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According to Article 114 of the Indian constitution, no money can be withdrawn from the Consolidated Fund of India to meet specified expenditure except under an appropriation made by Law. Similarly, State (sub-national) Governments can also draw from their Consolidated Funds only after an appropriation act is passed. Every year, after budgetary estimates are approved, an Appropriation Bill is passed by the Parliament/state legislature and then it is presented to the President/Governor. After the assent by the President/governor to the bill, it becomes an Act. However, if during the course of the financial year, the funds so appropriated are found to be insufficient, the Constitution provides for seeking approval from the Parliament or State Legislature for supplementary grants.

Appropriation Accounts present the total amount of funds (original and supplementary) authorised by the Parliament/State legislature in the budget vis-a-vis the actual expenditure incurred against each head of expenditure. The Office of the Comptroller and Auditor General of India reports to the Union and State Legislatures any discrepancies that occur between the amounts appropriated for a particular head of expenditure and what was actually spent at the end of the financial year. These reports provide an indication of unrealistic budget estimates made by various departments. Any expenditure in excess of what was approved requires regularization by the Parliament/State Legislature.

Some expenditure of Government (e.g. public debt repayments, expenditure incurred on the Judiciary etc.) is not voted by the Legislature and such expenditure is ‘Charged’ on Consolidated Fund under Article 112 (3) of the Constitution and is called Charged Appropriation.

All other expenditure is required under Article 113 (2) of the Constitution to be voted by the Legislature and is called voted grant.

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