Consolidated Fund of India (Article 266)

At a Glance

• What it is The main fund to which all government receipts are credited and from which payments are made
• Article Article 266(1)
• Withdrawal Only under a law of Parliament (appropriation)
• Charged items Salaries of the President, judges, CAG and similar, not voted by Parliament
• Exam link UPSC Prelims, Polity: Funds with Government of India

Where Does It Fit?

This is the first topic of the category on Funds with the Government of India. The Constitution provides for three kinds of funds for the Central government: the Consolidated Fund of India (Article 266), the Public Account of India (Article 266) and the Contingency Fund of India (Article 267).

What Goes Into the Fund

The Consolidated Fund of India is a fund to which all receipts are credited and all payments are debited. It is made of three kinds of money: all revenues received by the Government of India; all loans raised by the Government by the issue of treasury bills, loans or ways and means advances; and all money received by the Government in repayment of loans. All legally authorised payments on behalf of the Government of India are made out of this fund. No money out of this fund can be appropriated (issued or drawn) except in accordance with a parliamentary law.

Constitutional Controls on Withdrawal

Several provisions guard the fund. No money shall be withdrawn from the Consolidated Fund of India except under appropriation made by law (Article 114). No demand for a grant shall be made except on the recommendation of the President (Article 113). No tax shall be levied or collected except by authority of law (Article 265). The President causes to be laid before Parliament a statement of estimated receipts and expenditure for every financial year (Article 112), and the estimates must show separately the expenditure charged on the Consolidated Fund and the expenditure made from it. The Lok Sabha can approve, refuse or reduce a demand but cannot increase it, and a vote on account can be made in advance for a part of the year pending the completion of voting and the appropriation bill (Article 116).

Charged and Voted Expenditure

The budget consists of two types of expenditure: the expenditure charged upon the Consolidated Fund and the expenditure made from it. Charged expenditure is non-votable, that is, Parliament may discuss it but not vote on it. The other type has to be voted by Parliament. The charged list is:

1. Emoluments and allowances of the President and other expenditure relating to the office.
2. Salaries and allowances of the Chairman and Deputy Chairman of the Rajya Sabha and the Speaker and Deputy Speaker of the Lok Sabha.
3. Salaries, allowances and pensions of the judges of the Supreme Court.
4. Pensions of the judges of high courts.
5. Salary, allowances and pension of the Comptroller and Auditor General of India.
6. Salaries, allowances and pensions of the chairman and members of the Union Public Service Commission.
7. Administrative expenses of the Supreme Court, the office of the CAG and the UPSC, including the salaries, allowances and pensions of persons serving in these offices.
8. Debt charges for which the Government of India is liable, including interest, sinking fund and redemption charges.
9. Any sum required to satisfy any judgement, decree or award of any court or arbitral tribunal.
10. Any other expenditure declared by Parliament to be so charged.

Why Charging Matters

Charging an item on the fund protects the independence of the offices concerned, because their pay and expenses cannot be put to a vote in the annual budget. It also ensures that the Government’s debt obligations and court decrees are honoured every year. The Parliament can still discuss these items, so the fund remains under its eye even where it cannot vote.

The fund is the one through which Parliament exercises its power of the purse. Taxes shared with the states also come out of it, and grants to states under Article 275 are charged on it every year. The proceeds of certain duties levied within a state, such as stamp duties on cheques and insurance policies, do not form part of the fund but are assigned to that state, as do the net proceeds of taxes on inter-state sale and consignment of goods.

Why Is This Topic Important?

• Basis of financial control Parliament’s power of the purse operates through this fund
• List of charged items Commonly asked in Prelims
• Three-funds question Comparison with Public Account and Contingency Fund

What Came Next?

The next topic covers the Contingency Fund of India under Article 267.

Key People and Terms

• Appropriation Authorisation of withdrawal by law
• Charged expenditure Expenditure not voted by Parliament
• Vote on account Advance grant for part of the year
• Treasury bills Short-term government borrowing
• Ways and means advances Temporary advances to the government

Exam Corner

Mains Angle

Questions on this topic usually ask about parliamentary control over finance. Use these points to add depth.

• Power of the purse No withdrawal without a law
• Independence Charged items shield key offices
• Lok Sabha primacy Rajya Sabha cannot vote on demands for grants
• Limits Parliament can only reduce a demand, not increase it