• The Lok Sabha passed the Finance Bill 2024 after the government relaxed the just-introduced new capital gains tax on real estate, allowing taxpayers an option to switch to a new lower tax rate or stay with the old regime that had higher rate with indexation benefit.

• Finance Minister Nirmala Sitharaman, who in her Budget for 2024-25 proposed to lower the long-term capital gains (LTCG) tax on real estate to 12.5 per cent from 20 per cent but without the indexation benefit, moved an amendment to the Bill to give the option. 

• Indexation benefit allows taxpayers to arrive at the cost price of the property after adjusting for inflation.

• The amendment came after the new provision was criticised for raising tax incidence and disincentivising investments in the real estate.

What is the Finance Bill?

• Commonly, any Bill that relates to revenue or expenditure can be thought of as a Financial Bill. However, the term Financial Bill has been used in a technical sense in the Indian Constitution which makes it important to be understood clearly in relation to a Money Bill.

• Only those Financial Bills can be Money Bills which bear the certificate of the Speaker of the Lok Sabha to that effect. 

• Financial Bills that do not receive the certificate of the Speaker can be of two types, as have been dealt with under Article 117 of the Indian Constitution:

i) First Class [Financial Bills under Article 117 (1)]: Bills that contain any of the matters specified in Article 110 but do not contain solely those matters.

ii) Second Class [Financial Bills under Article 117(3)]: Any ordinary Bill that contains provisions involving expenditure from the Consolidated Fund of India.

What is a Money Bill?

Under article 110(1) of the Constitution, a Bill is deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely:

a) The imposition, abolition, remission, alteration or regulation of any tax.

b) The regulation of the borrowing of money or the giving of any guarantee by the government of India, or the amendment of the law with respect to any financial obligations undertaken or to be undertaken by the government of India.

c) The custody of the Consolidated Fund or the Contingency Fund of India, the payment of moneys into or the withdrawal of moneys from any such fund.

d) The appropriation of moneys out of the Consolidated Fund of India; The declaring of any expenditure to be expenditure charged on the Consolidated Fund of India or the increasing of the amount of any such expenditure.

e) The receipt of money on account of the Consolidated Fund of India or the public account of India or the custody or issue of such money or the audit of the accounts of the Union or of a State; or

f) Any matter incidental to any of the matters specified in sub-clauses (a) to (f).

A Bill is not deemed to be Money Bill by reason only that it provides for:

• The imposition of fines or other pecuniary penalties.

• The demand or payment of fees for licenses or fees for services rendered.

• The imposition, abolition, remission, alteration or regulation of any tax by any local authority or body for local purposes.

Procedure:

• A Money Bill can be introduced in the Lok Sabha only.

• It can only be introduced on the prior recommendation of the President.

• The Rajya Sabha cannot make any amendments to it or reject it, but can give its recommendations.

• Rajya Sabha has to return the Bill to the Lok Sabha in 14 days with or without recommendation.

• The Lok Sabha may or may not accept recommendations. 

• If after 14 days, the Bill is not returned to the Lok Sabha, it is deemed to have been passed by both the houses at the expiration of 14 days. 

• Hence, the power of the Rajya Sabha with respect to Money Bills is not co-equal with the Lok Sabha as is the case with ordinary Bills. 

• It is merely consultative. There is no chance of any disagreement between the two houses in regard to Money Bills. The President cannot return a Money Bill for reconsideration. Furthermore, the defeat of its motion to pass a Money Bill in the Lok Sabha leads to the resignation of the government.

• Furthermore, Constitution Amendment Bills cannot be treated as Money Bill, even if all its provisions attract article 110(1). 

• This is because such amendments are governed by article 368 which overrides the provisions regarding Money Bills.

Comparison between Money Bills and Financial Bills

• While a Money Bill deals solely with matters specified in article 110(1) (a) to (g) of the Constitution or incidental matters, a Financial Bill does not exclusively deal with all or any of the matters specified in the said article that is to say it contains some other provisions also.

• Financial Bills of the first class, like Money Bills, can be introduced only in Lok Sabha on the recommendation of the President. However, other restrictions in regard to Money Bills do not apply to this category of Bills.  Financial Bill under article 117(1) of the Constitution can be referred to a Joint Committee of the Houses.

• Financial Bills of the second class, i.e. those under article 117 (3) of the Constitution can be introduced in either House of Parliament like any other ordinary Bill. However, recommendation of the President is essential for consideration of these Bills by either House and unless such recommendation is received, neither House can pass the Bill. However, the Bill may be introduced without President’s recommendation, but in such a case its consideration cannot take place.

(The author is a trainer for Civil Services aspirants.)