GFR2017 0

PREFACE
1. General Financial Rules (GFRs) are a compilation of rules and orders of Government of India to be followed by
all while dealing with matters involving public finances. These rules and orders are treated as executive
instructions to be observed by all Departments and Organisations under the Government and specified Bodies
except otherwise provided for in these Rules.
2. General Financial Rules were issued for the first time in 1947 bringing together in one place all existing orders
and instructions pertaining to financial matters. These have subsequently been modified and issued as GFRs
1963 and GFRs 2005.
3. In the last few years, Government has made many innovative changes in the way it conducts its business. Reforms
in Government budgeting like removal of distinction in non-plan and plan expenditure, merger of Railway
Budget with General Budget, focusing on outcomes through an improved Outcome Budget document, all
needed to be reflected in the GFRs. Increased focus on Public Finance Management System(PFMS), reliance on
the Direct Benefit Transfer (DBT) Scheme to ensure efficient delivery of entitlements, introduction of new e-sites
like Central Public Procurement Portal, Government e-Marketing (GeM) Portal, Non-Tax Revenue Portal have
also necessitated revision of the existing GFRs to keep them in tune with the changing business environment. The
objective was to make the GFRs facilitate efficiency rather than create impediments in smooth and timely
implementation while following principles of accountability and procedures of financial discipline and
administrative due diligence. The Expenditure Management Commission set up in 2014 to recommend ways in
which efficiency of public expenditure could be increased has also made several recommendations especially
with respect to Autonomous Bodies. New rules on non-tax revenues, user charges, e-receipts portal have been
added in addition to the manner in which Autonomous Bodies are run.
4. The PAC in April 2015, Group of Secretaries in February 2016 and EMC in March 2016 has recommended
setting up a Task Force to review the GFRs so as to frame comprehensive rules to address the issues as highlighted
in the above para.
5. GFRs, 2017 have evolved as a result of wide consultations with Central Government Ministries and
Departments, some State Governments and other stakeholders at the Task Force stage and thereafter. The
Discussion Draft was also uploaded on the MoF’s website. Secretaries of each Department/ Ministry of
Government of India were asked to give their views for additions/ modifications, keeping in view their specific
requirements of their domain. Detailed deliberations were also carried out within the Ministry. C&AG’s
comments on the draft GFRs have also been taken into consideration.
6. The aim of any rule is to provide a framework within which an organization manages its business in a financially
prudent manner without compromising its flexibility to deal with varied situations. The GFRs 2005 have been very
comprehensively reviewed with the aim of promoting simplicity and transparency in the Government financial
system and procedures. It is expected that the new GFRs 2017 will enable an improved, efficient and effective
framework of fiscal management while providing the necessary flexibility to facilitate timely delivery of services.
7. Department of Expenditure would like to place on record the exceptional work done by the Task Force on Review
of GFRs, the office of the C&AG, the office of the CGA, Budget Division of Department of Economic Affairs, the
Ministries and Departments for their valuable inputs and its own officers for assiduously and meticulously
completing this vital and challenging exercise in a time bound manner.
(ASHOK LAVASA)
Finance Secretary &
Secretary(Expenditure)
Department of Expenditure
Ministry of Finance
North Block, New Delhi
Dated: 11th February, 2017
CONTENTS
GENERAL FINANCIAL RULES 2017
Ministry of Finance
TABLE OF CONTENTS
Chapter Name of the Chapter Page
No. No.
1 Introduction 9
2 General System of Financial Management 11
I. General Principles relating to expenditure and payment of money 12
II. Defalcation and losses 15
III.Submission of records & information 16
3 Budget formulation and implementation. 17
4 Government Accounts 25
5 Works 38
6 Procurement of Goods and Services 41
I. Procurement of Goods 41
II. Procurement of Services 54
7 Inventory Management 58
8 Contract Management 63
9 Grants-in-aid and Loans 67
10 Budgeting and Accounting for Externally Aided Projects 85
11 Government Guarantees 89
12 Miscellaneous Subjects 94
I. Establishment 94
II. Refund of revenue 96
III. Debt and misc. obligations of Govt. 97
IV. Security deposits 98
V. Transfer of land and buildings 99
VI. Charitable endowments and other trusts 99
VII. Local bodies 99
VIII. Maintenance of records 100
IX. Contingent and Miscellaneous Expenditure. 100
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Ministry of Finance
APPENDIX
Appendix Subject Page

No. No.
