Article 266 of the Indian Constitution lays the foundation for the financial management framework in India, encompassing the Consolidated Funds of both the central government and individual states, as well as the establishment of Public Accounts. This article ensures proper accounting and management of government revenues, loans, and expenditures, emphasizing the importance of adherence to the law in appropriating funds and preserving financial integrity.
What does Article 266 states ?
Consolidated Funds and public accounts of India and of the States
(1) Subject to the provisions of Article 267 and to the provisions of this Chapter with respect to the assignment of the whole or part of the net proceeds of certain taxes and duties to States, all revenues received by the Government of India, 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 India, and all revenues 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
(2) All other public moneys received by or on behalf of the Government of India or the Government of a State shall be entitled to the public account of India or the public account of the State, as the case may be
(3) No moneys out of the Consolidated Fund of India or the Consolidated Fund of a State shall be appropriated except in accordance with law and for the purposes and in the manner provided in this Constitution
The three funds
| Fund | Description | Functions |
| Consolidated Fund of India | – Contains all revenues received by the Government of India. – Includes loans raised by the Government through treasury bills, loans, or ways and means advances. – Money received in repayment of loans also go into this fund . | – Funding government expenditure and liabilities. – Cannot be appropriated without legal authorization. |
| Consolidated Fund of a state | – Contains all revenues received by an individual State government. – Includes loans raised by the State through treasury bills, loans, or ways and means advances. – Moneys received in repayment of loans also go into this fund. | – Funding state government expenditure and liabilities. – Cannot be appropriated without legal authorization. |
| Public Account of India / state | Contains all other public moneys received by or on behalf of the respective government, distinct from the consolidated fund. | – Used for transactions that do not form part of the consolidated fund. – Examples include provident funds, small savings, and other deposits |
Key aspects of Article 266
1. Consolidated Funds: Article 266 establishes the Consolidated Fund of India and the Consolidated Fund of each State. These funds are essentially the treasuries where all government revenues, loans, and loan repayments are consolidated. It ensures that all financial resources are properly accounted for and managed.
2. Revenue Inflows: It covers all revenues received by the government, including taxes, duties, and non-tax revenues. These revenues are used to meet various expenditures, from administrative costs to public welfare programs.
3. Loans and Borrowings: The article includes loans raised through the issuance of treasury bills, loans, or ways and means advances. Governments often resort to borrowing to meet their financial needs, and this provision ensures that such borrowings are recorded and managed appropriately.
4. Public Accounts: Besides the Consolidated Fund, Article 266 also establishes the Public Account of India and the Public Account of each State. These accounts are used for transactions other than those covered by the Consolidated Fund, such as funds held in trust.
5. Appropriation of Funds: One of the most crucial aspects of this article is that it establishes the principle that no money from the Consolidated Fund of India or a State can be spent or appropriated without the authority of law. This means that government spending must be authorized by legislation, ensuring financial discipline and accountability.
6. Preservation of Financial Integrity: By clearly defining the separate funds and their purposes, Article 266 safeguards the financial integrity of the government. It prevents commingling of funds and ensures that revenues are used for their designated purposes.
7. Compliance with the Constitution: Article 266 underscores that all financial transactions must adhere to the provisions of the Constitution. This reinforces the constitutional framework for financial management in India.
[…] to which all inflows and outflows are recorded. The Consolidated Fund of India was formed by Article 266(1) of the Indian Constitution. The Indian Constitution makes reference to the Public Accounts of […]