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On 1 February 2024, the Union Interim Budget for 2024-25 was announced which outlined the government’s expense policies, tax reforms, and expenditures. This naturally drives curiosity on whether these financial matters fall under the Finance Bill or Money Bill? The Finance Bill contains details about any legal amendment required for making changes in fiscal policies and rules as proposed by the Finance Minister. The Money Bill on the other hand looks at financial matters including public expenditure, taxation, and related issues. But how is the Finance Bill different from the Money Bill? We’ll take a close look at Finance Bill vs Money Bill here and also understand the main difference between Money Bill and Finance Bill.

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Difference between Money Bill and Finance Bill

It must be obvious that components of the Money Bill are a part of the Finance Bill but not vice-versa. A Money Bill is a distinct part of Finance Bill that deals with components as mentioned in Article 110 (1) (a) to (g).

We’ll take a closer look at each of them in the following sections, but first, a snapshot of the main differences between the Finance Bill and the Money Bill.

How the Finance Bill and Money Bill are different:

Particulars Finance Bill Money Bill
Scope Part of the Union Budget – Concerned with legal amendments required for financial regulations, economic and fiscal policies (broader in scope) Part of the Finance Bill – Concerned with matters on tax and expenditures
Introduction Can be introduced in either Houses with or without recommendation by the President (i.e., Category-I in Lok Sabha, Category-II in Lok Sabha or Rajya Sabha) Only in the Lok Sabha (after recommendation by the President)
Approval from Both Houses of Parliament – Lok Sabha and Rajya Sabha Lok Sabha only
Status granted by Declaration and status granted by Speaker not required The Lok Sabha Speaker must declare a bill on financial matters as a Money Bill
Amendment by Can be done by both Houses Can only be done in the Lok Sabha
Article reference Article 117(1) and 117(3) of the Constitution 110 (1) (a) to (g) of the Constitution
Timeline No specific timeline for passage of Bill Recommendations must be shared by the Rajya Sabha within 14 days
Powers of the Upper House (Rajya Sabha) Complete powers – Can amend and/or reject the proposed Bill Limited powers – Can suggest recommendations
Implications Fiscal policies, financial statements, economic policies Taxation, revenue collection and expenditure
Enactment process It undergoes through the regular legislative procedure (i.e., after being passed in the LS it would have to go to the RS and requires approval of both Houses to become a law) Once it is passed by the Lok Sabha, it is presented directly to the President

Also read: Business finance – Meaning, benefits, types

As you can understand, the Finance Bill will have a direct impact on the Union Budget as it deals with matters on the country’s economic policies. The Money Bill on the other hand, deals with taxation policies and will impact allocation of budgets and related policies. Understanding the key distinctions between the Money Bill and Finance Bill is important for those looking to navigate the complexities in financial legislation.

Importance of Finance Bill vs Money Bill for businesses

We’ve taken a look at how the Money Bill and Finance Bill are different. While one ensures that the right financial policies are implemented, the other ensures that policies are scrutinised and then passed for relevant, streamlined, and stable financial governance in the country.

As a MSME business owner in India, it’s important for you to understand how Finance Bill vs Money Bill are different, its importance and how it impacts your business decisions, revenue, taxation and growth. For instance, as per the Interim Budget – Tax reforms and compliance for MSMEs, the threshold for presumptive tax for retail businesses is recommended to be increased to ₹3 crores from ₹2 crores. This step is likely to enable many small businesses to stay competitive and expand their businesses.

On that note, let’s understand why it’s important for businesses to understand the differences between the Money Bill and Finance Bill.

Business relevance:

  • Comprehend changes in taxation and government spendings: If you understand how these two Bills are different and how it impacts your business, you’ll be able to improvise on your financial planning and budgets. For instance, the Money Bill deals with revenue and expenditures. This can impact the tax environment, especially corporate tax, exemptions and deductions.
  • Prompt response to wider financial regulations: Some changes in government regulations can impact the overall business and financial ecosystems. For instance, any amendment to the Finance Bill, such as changes in corporate laws, will have far-reaching implications on business operations. By understanding these nuances, companies can be prompt with their responses and make strategic changes for being aligned and complaint with changing laws while leveraging the benefits or opportunities these present.
  • Understand government priorities: Having clarity on priority areas and shifts for the government can be beneficial in aligning your business’s operational focus. For instance, the MSME sector is a priority area for the government. Similarly, infrastructure development, logistics and sustainability as highlighted in the Interim Budget. (Also read: Infrastructure development and logistics initiatives in Interim Budget).