1 Instructions for regulating the Enforcement of 102
Responsibility for losses, etc.,
2 Procedure for the preparation of Detailed Estimates of Receipts 103
3 Instructions for the preparation of Detailed Estimates of 105
expenditure from the Consolidated Fund
4 Procedure for compilation of Detailed Demands for Grants 112
5 Procedure to be followed in connection with the Demands for 115
Supplementary Grants
6 The Contingency Fund of India Rules 117
7 Transfer of Land and Buildings between the Union and 120
State Governments
8 Charitable Endowments and other Trusts 122
9 Destruction of Office Records connected with Accounts. 135
10 Check against provision of funds 144
11 Formula for Price Variation Clause 145
12 Rates of Guarantee Fee 146
FORMS
Form Description Page
Serial No. No.
GFR 1 Application for an Additional Appropriation 147
GFR 2 Revenue Receipts 148
GFR 2 - A Estimates of foreign grants 149
GFR 2 - B Estimates of interest receipts and loan repayments 150
GFR 3 Liability Register 151
GFR 3 - A Liability Statement 153
GFR 4 Statement of proposals for pre-budget discussions 156
GFR 5 Register showing expenses by Heads of Account 158
GFR 6 Broadsheet for watching receipt of account from Disbursing Officers 159
GFR 7 Compilation Sheet 160
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Ministry of Finance
Form Description Page

Serial No. No.
GFR 8 Consolidated Accounts 161
GFR 9 Broadsheet for watching Receipt of the Returns from the Heads of 162
Departments under a Department of the Central Government
GFR 10 Report of Surplus, Obsolete and Unserviceable Stores for Disposal 163
GFR 11 Sale Account 164
GFR 12 - A Form of Utilization Certificate (Autonomous Bodies) 165
GFR 12 - B Form of Utilization Certificate (For Loans) 167
GFR 12 - C Form of Utilization Certificate (State Governments)) 168
GFR 13 Statement of aggregate balance of loan(s) outstanding as on 169
31st March and details of defaults
GFR 14 Form of Security Bond (Fidelity Bond Deposited as Security) 170
GFR 15 Form of Written Undertaking to be executed by an Undertaking/ 172
Corporation wholly owned by the Central Government at the
time of sanctioning of a loan.
GFR 16 Certificate of transfer of charge 173
GFR 16 - A Joining Report 175
GFR 17 Fidelity Guarantee Policy 176
GFR 18 Accession Register 179
GFR 19 Notice to borrower about the due date for repayment of 180
loan and interest thereon
GFR 20 Register of Policy Holder 181
GFR 21 Register of Grants to be maintained by the sanctioning Authority. 182
GFR 22 Register of Fixed Assets 183
GFR 23 Stock Register of consumables such as Stationery, Chemicals, 184
Spare parts etc.
