Public Account of India (Article 266)

At a Glance

• What it is The account for public money other than that credited to the Consolidated Fund
• Article Article 266(2)
• Contents Provident fund, judicial, savings bank and departmental deposits, remittances
• Operation By executive action; no parliamentary appropriation
• Exam link UPSC Prelims, Polity: Funds with Government of India

Where Does It Fit?

This is the third topic of the category on Funds with the Government of India. Not all money in the hands of the government belongs to it. Some is held on behalf of others, and that money goes to the Public Account.

What Is Credited

All other public money, other than that which is credited to the Consolidated Fund of India, received by or on behalf of the Government of India is credited to the Public Account of India. This includes provident fund deposits, judicial deposits, savings bank deposits, departmental deposits, remittances and so on. Much of this money is held by the Government as a banker or trustee and has to be paid back to the depositors.

How It Is Operated

The Public Account is operated by executive action, that is, payments from this account can be made without parliamentary appropriation. Such payments are mostly in the nature of banking transactions. This is a major contrast with the Consolidated Fund, from which no money can be drawn without a law. Even so, the disbursements are subject to audit: the CAG audits all transactions relating to the Contingency Fund of India and the Public Account of India.

Why Parliament Does Not Vote on It

Since the money in the Public Account is not the government’s own revenue but a deposit, voting on it would amount to asking Parliament to approve the withdrawal of the depositors’ own money. The government acts as a banker and returns the money when it is demanded. This explains why such withdrawals are treated as banking transactions and not as government spending that needs a grant.

The Public Account has an equivalent at the state level, held by the state government. Neither the Union nor the state Public Account forms part of the Consolidated Fund, and neither is subject to the annual vote on demands for grants.

Audit and Accountability

The Comptroller and Auditor General is the guardian of the public purse. Among his duties laid down by the Constitution and by the CAG’s (Duties, Powers and Conditions of Service) Act, 1971, he audits all expenditure from the Consolidated Fund of India, of each state and of each Union territory having a Legislative Assembly. He also audits all transactions relating to the Contingency Fund and the Public Account of India, as well as the contingency fund and public account of each state. The audit reports are laid before Parliament and examined by the Public Accounts Committee. In this way, even though the Public Account is outside parliamentary appropriation, it is not outside parliamentary scrutiny.

Reading the Fund Correctly in Exams

Prelims statements on this topic usually test four ideas. First, that the Public Account is a separate account from the Consolidated Fund, though both come under Article 266. Second, that money in it belongs mostly to depositors, so the government is a banker and not an owner. Third, that payments from it need no parliamentary appropriation, because they are returns of deposits, not government spending. Fourth, that the absence of appropriation does not mean the absence of audit, since the CAG audits it and the Public Accounts Committee examines the reports. A statement saying that Parliament votes on the Public Account is wrong, and so is a statement that the Public Account is part of the Consolidated Fund.

Comparison with the Other Two Funds

Why Is This Topic Important?

• Funds trio The three funds are asked as a set
• Banking nature Why it escapes appropriation
• Audit link The CAG audits it

What Came Next?

The next topic covers the distribution of revenues between the Union and the states.

Key People and Terms

• Public Account Account for deposits and trust money
• Provident fund A major component
• Judicial deposits Money deposited in courts
• Remittances Money transfers between accounts
• Departmental deposits Deposits by departments

Exam Corner

Mains Angle

Questions on this topic usually ask why some funds escape parliamentary vote. Use these points to add depth.

• Banker role Government holds deposits and returns them
• Control Audit by the CAG instead of vote
• Distinction Between receipts of the state and trust money