The independent India post-colonial British rule has witnessed budgets presented by the Finance Ministers of the Central Government annually before the commencement of financial year (April 1) on a regular basis.

Ahead of the elections which is slated during May 2019, the central government is all geared up to announce its interim budget most likely on February 1, 2019.

Let's take a sneak peek into what an interim budget is and the need for it at the moment.

What is a Budget?

The term budget refers to the financial plan for a defined period of time mostly one year. It refers to the sum of money allocated for a particular reason and the budget gives a clear picture of a summary of calculated expenditures and proposals for how to meet the same. The budget may also include surplus which provides additional money for use which can be used at a future point of time or may involve a deficit wherein the expenses exceed income.

The Union Budget is presented in the Lok Sabha by the Finance Minister of the country on February 1. Starting from 2017, the Rail Budget which was earlier presented separately prior to the financial budget was merged with the Union Budget and announced on the same day on which Union Budget is made.

After understanding the meaning of budget, let's understand about the interim budget.

What is an Interim Budget?

An Interim Budget is a set of account which includes both receipts and expenses. It gives a complete financial statement which is similar to that of the full year budget. The interim budget is introduced by those governments in India which is likely to face polls in the near future and it will allow the elected governments to present the full fiscal budget post elections once it assumes office.

It is a budget presented by the outgoing government for a temporary period of time (transition time between the two governments - the outgoing one and the incoming new government) so that both the governments can function smoothly.

It generally estimates the expenditures incurred for a particular time frame and the same shall be sanctioned by the parliament.

Though the interim budget gives the government to introduce new taxation policies, major reforms and so on, most of the governments in the country have evaded so far to make major decisions in terms of income tax laws normally during an election year.

The current Central Government in India which will face polls during May 2019, will announce interim budget during February 1, 2019.

Need for an Interim Budget

Usually, the budget for a fiscal year, which is approved by the Parliament, gives the governments, its spending rights only till the end of the fiscal year March 31. If the government is not in a position to provide full-year budget before the end of the financial year (March 31), then it will be requiring a parliamentary authority for incurring expenditure during a fiscal year until the full year's budget is presented in the Parliament.

In the interim budget, the parliament passes a vote - on - account which allows the current government to meet the expenses related to the administration until the newly elected government considers and passes the budget for the full year. In case if the general elections are around the corner, then the interim budget passed by the government will usually hold good for four months.

Interim Budget Vs Regular Union Budget

In an interim budget, the vote - on - account will seek the Parliament's permission for incurring expenses for a particular period of time during a financial year. In an interim budget, estimates will be presented for the fiscal year as the case may be with the regular budget by the outgoing government. However, it is at the discretion of the new incoming government which has full freedom to either make necessary changes to the estimates or to change it completely while presenting its final budget.

One has to wait and watch as to what is in store during the interim budget session which will take place within some days from now.