Budget and Taxes

In the 21st century, we are more than ever before aware of the scarcity of resources. Assets, especially in terms of liquid money, tend to be exhausted sooner than we want them to be. Often, we don’t even have a clear idea at the end of the month where all our money has gone. Budget is an effective way of maintaining an account of your income and expenditure, and therefore, managing your money efficiently. A budget is an essential tool used by the government, corporations and many other individuals to pre-plan their expenditure and spend money wisely.  Article 112 of the Indian Constitution describes the Budget as a general account statement and the “Annual Financial Statement” is the country’s economy’s main budget document of a certain financial year. 

A budget is a tool that focuses on the revenue an organisation has generated (annually) and all the future expenses of the organisation. It is planning an estimate of the costs of products and services required to be purchased to run the organisation, and how much of the revenue is to be allocated for each of them. Thus, research and planning are essential to effective budget management. The Indian Budget is usually presented with a budget speech that summarises the features of the budget and is highlighted by The Finance Minister. 

Preparing a budget for the expenses beforehand requires skillfully prioritising the sectors or areas that you want to or need to spend more on, as well as, restricting the amount of expenditure to a minimum in areas that you don’t need to spend much. 

There are many types of budgets. A surplus budget is a budget where the expenditure is less than the revenue generated, hence, making a profit for the entrepreneur. On the other hand, when the revenue is equal to the expense, it is called a balanced budget. And if the amount of money spent is more than the revenue, we call it a deficit budget. 

Static Budget and Flexible Budget

There are two further classifications of budget. Both static budgets and flexible budgets are useful tools for any organisation. 

We can easily assume the nature of these two types of budgets by their names. The static budget stays fixed for the entire period the budget has been prepared for. In the meantime, even if changes occur, the figures calculated for the budget remain the same.

On the other hand, the organisation prepares another budget which may change with changes in various factors over the budgeting period. The amounts allocated to particular areas are subject to various changes in the market in this budget. Hence it is called a flexible budget. 

Through effective budget management, using both types of budgets efficiently the organisation moves towards making profits. 

Budget Planning

Planning a budget is a skilful task, the initial rough budget made before starting a project often seems to face many hurdles during the project. With time and experience, one becomes more and more efficient with the job. 

A budget planner helps you skillfully allocate your resources in different areas for spending them. One example will be prioritising your needs over your wants and then deciding the amount you want to save for the future. Thus, with the help of a budget planner, you can spend your money without unknowingly wasting them. Many budget planners are available online these days.  

Performance Budget

A performance budget is a type of budget that is specifically result-oriented. In other words, it is a type of budget where the inputs of resources allocated to a particular unit of an organisation have a particular aim and reaching the targeted aim brings certain perks or benefits. Performance budgeting is often done by government bodies to present a clear picture of the tasks done with the taxpayers’ money. Allocation of money for motivating employees in an organisation for better performance is also done through performance budgeting. 

Both government and non-government organisations use performance budgets so that the taxpayers and donors can have a visible account of where their money is being spent and encourage them to further donations. In the public sector, providing the public with the knowledge of where the taxpayers’ money is allocated prevents local authorities from misusing public money. 

Conclusion

Preparing a budget requires proper planning for skilful allocations of resources in areas according to your priority and thus, help you spend and save money efficiently. However, a determination is necessary for effectively executing the plan. A good budget can help to save money only if aided by self-control.