GFR 24 Register of Assets of Historical /Artistic value. 185
GFR 25 Government Guarantees. 186
GFR 26 Furnishing of data regarding Guarantees to Ministry of Finance. 187
CONCORDANCE TABLE 188
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INTRODUCTION
Rule 1 Short Title and Commencement: These responsibility of controlling the
rules may be called General Financial Rules, incurring of expenditure and/or the
2017 and they shall come into force at once collection of revenue. The term shall
and shall be applicable to all Central include a Head of Department and
Government Ministries/Departments, also an Administrator;
attached and subordinate bodies. The (xi) “Department of the Government of
provisions contained in GFRs are deemed to India” means any of the Ministries,
be applicable to Autonomous Bodies except Departments, Secretariats and Offices
to the extent the bye-laws of an Autonomous as notified from time to time and listed
Body provides for separate Financial Rules in the First Schedule to the
which have been approved by the Government of India (Allocation of
Government. Business Rules);
Rule 2 Definition : In these rules, unless the context (xii) “Drawing and Disbursing Officer”
otherwise requires- means a Head of Office and also any
(i) “Accounts Officer ” means the other Gazetted Officer so designated
Head of an Office of Accounts or the by a Department of the Central
Head of a Pay and Accounts Government, a Head of Department
Office set up under the scheme of or an Administrator, to draw bills and
departmentalization of accounts; make payments on behalf of the
(ii) “A d m i n i s t r a t o r ” m e a n s Central Government. The term shall
Administrator of a Union Territory, by also include a Head of Department or
whatever name designated; an Administrator where he himself
(iii) “A p p r o p r i a t i o n” m e a n s t h e discharges such function;
assignment, to meet specified (xiii) “Ministry of Finance” means the
expenditure, of funds included in a Ministry of Finance of the Central
primary unit of appropriation; Government;
(iv) “Audit Officer” means the Head of (xiv) “Financial Year” means the year
an Office of Audit; beginning on the 1st of April and
(v) “Competent Authority” means, in ending on the 31st of March
respect of the power to be exercised following;
under any of these Rules, the President (xv) “Government” means the Central
or such other authority to which the Government;
power is delegated by or under these (xvi) “Government Account” means the
Rules, Delegation of Financial Power account relating to the Consolidated
Rules or any other general or special Fund, the Contingency Fund and the
orders issued by the Government of Public Account; as defined in these
India; rules;
(vi) “ C o m p t r o l l e r a n d A u d i t o r (xvii) “Head of the Department’ means
General” means the Comptroller an authority or person (not below the
and Auditor General of India; rank of a Deputy Secretary to the
(vii) “Consolidated Fund” means the Government of India), declared by the
Consolidated Fund of India referred concerned Department in the
to in Article 266 (1) of the Government of India as a Head of
Constitution; Department in relation to an
(viii) “ C o n s t i t u t i o n ” m e a n s t h e identifiable establishment or
Constitution of India; establishments to exercise the
delegated financial powers under
(ix) “Contingency Fund” means the
these Rules;
Contingency Fund of India
established under the Contingency (xviii) “Head of Office” means (a) a
Fund of India Act, 1950, in terms of Gazetted Officer declared as such in
Article 267 (1) of the Constitution; the Delegation of Financial Powers
Rules and (b) any other authority
(x) “Controlling Officer” means an
declared as such under any general or
officer entrusted by a Department of
special orders of the competent
the Central Government with the
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Ministry of Finance
authority; (xxxi) CAPEX model: In the CAPEX Model,

(xix) “Local Body” means an authority Capital expenditures is used by the
legally entitled or specially buyer to straightway purchase goods
empowered by Government to followed by procurement of
administer a local fund; consumables, arranging
(xx) “Local Fund” means a local fund as comprehensive maintenance contact
defined in Rule 652 of the Treasury after warranty period and finally
Rules; disposing the product after useful life;
(xxi) “Non-recurring expenditure” (xxxii) OPEX model: In the OPEX model, the
means expenditure other than Seller provides the goods, maintains it
recurring expenditure; and also provides the consumables as
required and finally takes back the
(xxii) “President” means the President of goods after useful / contracted life.
