liabilities” of the government are:
(a) Liabilities that are certain and must be paid within the financial year.
(b) Potential liabilities that may arise depending on the occurrence of a future event.
(c) Liabilities that are not recorded in the budget.
(d) Liabilities related to defense expenditure.
Answer: (b)
Explanation: Contingent Liabilities are obligations that the government may have to incur if a specific event occurs, such as the honoring of guarantees given to third parties or the outcome of legal cases.
46. The “Consolidated Fund of India” derives its major sources from:
(a) Public borrowings and grants from international bodies.
(b) Revenue receipts (taxes, duties) and non-tax revenue.
(c) Proceeds from the sale of public sector undertakings.
(d) Small savings and provident fund collections.
Answer: (b)
Explanation: The Consolidated Fund of India primarily consists of all revenues received by the Government of India, all loans raised by the Government by the issue of treasury bills, loans or otherwise, and all moneys received by the Government in repayment of loans. Tax and non-tax revenues are the main streams.
47. “Charged Expenditure” on the Consolidated Fund of India includes:
(a) Salaries of all government employees.
(b) Defence expenditure.
(c) Emoluments of the President, salaries of Supreme Court and High Court judges, debt servicing charges, etc.
(d) Grants to state governments.
Answer: (c)
Explanation: Article 112(3) lists the expenditure that is charged on the Consolidated Fund of India. These are significant constitutional and statutory obligations and are not subject to the vote of Parliament.
48. The “Finance Commission” is constituted under Article:
(a) 270
(b) 275
(c) 280
(d) 282
Answer: (c)
Explanation: Article 280 of the Constitution provides for the establishment of a Finance Commission by the President to make recommendations on the distribution of certain tax revenues between the Union and the States and on the principles governing the grants-in-aid to the States out of the Consolidated Fund of India.
49. The recommendations of the Finance Commission are:
(a) Binding on the Government of India.
(b) Advisory in nature.
(c) Subject to approval by the Parliament.
(d) Enforceable by the Supreme Court.
Answer: (b)
Explanation: The recommendations of the Finance Commission are advisory in nature. While the government usually accepts and implements most of the recommendations, it is not constitutionally bound to do so.
50. “Fiscal Deficit” refers to the difference between:
(a) Total revenue and total expenditure of the government.
(b) Revenue receipts and revenue expenditure of the government.
(c) Total expenditure of the government and its total receipts excluding borrowings.
(d) Budgeted expenditure and actual expenditure.
Answer: (c)
Explanation: Fiscal Deficit is the excess of total government expenditure (including capital expenditure) over its total receipts (revenue receipts and capital receipts excluding borrowings) in a fiscal year. It indicates the total borrowing requirements of the government.
A comprehensive knowledge of the Budget process and Money Bills is crucial for answering questions effectively in the UPSC CSE and other competitive exams. By mastering these topics, you not only enhance your chances of scoring well but also gain a better understanding of India’s financial administration.
We hope these MCQs and explanations have clarified the nuances of the Budget and Money Bills. Regular practice and revision will ensure you’re well-prepared to tackle any question on these topics in your exams.