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How the Union Budget is made, step by step

The Budget speech on 1 February is the visible end of a process that starts in late August and only finishes when Parliament passes two laws in March. Here is each step, what the Constitution requires, and which documents to read.

Chander Prakash

By Founder & Editor

7 min read

Illustrative cover: How the Union Budget is made, step by step
Illustration: Pointales

The Union Budget is the government’s annual plan for how much it expects to earn and spend in the financial year that runs from 1 April to 31 March. The Finance Minister’s speech on 1 February is only the midpoint. Preparation inside the Ministry of Finance starts about five months earlier, in late August, and the process ends only when Parliament has passed two laws, the Appropriation Act (permission to spend) and the Finance Act (the tax changes), before the new year begins.

What the Constitution requires

What the Constitution requires is an Annual Financial Statement under Article 112: a statement of the government’s estimated receipts and expenditure for the year, laid before both Houses of Parliament. It must show separately the spending “charged” on the Consolidated Fund of India, such as the President’s emoluments, judges’ salaries and interest on government debt, which Parliament can discuss but does not vote on.

The other articles set out the rest of the sequence:

  • Article 113: all other spending goes to the Lok Sabha as demands for grants. The Lok Sabha can approve a demand, reject it or reduce it, but cannot increase it, and no demand can be made except on the President’s recommendation.
  • Article 114: once the grants are voted, an Appropriation Bill authorises the withdrawal of money. No money can leave the Consolidated Fund except under such a law.
  • Article 115: supplementary, additional or excess grants when the year’s money proves insufficient.
  • Article 116: a vote on account, an advance grant for part of the year while the full process is pending.
  • Article 117: special rules for financial Bills, which also need the President’s recommendation.

The Finance Bill, which carries the tax proposals, is a money Bill under Article 110, the Ministry of Finance’s Key to Budget Documents notes. That limits the Rajya Sabha’s role. Under Article 109, it must return a money Bill within 14 days with recommendations, which the Lok Sabha may accept or reject. If it does not return the Bill in time, the Bill is deemed passed.

The annual cycle, step by step

  1. Budget circular (late August). The Department of Economic Affairs (DEA) asks every ministry for its numbers. The Budget Circular 2026-27 was dated 28 August 2025. For 2027-28, the circular was issued in late August 2026, asking ministries to enter data in the Union Budget Information System by 6 October 2026, ETV Bharat reported.
  2. Revised and budget estimates. Each ministry submits two sets of figures: revised estimates (RE) for the year already under way, and budget estimates (BE) for the next year. The current cycle covers RE 2026-27 and BE 2027-28.
  3. Pre-budget meetings (October–November). Officials review each ministry’s figures. For 2027-28, these meetings, chaired by the Secretary (Expenditure), start on 12 October 2026 and run until mid-November, after which the estimates are provisionally finalised, according to the same report.
  4. Pre-budget consultations. The Finance Minister meets outside groups. Before Budget 2026-27, Nirmala Sitharaman held 10 rounds with economists, farmer groups, MSMEs, capital markets, startups, manufacturing, financial services, IT, tourism and trade unions in November 2025.
  5. Halwa ceremony and lock-in (late January). A traditional ceremony at the Budget Press in North Block marks the start of the “lock-in”, during which officials drafting the Budget stay isolated until it is presented. For 2026-27 it was held on 27 January 2026.
  6. Economic Survey. Prepared by the DEA under the Chief Economic Adviser, it reviews the economy before the Budget. The 2025-26 Survey was tabled on 29 January 2026.
  7. Budget day (1 February). The Finance Minister presents the Annual Financial Statement, the demands for grants and the Finance Bill. Budget 2026-27 was presented on 1 February 2026.
  8. General discussion. Both Houses debate the Budget as a whole, without voting on individual demands.
  9. Standing committees. Parliament then breaks for a recess. The 24 departmentally related standing committees, each with 21 Lok Sabha and 10 Rajya Sabha members, examine the demands for grants of the ministries they cover. Their recommendations are not binding on the government, PRS Legislative Research notes.
  10. Demands for grants and the guillotine. The Lok Sabha debates a handful of ministries’ demands. On the last allotted day, the Speaker puts all remaining demands to a vote together, without discussion. This is the “guillotine”. On 18 March 2026, after discussing Railways and Agriculture, the Lok Sabha used it to approve over ₹53 lakh crore of spending for 2026-27, ETV Bharat reported.
  11. Appropriation Act and Finance Act (by 31 March). In 2026, Parliament completed both when the Rajya Sabha returned the Finance Bill and the Appropriation (No. 2) Bill on 27 March 2026.

