Q. With reference to Finance Bill and Money Bill in the Indian Parliament, consider the following statements:

  1. When the Lok Sabha transmits Finance Bill to the Rajya Sabha, it can amend or reject the Bill.
  2. When the Lok Sabha transmits Money Bill to the Rajya Sabha, it cannot amend or reject the Bill, it can only make recommendations.
  3. In the case of disagreement between the Lok Sabha and the Rajya Sabha, there is no joint sitting for Money Bill, but a joint sitting becomes necessary for Finance Bill.

How many of the above statements are correct?

  • Only one
  • Only two
  • All three
  • None

Answer: (a) Only one

Notes:
  • In a general sense, any Bill that relates to revenue or expenditure is a financial Bill.
    • A money Bill is also a specific type of financial Bill, that must deal only with matters specified in Article 110 (1) (a) to (g).
    • Financial bills are responsible for the fiscal matters such as government spending or revenue.
      • It specifies the amount of money to be spent by the government and the way it is to be spent.
      • More specifically, Article 117 of the Constitution deals with the special provisions relating to financial Bills.
  • A Finance Bill is a Money Bill as defined in Article 110 of the Constitution. Whereas a Financial Bill is an ordinary bill as it apart from dealing with money matters also deals with non-money matters.
    • As the Finanace Bill is a type of money bill,  It (like the money bills) cannot be either rejected or amended by the Rajya Sabha.
  • A Finance Bill deals with the proposals of the government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill. So, it is introduced as a part of the Annual Financial Statement (i.e. Budget) under Article 112.
    • The Finance Bill is accompanied by a Memorandum containing explanations of the provisions included in it. The Finance Bill can be introduced only in Lok Sabha.
      • However, the Rajya Sabha can only recommend amendments in the Bill. The bill has to be passed by the Parliament within 75 days of its introduction.
  • As a finance bill is a money bill so no joint sitting of the two houses is allowed with regard to a finance bill under Article 108.
Difference Between Money Bills and Financial Bills
  • While all Money Bills are Financial Bills, all Financial Bills are not Money Bills.
    • E.g., the Financial Bill which only contains provisions related to tax proposals would be a Money Bill. 
    • However, a Bill that contains some provisions related to taxation or expenditure, but also covers other matters would be considered as a Financial Bill. 
    • The Compensatory Afforestation Fund Bill, 2015, which establishes funds under the Public Account of India and states, was introduced as a Financial Bill.
  • The procedure for the passage of the two bills varies significantly.
    • The Rajya Sabha has no power to reject or amend a Money Bill.
      • After being passed by the Lok Sabha, money Bills are sent to the Rajya Sabha for its recommendations.
      • Within 14 days, the Upper House must submit the Bill back to the Lower House with its non-binding recommendations.
      • If the Lok Sabha rejects the recommendations, the Bill is deemed to have passed by both Houses in the form in which it was passed by the Lok Sabha without the recommendations of the Rajya Sabha.
      • Even if the Rajya Sabha doesn’t respond with its recommendations within 14 days, the same consequences would follow.
    • However, a Financial Bill must be passed by both Houses of Parliament.
  • While an ordinary Bill can originate in either house, a money Bill can only be introduced in the Lok Sabha, as laid down in Article 117 (1).
  • Additionally, no one can introduce or move money Bills in the Lok Sabha, except on the President’s recommendation.
  • Amendments relating to the reduction or abolition of any tax are exempt from the requirement of the President’s recommendation.
  • The two prerequisites for any financial Bill to become a money Bill are that
    • It must only be introduced in the Lok Sabha and not the Rajya Sabha.
    • These bills can only be introduced on the President’s recommendation.