Article 112 of the Indian Constitution constitutes a fundamental cornerstone that underpins the financial architecture of the nation. At its heart lies the provision for the Annual Financial Statement, a comprehensive blueprint that charts the financial course for the upcoming year. This pivotal article establishes a systematic framework for the government to present its budgetary plans, shedding light on revenue sources, expenditure allocations, and the broader economic strategy.

What does Article 112 states ?

Annual financial statement

(1) The President shall in respect of every financial year cause to be laid before both the Houses of Parliament a statement of the estimated receipts and expenditure of the Government of India for that year, in this Part referred to as the annual financial statement

(2) The estimates of expenditure embodied in the annual financial statement shall show separately

(a) the sums required to meet expenditure described by the Condition as expenditure charged upon the Consolidated Fund of India; and

(b) the sums required to meet other expenditure proposed to be made from the Consolidated Fund of India, and shall distinguish expenditure on revenue account from other expenditure

(3) The following expenditure shall be expenditure charged on the Consolidated Fund of India

(a) the emoluments and allowances of the President and other expenditure relating to his office;

(b) the salaries and allowances of the Chairman and the Deputy Chairman of the Council of States and the Speaker and the Deputy Speaker of the House of the People;

(c) debt charges for which the Government of India is liable including interest, sinking fund charges and redemption charges, and other expenditure relating to the raising of loans and the service and redemption of debt;


(i) the salaries, allowances and pensions payable to or in respect of Judges of the Supreme Court,

(ii) the pensions payable to or in respect of Judges of the Federal Court,

(iii) the pensions payable to or in respect of Judges of any High Court which exercises jurisdiction in relation to any area included in the territory of India or which at any time before the commencement of this Constitution exercises jurisdiction in relation to any area included in a Governors Province of the Dominion of India;

(e) the salary, allowances and pension payable to or in respect of the Comptroller and Auditor General of India;

(f) any sums required to satisfy any judgment, decree or award of any court or arbitral tribunal;

(g) any other expenditure declared by this Constitution or by Parliament by law to be so charged

Clauses of Article 112

Clause(1) :-

  • According to Clause 1 of Article 112 of the Indian constitution, it is mandated that the President is legally obligated to submit a statement including the projected receipts to both houses of Parliament, namely the Lok Sabha and the Rajya Sabha, at the conclusion of each fiscal year.
  • The statement will encompass the entirety of expenditures incurred by the government of India during the preceding fiscal year. In this particular section of the constitution, the aforementioned declaration is commonly known as the yearly financial statement.

Clause(2) :-

  • The second phrase is additionally subdivided into two subordinate clauses. The second clause pertains to the necessity of presenting all estimations individually in the statement in order to avoid any potential discrepancies.
  • The distinct estimations that necessitate separate presentation are delineated in subclauses (a) and (b).
  • The necessary amounts to cover all costs, as specified by the condition dictating the disbursement from the Consolidated Fund of India.
  • The aggregate allocation of funds intended for many significant projects or situations. It is important to establish a clear differentiation between revenue expenditure and other types of expenses.

Clause(3) :-

  • The third clause of Article 112 of the Indian Constitution pertains to the allocation of costs to be covered by the Consolidated Fund of India. The aforementioned expenditures are referenced in the sub-clauses outlined below.
  • The remuneration of the President, the authorized entitlements, and the expenditures associated with the presidential office.
  • The remuneration of the Chairman and Deputy Chairman of the Rajya Sabha, as well as the Speaker and Deputy Speaker of the Lok Sabha, is of interest.
  • The entirety of the financial obligations incurred by the government of India, including both the principal amount borrowed and the associated interest. Additionally, the aforementioned expenses encompass redemption costs, sinking funds, and other relevant expenditures associated with the loans procured and the services rendered.
  • The remuneration, including pensions, allowances, and salary, received by the Judges serving on the Supreme Court. The remuneration allocated for the retirement benefits of the Judges serving in the Federal Court.
  • The provision also encompasses the retirement benefits allocated to the Judges of High Courts situated within the territorial jurisdiction of India or those that were under Indian Territory prior to the enactment of the Indian Constitution, and exercise jurisdiction over any geographical area falling within the Governors Province of the Dominion of India.
  • The remuneration, benefits, and retirement benefits allocated for the Comptroller and Auditor General of India.
  • The monetary amounts that are necessary to adhere to a decision, decree, or award issued by a court or arbitral tribunal.
  • Any charges that are delineated by the Constitution or enacted by the Parliament.
Annual Financial Statement
  • The Annual Financial Statement is a formal document that is submitted to the Parliament on a yearly basis as a component of the Budget procedure, in accordance with the provisions outlined in Article 112 of the Constitution of India. The collection of records comprises of receipts and expenditures of the government during the present year, preceding year, and the Budget year, categorized into three distinct sections: the Consolidated Fund of India, the Contingency Fund of India, and the Public Account of India. Annually, the government submits a report to Parliament detailing the inflows and outflows of funds for these accounts.
  • Capital receipts in the government’s financial statements encompass several sources of funds, including loans obtained from the government itself, borrowings from the Reserve Bank of India (RBI), and borrowings from foreign governments or institutions. These receipts also encompass loan recoveries, proceeds from asset sales, disinvestment, and other related transactions.
  1. The Consolidated Fund of India

The Consolidated Fund of India is a term used to describe the single pool of funds that the government of India holds for all its revenue receipts, non-debt capital receipts, and certain other public funds. It’s a key concept in public finance and is enshrined in Article 266 of the Indian Constitution.

Components and significance:

  1. Revenue Receipts: This includes all the revenue the government earns through sources like taxes, fees, fines, and other receipts that don’t create liabilities. For example, income tax, corporate tax, GST, customs duties, etc.
  2. Non-Debt Capital Receipts: This involves capital receipts that don’t create any corresponding liability on the government’s part. It mainly includes money raised from disinvestment, sale of assets, and recoveries of loans.
  3. Loans Raised: Any loans raised by the government, excluding those specifically categorized as “public debt,” are part of the Consolidated Fund.
  4. Contingency Fund: A small amount is allocated to the Contingency Fund of India from the Consolidated Fund. This fund is meant to address unforeseen emergencies and expenses.

2. Contingency Fund

  • The Contingency Fund of India serves as the nation’s emergency fund. The Contingency Fund of India, established in accordance with Article 267(1) of the Indian Constitution, serves the purpose of providing financial resources at times of national crisis, such as natural disasters, where immediate funding is necessary for effective response and management. The government at the Union level possesses a contingency fund of Rs 500 crore.

3. Public Fund

  • The Public Account is responsible for managing monies allocated for various transactions pertaining to minor savings, provident funds, and specialized purposes such as road building and elementary education, among others. Parliamentary authorization is unnecessary for the withdrawal from this account. The monies held in Public Account are not the property of the government and should be returned to the individuals and entities that made the deposits.


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