Some tax changes cannot wait for the Finance Act. Under the Provisional Collection of Taxes Act, 2023, a declaration in the Bill can bring certain customs and excise changes into force immediately, but it lapses if the Bill is not enacted within 75 days of its introduction, PRS explains.

Why 1 February, and where the Railway Budget went

Until 2016, the Budget was presented on the last day of February, and Railways had a separate budget, a practice that began in 1924. On 21 September 2016, the Union Cabinet approved three changes, all from Budget 2017-18: merging the Railway Budget into the general Budget, moving presentation earlier, and ending the Plan and Non-Plan split.

The government’s reason for the earlier date was practical. Finishing Budget legislation before 31 March would let ministries spend from the first quarter of the year, and would remove the need for a vote on account in a normal year.

The 1 February date is a convention, not a rule. Budget 2027-28 is expected to follow it, but as of early October 2026 the date has not been formally announced.

The documents, and what each one is for

The Finance Ministry’s Key to Budget Documents 2026-27 lists what is tabled alongside the speech.

DocumentRequired byWhat it tells you
Budget speechConventionPolicy announcements and tax changes in plain words
Annual Financial StatementArticle 112Receipts and spending across the Consolidated Fund, Contingency Fund and Public Account
Demands for GrantsArticle 113Ministry-wise spending Parliament votes on; 102 demands in 2026-27
Finance BillArticle 110(1)(a)The legal text of tax changes
Memorandum explaining the Finance BillExplanatoryClause-by-clause explanation of the tax proposals
Macro-Economic Framework StatementFRBM Act, 2003The government’s assessment of growth prospects and its assumptions
Medium-Term Fiscal Policy cum Fiscal Policy Strategy StatementFRBM Act, 2003Rolling targets for the fiscal deficit, debt and other indicators as a share of GDP
Receipt Budget and Expenditure BudgetExplanatoryDetail on tax and non-tax receipts; scheme-wise spending
Budget at a GlanceExplanatoryHeadline totals and the revenue, fiscal and primary deficits

Because the FRBM targets are set as shares of GDP at market prices, a Budget’s deficit numbers are only as meaningful as the GDP estimate behind them. Our guide to reading India’s GDP numbers explains real and nominal GDP and why estimates get revised.

The Budget does not set GST rates; those come from the GST Council. Our explainer on how GST works for small businesses covers that system.

Interim budgets and votes on account

In a general election year, the timetable changes. In 2024, the outgoing government presented an interim budget on 1 February and sought a vote on account under Article 116, an advance grant to cover spending until a full budget could be passed. The new government presented the full Budget 2024-25 on 23 July 2024.

During the year, if money runs short, the government returns to Parliament with supplementary demands under Article 115.

The point: The Union Budget is a five-month administrative exercise followed by a two-month parliamentary one. Ministries’ estimates are built from late August, the speech comes on 1 February, and the Lok Sabha’s votes on demands for grants, the Appropriation Act and the Finance Act must be completed by 31 March. For the real detail, read the Demands for Grants and the FRBM statements, not just the speech. And watch the GDP numbers the targets are measured against.

Sources

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Chander Prakash

Chander Prakash Founder & Editor

Chander Prakash is the founder and editor of Pointales. He reviews every story before it is published and sets the publication's editorial standards, with a focus on clear, well-sourced explanations of business and technology.

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