Money Bill vs Finance Bill: What the New Income Tax Bill Means for India’s Budget

As the parliamentary session unfolds, various bills are presented for discussion, each following a distinct process to become an act. Some bills require approval solely from the Lok Sabha (the lower house), while others must also pass through the Rajya Sabha (the upper house) to gain enactment.

With the recent announcement in the Budget 2025, stating that no income tax will be levied on incomes up to ₹12 lakh, questions arise on how this proposal is introduced in Parliament. What category does it fall under, and what rules govern its passage? Let’s explore the specifics of this significant change and the legal framework that governs it.

Understanding the New Income Tax Bill: Money or Finance Bill?

The Finance Bill and Money Bill are both integral to India’s financial legislative framework, though they serve distinct roles.

The Finance Bill is primarily focused on tax-related proposals presented in the Budget. It covers changes to income tax rates, the introduction of new surcharges, or adjustments to customs duties. The Union Budget is classified as a ‘Finance Bill’

On the other hand, a Money Bill has a broader scope and includes provisions on various financial matters such as government borrowing, expenditure from the Consolidated Fund of India, and other critical fiscal operations.

What Happens When a Money Bill Is Introduced?

Money Bill can only be introduced in the Lok Sabha and must be approved by the Rajya Sabha within 14 days. The Rajya Sabha can make non-binding recommendations for amendments.

However, the final decision lies with the Lok Sabha. The key distinction between a Money Bill and a Finance Bill is that the latter allows for the involvement of the Rajya Sabha, whereas the former bypasses it, giving more authority to the Lok Sabha.

The Speaker of the Lok Sabha certifies a bill as a money bill before it is sent to the Rajya Sabha for recommendations.

Scope of Money Bill: Including Incidental Provisions and Welfare Schemes

One crucial aspect of the Money Bill is their ability to include provisions that are incidental to the primary financial matters outlined in the bill. While Article 110 does not explicitly define the term “incidental,” it offers flexibility for addressing related issues.

Money Bill often encompass provisions for funding welfare schemes that improve access to essential services like food, housing, or rural employment. A prominent example of the broad scope of Money Bill can be seen in the enactment of the Aadhaar Act in 2016.

Although it was a subject of debate, the bill was certified as a Money Bill by the Speaker of the Lok Sabha, meaning it did not require approval from the Rajya Sabha. This illustrates how the scope of a Money Bill can extend to a wide array of provisions that impact public welfare.

Conclusion

In conclusion, the introduction of the new Income Tax Bill in Budget 2025 is a significant step in India’s fiscal policy, offering relief to taxpayers with no tax on incomes up to ₹12 lakh. While this proposal falls under the Finance Bill, it’s important to understand the distinction between the Finance Bill and the Money Bill, especially in terms of their passage through Parliament.

Money Bill, with their broader scope, can include incidental provisions and welfare schemes that have a far-reaching impact on the nation. Whether it’s a tax change or a welfare initiative, these legislative tools shape the country’s economic and social landscape. As the process moves forward, it will be interesting to see how the bill is received and debated within Parliament.

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