India; The expenditure is made by the Buyer
(xxiii) “Primary unit of appropriation” in a staggered manner as per the
means a primary unit of terms and conditions of the contract.
appropriation referred to in Rule 8 of Rule 3 Interdepartmental consultations: When
the Delegation of Financial Powers the subject of a case concerns more than one
Rules; Department, no order shall be issued until all
(xxiv) “Public Account” means the Public such Departments have concurred, or, failing
Account of India referred to in Article such concurrence, a decision has been taken
266 (2) of the Constitution; by or under the authority of the Cabinet. In
(xxv) “Public Works” means civil/ this regard it is clarified that every case in
electrical works including public which a decision, if taken in one Department,
buildings, public services, transport is likely to affect the transaction of business
infrastructure etc., both original and allotted to another Department, shall also be
repair works and any other project, deemed to be a case which concerns more
including infrastructure which is for than one Department.
the use of general public; Rule 4 Departmental Regulations of financial
(xxvi) “Re-appropriation” means the character: All Departmental regulations, in
transfer of funds from one primary so far as they embody orders or instructions
unit of appropriation to another such of a financial character or have important
unit; financial bearing, must invariably be made
(xxvii) “Recurring expenditure” means the by, or with the approval of the Ministry of
expenditure which is incurred at Finance.
periodical intervals for the same Rule 5 Removal of Doubts: Where a doubt arises
purpose. Expenditures other than as to the interpretation of any of the
recurring expenditure are non- provisions of these Rules, the matter shall be
recurring expenditure; referred to the Ministry of Finance for
(xxviii)“Reserve Bank” means the Reserve decision.
Bank of India or any office or agency Rule 6 Modifications:
of the Reserve Bank of India and (1) The systems and procedures
includes any Bank acting as the agent established by these Rules are subject
of the Reserve Bank of India in to general or special instructions/
accordance with the provisions of the orders, which the Ministry of Finance
Reserve Bank of India Act, 1934 (Act II may issue from time to time.
of 1934); (2) The systems and procedures
(xxix) “Subordinate authority” means a established by these Rules may be
Department of the Central modified by any other authority only
Government or any authority with the express approval of the
subordinate to the President; Ministry of Finance.
(xxx) “Treasury Rules” means the Treasury
Rules of the Central Government;
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Chapter – 2
Ministry of Finance
GENERAL SYSTEM OF FINANCIAL MANAGEMENT

Rule 7 All moneys received by or on behalf of the receipts shall be laid down in the regulations
Government either as dues of Government or of the Department responsible for the same
for deposit, remittance or otherwise, shall be Rule 11 (2) In Departments in which officers are
brought into Government Account without required to receive moneys on behalf of
delay, in accordance with such general or Government and issue receipts therefor in
special rules as may be issued under Articles Form GAR-6 the departmental regulations
150 and 283 (1) of the Constitution. should provide for the maintenance of a
Rule 8 (1) proper account of the receipt and issue of the
(I) Under Article 284 of the Constitution all receipt books, the number of receipt books to
moneys received by or deposited with be issued at a time to each officer and a check
any officer employed in connection with with the officer’s accounts of the used books
the affairs of the Union in his capacity as when returned.
such, other than revenues or public Rule 12 Amounts due to Government shall not be left
moneys raised or received by outstanding without sufficient reasons.
Government, shall be paid into the Where such amounts appear to be
Public Account. irrecoverable, the orders of the competent
(ii) All moneys received by or deposited with authority shall be obtained for their
the Supreme Court of India or with any adjustment.
other Court, other than a High Court, Rule 13 Unless specially authorized by any rule or
within a Union Territory, shall also be order made by competent authority, no sums
dealt with in accordance with Clause (i) shall be credited as revenue by debit to a
of sub-rule (1). suspense head. The credit must follow and
Rule 8 (2) The Head of Account to which such not precede actual realization.
moneys shall be credited and the withdrawal Rule 14 Subject to any general or special orders
of moneys therefrom shall be governed by the issued by a Department of the Central
relevant provisions of Government Government, an Administrator or a Head of a
Accounting Rules 1990 and the Central Department responsible for the collection of
Government Account (Receipts and revenue shall keep the Finance Ministry fully
Payments) Rules, 1983 or such other general informed of the progress of collection of
or special orders as may be issued in this revenue under his control and of all
behalf. important variations in such collections as
Rule 9 It is the duty of the Department of the Central compared with the Budget Estimates.