In the next sections, we will take a detailed look at the Money Bill and Finance Bill in India.

What is Money Bill?

The term Money Bill has special significance in India and plays a pivotal role in its financial governance. For a better understanding of the difference between Money Bill and Finance Bill, let’s take a look at each of them.

A Money Bill is a legislative proposal that deals with issues of taxation, government spendings, and other financial matters, making it a vital tool for implementing the government’s fiscal policies. It must be introduced in the Lower House of Parliament, i.e., the Lok Sabha upon the recommendation of the President. The Upper House of Parliament, i.e., the Rajya Sabha can suggest its recommendations within 14 days and the Lok Sabha may or may not accept those.

Key points about the Money Bill in India:

  • It is introduced in the Lower House of Parliament – The Lok Sabha – where it can be scrutinised and passed
  • It deals with provisions under Article 110 of the Constitution
  • Main components of the Money Bill include – Taxes (imposition and/or abolition), regulations in government’s borrowing of money, custody and maintenance of the Consolidated Fund of India, and any other matter directly related to these
  • The Upper House of Parliament – The Rajya Sabha – can make recommendations but cannot amend or reject the Bill
  • The Lok Sabha sends the Money Bill to the Rajya Sabha for recommendations; the Lok Sabha may or may not approve the recommendations and pass the Bill and send it to the President for being enacted into an Act (Note: The President may withhold or give assent to a Money Bill. However, since it is introduced upon prior recommendation of the President, assent is usually provided and the Bill is enacted as a Law.)

Understanding of the Money Bill enables businesses and individuals to grasp how public funds are managed and allocated and its role in shaping the nation’s economic policy and financial health.

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What is Finance Bill?

We take a look at Finance Bill vs Money Bill in this section to understand how they differ.

The Finance Bill is important to the nation from the perspective of its economic governance. It’s a proposal made in the Parliament for legal amendments on revenue and expenditure matters. Unlike a Money Bill that deals primarily with taxation (Central and State level), the Finance Bill has a broader spectrum across financial legislation and fiscal policies.

Finance Bill categories:

There are two categories of Finance Bill:

  • Finance Bill Category-I: Similar to a Money Bill it may contain matters from Article 110. It is initiated upon the recommendation by the President of India and introduced in the Lok Sabha. However, unlike a Money Bill where the decision of the Lok Sabha is prevalent, a Category-I Finance Bill is passed upon the approval of both Houses.
  • Finance Bill Category-II: Includes provisions on government expenditure and must be passed by either Houses. Presidential assent is required for Category-II Finance Bill to become a Law.

Key points about the Finance Bill in India:

  • It can be introduced in either of the Houses
  • It requires the approval of both the Lok Sabha and Rajya Sabha (i.e., collaborative approach to financial decision-making)
  • Components of the Finance Bill includes – Tax law amendments, new financial regulations, adjustments to existing financial legislation, and other related matters that shape the country’s economic landscape (across tax, corporate finance, government spendings)

The Finance Bill ensures that diverse perspectives are included in determining the final fiscal policies. It reflects a balanced and detailed examination of the proposed financial changes.

Also read: GST returns types in India – GSTR-1 to GSTR-11 and which is applicable to you

Role in Indian business ecosystem

We have looked at the meaning of Finance Bill vs Money Bill and the main differences between the two. We have also tried to understand the main differences between Money Bill and Finance Bill that explains why it is important for businesses to understand them and its role.

For any business looking to navigate the country’s economic policies and financial regulations, understanding these Bills is important. Its knowledge is not just good-to-have but important as it enables to demystify the financial legislative process but also make strategic changes in business operations to run smoothly, stay compliant and leverage the opportunities it brings.

At Tata nexarc our goal is to enable MSMEs in India accelerate growth. We offer a wide range of trusted and affordable solutions for MSMEs. We have partnered with leading service providers and offer quality steel at the best prices, doorstep logistics services and more. To learn more register now on Tata nexarc.

Sohini Banerjee

Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.