Types of Budget in India: A Quick and Perfect Guide in 2024 {Each and Every Details}

Definition:

A Budget is an estimates of expected income and expenses over a specific period. it can be prepared for a month, quarter, or year. The purpose of a budget is to allocate funds effectively, control spending, and ensure financial stability. The Two components of a budget play an important role to define the types of budget in India. First is Receipt and Second is Expenditure. In This Article we will see the types of budget in India and its impact. Here is the image which shows the Types of Budget in India.

Types of Budget in India

There are mainly three types of budget, Details are:

Surplus budget= Receitps> Expenditure

Balance Budget= Recepts= Expenditure

Deficit Budget= Expenditure>Receipts

Types of Budget in India

Note: Now a days deficit budget has become more common.

Budgeting Methods

Every Organization has different goals, revenue options, objects on expenditure. On the Basis of institution need, There are 03 types of budget which are most Common. Details are:

1-Incremental:    Where we use previous year’s budget as a baseline, which adjust by incremental amounts. Mostly uses in educational institutions, governments, and large organizations, Where income and expenses increases each year. Ex- Employee Salaries that grow Year on Year as part of standard raises. Taking last year’s salaries as a baseline and adding a small incremental percentage every year is perhaps the most common example of incremental budget.

2-Zero Base Budgeting:    Every Expense Category starts from zero. It emphasizes allocating funds based on current needs and priorities. approach for re-evaluating every detail and decision. Mostly uses by individuals and families.

3-Value Based Budgeting:  Ensures that money is spent in a way that aligns with one’s priorities and provides a sense of fulfillment. This type of budget uses by the companies who aim something in specific time span.

Know About budget through Wikipedia

Types of budget in india
Types of budget in india

What is the Use of Budget? Types of Budget in India

For Personal Finance A budget helps individuals manage their money by tracking income sources, such as salary or investments, and allocating funds for various expenses like rent, mortgage payments, utilities, groceries, transportation, entertainment, savings, and debt repayment.

For Businesses– A budget serves as a roadmap for financial management. It helps in determining the financial resources needed to achieve specific goals, estimating revenue streams, and allocating funds to different departments or projects. Business budgets often include categories such as sales, marketing, operations, research and development, human resources, and capital expenditures.

Budgets can be flexible or strict, depending on the financial situation and goals of the individual or organization. They can be adjusted as circumstances change or used as a benchmark for evaluating financial performance against the planned targets. Effective budgeting is important for maintaining financial health, making informed financial decisions, and working towards long-term financial objectives.

Creating A Budget Involves Below Steps:

  1. Calculate your Income: Calculating the total income from all sources such as salary, investment and side jobs.
  2. Tracking Expenses: Tracking the Spending to find where is money is being spent. This helps to finding areas where you can cut back your expenses.
  3. Set Financial Goals: Establish short term and long term financial aims, such as emergency savings, debt repayment or vacation saving. This will help to guide your budgeting decisions.
  4. Allocate Funds: Prioritize your expenses and allocate funds to different categories, such as housing, utilities, transportation, groceries, debt repayment, savings, and entertainment. your income must covers all necessary expenses.
  5. Reduce Unnecessary Expenses: Put the Cap on unnecessary spending such as excess entertainment, dining out.
  6. Monitor and Adjust: Regularly reviewing and tracking budget spending. stay on track with your financial goals.
  7. Save and Plan for the Future: Allocate a portion of your income for savings and investments for future aspects such as retirement, education, marriage etc. or other long-term goals.

FAQ (Frequently Asked Questions) on Types of budget in India

Why are budgets important?

Whether it is corporate, personal, or government organization, every unit requires planning to fulfill  short-term or long-term goals. Calculating revenue and expenditure helps track overspending and depleted emergency funds.

How is a budget prepared?

First needs to define the goal. The next step is to collect past and and present data. Then, revenue and expenses are predicted for the future purpose.

What is 3 Type of Budget in India?

Surplus Budget, Balanced Budget and Deficit Budget

Who Prepared First Budget of India?

James Wilson was First introduced budget on 7th April, 1860. After Independence Shanmukham Chetty Presented first budget on 26, November, 1947.

What is the “50 30 20 budget rule”?

Spending 50% of earnings (after-tax) on basic necessities. spending of 30% on leisure and 20% on savings.

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