Government concerned to ensure that the Rule 15 (1) Rents of buildings and lands. When
receipts and dues of the Government are the maintenance of any rentable building is
correctly and promptly assessed, collected entrusted to a civil department, other than the
and duly credited to the Consolidated Fund Central Public Works Department, the
or Public Account as the case may be. Administrator or the Head of the Department
Rule 10 The Controlling Officer shall arrange to concerned shall be responsible for the due
obtain from his subordinate officers monthly recovery of the rent thereof.
accounts and returns in suitable form Rule 15 (2) The procedure for the assessment and
claiming credit for the amounts paid into the recovery of rent of any building hired out will
treasury or bank as the case may be, or be regulated generally by the rules applicable
otherwise accounted for, and compare them to buildings under the direct charge of the
with the statements of credits furnished by the Central Public Works Department.
Accounts Officer to see that the amounts Rule 15 (3) The detailed rules and procedure,
reported as collected have been duly regarding the demand and recovery of rent of
credited. Accordingly, each Accounts Officer Government buildings and lands, are
will send an extract from his accounts contained in the departmental regulations of
showing the amounts brought to credit in the the departments in charge of those buildings.
accounts in each month to the Controlling Rule 16 (1) Fines . Every authority having the power
Officer concerned. to impose and/ or realize a fine shall ensure
Rule 11 (1) Detailed rules and procedure regarding that the money is realized, duly checked and
assessment, collection, allocation, remission deposited into a treasury or bank as the case
and abandonment of revenue and other may be.
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Chapter – 2
Ministry of Finance
Rule 16 (2) Every authority having the power to officer should also enforce financial order
refund fines shall ensure that the refunds are and strict economy and see that all relevant
checked and no double refunds of amounts financial rules and regulations are observed,
of fines collected or refunds of fines not by his own office and by subordinate
actually paid into a treasury or bank as the disbursing officers. Among the principles on
case may be, are made which emphasis is generally laid are the
Rule 17 Miscellaneous Demands. Accounts following :-
Officers shall watch the realization of (i) Every officer is expected to exercise the
miscellaneous demands of Government, not same vigilance in respect of
falling under the ordinary revenue expenditure incurred from public
administration, such as contributions from moneys as a person of ordinary
State Governments, Local Funds, contractors prudence would exercise in respect of
and others towards establishment charges. expenditure of his own money.
Rule 18 Remission of Revenue. A claim to revenue (ii) The expenditure should not be prima
shall not be remitted or abandoned save with facie more than the occasion
the sanction of the competent authority. demands.
Rule 19 (1) Subject to any general or special orders (iii) No authority should exercise its
issued by the Government Departments of powers of sanctioning expenditure to
the Central Government, Administrators and pass an order which will be directly or
Heads of Departments, other than those in indirectly to its own advantage.
the Department of Posts, shall submit (iv) Expenditure from public moneys
annually on the 1st of June to the Audit should not be incurred for the benefit
Officer and the Accounts Officer concerned, of a particular person or a section of
statements showing the remissions of the people, unless –
revenue and abandonment of claims to
(a) a claim for the amount could be
revenue sanctioned during the preceding
enforced in a Court of Law, or
year by competent authorities in exercise of
the discretionary powers vested in them (b) the expenditure is in pursuance of
otherwise than by law or rule having the force a recognized policy or custom.
of law, provided that individual remissions Rule 22 Expenditure from Public Funds. No
below Rupees one thousand need not be authority may incur any expenditure or enter
included in the statements. into any liability involving expenditure or
Rule 19 (2) For inclusion in the statements referred to transfer of moneys for investment or deposit
in Rule 19 (1) above, remissions and from public funds (Consolidated Fund /
abandonments should be classified broadly Contingency Fund and the Public Accounts)
with reference to the grounds on which they unless the same has been sanctioned by a
were sanctioned and a total figure should be competent authority
given for each class. A brief explanation of Rule 23 Delegation of Financial Powers. The
the circumstances leading to the remission financial powers of the Government have
should be added in the case of each class. been delegated to various subordinate
Rule 20 Departments of the Central Government and authorities vide Delegation of Financial
Administrators may make rules defining Powers Rules as amended from time to time.
remissions and abandonments of revenue The financial powers of the Government,
for the purpose of Rule 19 above. which have not been delegated to a
subordinate authority, shall vest in the
Finance Ministry.
