Ministry of Finance is responsible for matters such as taxation, financial institutions, union budget, etc. It is also the cadre controlling authority of Indian Revenue Service, and Indian Economic Service.
Departments and Associated Organisations
The Ministry of Finance comprises of five departments:
- Department of Economic Affairs (DEA)
- Department of Expenditure
- Department of Revenue
- Department of Disinvestment
- Department of Financial Services (DFS)
Department of Economic Affairs
Department of Economic Affairs (DEA) is responsible for formulation and monitoring of macroeconomic policies, and fiscal policy of the government. It also prepares the annual financial statement of the government – The Budget. It administers the Small Savings Schemes, and also administered the erstwhile Foreign Investment Promotion Board (FIPB) (now abolished).
Department of Expenditure
Department of Expenditure is the nodal department for overseeing the government expenditure (through Public Financial Management System). It is also involved in pre-sanction appraisal of government schemes, and implementation of recommendations of the Finance Commission and Central Pay Commission.
PFMS – Public Financial Management System is a system to track and monitor the flow of funds, to the implementing agencies for various government programmes, in real-time. It is also used for direct benefit transfer (DBT) payments.
The Controller General of Accounts (CGA) is the principal accounting and reporting agency of the government of India. It heads the Indian Civil Accounts Service (ICAS), a Group-A central civil service.
Department of Revenue
Department of Revenue exercises control in matters relating to direct and indirect union taxes through two statutory boards (CBDT and CBIC) constituted under the Central Board of Revenue Act 1963.
CBDT – Central Board of Direct Taxes is responsible for administration of all direct taxes of the union government. It implements the Income tax Act 1961 through the Income Tax Department. Earlier, CBDT was also responsible for the administration of wealth tax, but wealth tax was abolished in 2016 with the repealing of the Wealth tax Act 1957. The wealth tax was replaced with surcharge income tax of 2 percent on super rich with taxable income over rupees 2 crore annually.
CBIC – Central Board of Indirect Taxes and Customs is responsible for the administration of indirect taxes. It oversees the implementation of the Goods and Services Tax (GST). CBIC was earlier called CBEC – Central Board of Excise and Customs.
Directorate General of Safeguards (DGS) implements Safeguard Provisions and Safeguard Duty Rules under Customs Tariff Act 1975 to protect domestic industry. It is an investigative agency, and also supports the National Anti-profiteering Authority (NAA) in implementing the anti-profiteering measures under GST.
Enforcement Directorate is the law enforcement and economic intelligence agency under Department of Revenue, Ministry of Finance. It enforces two key laws:
- Foreign Exchange Management Act (FEMA) – a civil law.
- Prevention of Money Laundering Act (PMLA) – a criminal law.
Department of Financial Services (DFS)
Department of Financial Services is responsible for overseeing the functioning of and providing support to the public sector banks, financial institutions, insurance companies and the National Pension System. It also oversees several key programmes of the government including the flagship Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Suraksha Bima Yojana (PMSBY).
Pension Fund Regulatory and Development Authority (PFRDA), established in 2003, is the statutory regulatory body for the pension sector.
Department of Investment and Public Asset Management – DIPAM
Department of Investment and Public Asset Management (DIPAM), formerly Department of Disinvestment, manages the central government’s investments in equity, including disinvestment of equity in central Public Sector Undertakings.
The National Investment Fund (NIF), constituted in 2005, receives the disinvestment proceeds and invests them to generate earnings, which are then used for welfare schemes and other approved purposes. The fund is a part of the Public Account of India.
Schemes and Initiatives:
Welfare schemes overseen by the Department of Financial Services (DFS):
- Pradhan Mantri Jan Dhan Yojana (PMJDY) – National Mission on Financial Inclusion – aims to promote financial inclusion of all households in the country by providing them access to banking facilities with at least one basic bank account to every household.
- Pradhan Mantri Vaya Vandana Yojana (PMVVY) – is a social security during scheme for the senior citizens. It protects the elderly persons against a future fall in their interest income due to uncertain market conditions, by providing them assured returns of 8% per annum, payable monthly, along with a monthly pension the value of which depends on the initial lumpsum investment of the subscriber of the scheme. Minimum entry age for the scheme is 60 years, and the scheme is implemented through Life Insurance Corporation (LIC) of India.
- Atal Pension Yojana is a pension scheme targeted at the unorganised sector workers. Minimum contribution period under the scheme is 20 years, hence the subscribers’ age should be between 18 to 40 years.
- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
- Pradhan Mantri Suraksha Bima Yojana (PMSBY)
Financial Stability and Development Council (FSDC) is an autonomous body for inter-regulatory coordination among financial market regulators. It is chaired by the Finance Minister, and its other members include the Governor of RBI, chairmans of SEBI, IRDA, PFRDA, IBBI, etc.
National Payments Corporation of India (NPCI) is an umbrella organisation (company) for all retail payments system in India – It offers various e-services and payment products such as UPI, BHIM, Rupay card, IMPS.
Subhash Garg Committee 2018 set up by Ministry of Finance- on Fintech and flexible regulations for promoting Financial Inclusion.
SWIFT – Customs Single Window Interface for Facilitating Trade – is an initiative of Ministry of Finance for promoting easy compliance for imports.
SWIFT – Society for Worldwide Interbank Financial Telecommunication – is a network for financial institutions, headquartered in Belgium.
Financial Sector Legislative Reforms Commission (FSLRC) 2011 report