On February 1, India’s Finance Minister Nirmala Sitharaman is set to present her second Union budget for the financial year 2020-2021. Like all Union Budgets, Budget 2020 is set to be a detailed and comprehensive report of the country’s revenues as well as estimated expenditures for the fiscal year ahead.

Owing to the wide range of information and complex terms contained within the Budget 2020 document, it could seem quite overwhelming. However, for the sake of simplifying the upcoming document and its key takeaways, here are a few important terms that can help:

Revenue Budget
The Union Budget is divided into two parts: Revenue Budget and Capital Budget. The Revenue Budget consists of the Government’s revenue receipts and payments. The revenue receipts are largely made up of the revenue received by the government via taxes and other sources. The revenue expenditure consists of the amount spent on running the government and providing services to the people.

Capital Budget
The Capital Budget consists of capital receipts and payments, and deals with elements of a more long-term nature. Capital receipts consist of loans taken by the government from the public, other countries as well as borrowings from the Reserved Bank of India. Capital expenditure is the money spent by the government on building essential facilities such as for health and education, as well as for investments and acquiring assets.

Gross Domestic Product
The Gross Domestic Product, or GDP of a country is defined as the total value – measured in monetary terms – of all the goods and services produced by that country within a year. As a figure, it is considered the most significant indicator of a country’s economic as well as overall development and progress.

Fiscal Deficit
Simply put, Fiscal Deficit is the difference between the total revenue or income generated and total expenditure incurred by the government. It indicates the total borrowings required by the government. Owing to circumstances, a Fiscal deficit can occur either when there is a deficit in the collection of revenue or a sudden increase in the expenditure of capital.

Capital Expenditure
Speaking of which, capital expenditure refers to expenditure by the government that creates assets such as schools, hospitals and institutes. It also includes investments made by the government for the purpose of yielding long-term profits in the future.

Revenue Expenditure
On the other hand, expenditure by the government that does not create assets is known as revenue expenditure. These expenditures are incurred in the process of a functioning government, running its various departments, subsidies, providing services to the citizens and more.

Direct and Indirect Taxes
Direct taxes are the types of taxes that are paid directly by an individual or organization on their income or profits generated within a financial year. The most relevant direct tax laws in discussion are income tax and corporate tax.

Indirect taxes, on the other hand, are types of taxes that are levied on goods and services. These are paid by the consumer only when they buy a product or avail a service. These indirect tax laws include Goods and Services Tax (GST), Value Added Tax (VAT) and excise duty.

Long Term Capital Gains (LTCG) Tax
The LTCG tax is a type of tax law levied on the profit generated by the sale of an asset – such as property or equity – held for a long period of time. The exact period of time for the asset in question is currently variable. This year in particular, with the Budget 2020, there are expected to be certain major changes regarding LTCG taxes in the country.

Revenue Deficit
The Union Budget of a country also helps shed light on its revenue deficit. It is the difference between the government’s total revenue expenditure and its revenue receipts. Revenue Deficit arises in case the revenue expenditure of the government exceeds its revenue receipts. To bridge this gap, the government may choose to raise taxes, reduce unnecessary expenditure, sell assets or make borrowings.

Tax Revenue
Tax revenue simply refers to the total income generated by the government through the means of taxation. This includes taxes on incomes, profits, goods and services, transfer of property and others. The percentage of tax revenue in the total GDP is a good indicator of how much control the government has over the country’s resources.

Non-Tax Revenue
On the other hand, non-tax revenue is the type of income generated by the government through sources other than taxation. These typically include interest on loans provided by the government, dividends and profits from its profit making enterprises and money earned by its various services, such as medical, police and defence facilities.

Fiscal Policy
Most importantly, a fiscal policy is the means through which the government controls  its revenue collection and expenditure, and influences the economy at large. It is through fiscal policies that the government determines how much money it should be making through the system and how much it should spend on economic activities, to support the economy.