I. GENERAL PRINCIPLES RELATING TO
Rule 24 Consultation with Financial Advisers. All
EXPENDITURE AND PAYMENT OF
draft memoranda for Expenditure Finance
MONEY
Committee or Public Investment Bureau or
Committee on Establishment Expenditure
Rule 21 Standards of financial propriety. Every and Cabinet Committee for Economic Affairs
officer incurring or authorizing expenditure or Cabinet shall be circulated by the Ministry
from public moneys should be guided by or Department concerned after consultation
high standards of financial propriety. Every with the concerned Financial Adviser of the
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Chapter – 2
Ministry of Finance
Ministry or Department. A confirmation to the President, a subordinate authority shall

this effect shall be included in the draft not, without the previous consent of the
memorandum at the circulation stage. Finance Ministry, issue an order which -
Rule 25 (1) Provision of funds for sanction. All (i) involves any grant of land, or
sanctions to the expenditure shall indicate the assignment of revenue, or concession,
details of the provisions in the relevant grant grant, lease or licence of mineral or
or appropriation wherefrom such forest rights, or rights to water, power
expenditure is to be met. or any easement or privilege of such
Rule 25 (2) All proposals for sanction to expenditure, concessions, or
shall indicate whether such expenditure can (ii) involves relinquishment of revenue in
be met by valid appropriation or re- any way
appropriation. Rule 29 Procedure for communication of
Rule 25 (3) In cases where it becomes necessary to sanctions. All financial sanctions and orders
issue a sanction to expenditure before funds issued by a competent authority shall be
are communicated, the sanction should communicated to the Audit Officer and the
specify that such expenditure is subjected to Accounts Officer. The procedure to be
funds being communicated in the budget of followed for communication of financial
the year. sanctions and orders will be as under :-
Rule 26 Responsibility of Controlling Officer in (i) All financial sanctions issued by a
respect of Budget allocation. The duties Department of the Central
and responsibilities of a controlling officer in Government which relate to a matter
respect of funds placed at his disposal are to concerning the Department proper
ensure : and on the basis of which payment is
(i) that the expenditure does not exceed to be made or authorized by the
the budget allocation. Accounts Officer, should be addressed
(ii) that the expenditure is incurred for the to him.
purpose for which funds have been (ii) All other sanctions should be accorded
provided. in the form of an Order, which need
(iii) that the expenditure is incurred in not be addressed to any authority, but
public interest. a copy thereof should be endorsed to
the Accounts Officer concerned.
(iv) that adequate control mechanism is
functioning in his Department for (iii) In the case of non-recurring
prevention, detection of errors and contingent and miscellaneous
irregularities in the financial expenditure, the sanctioning authority
proceedings of his subordinate offices may, where required, accord sanction
and to guard against waste and loss by signing or countersigning the bill or
of public money, voucher, whether before or after the
money is drawn, instead of by a
Rule 27 (1) Date of effect of sanction. Subject to separate sanction.
fulfilment of the provisions as contained in
the Delegation of Financial Powers Rules, all (iv) All financial sanctions and orders
rules, sanctions or orders shall come into issued by a Department of the Central
force from the date of issue unless any other Government with the concurrence of
date from which they shall come into force is the Internal Finance Wing or Finance
specified therein. Ministry, as applicable, should be
communicated to the Accounts Officer
Rule 27 (2) Date of creation to be indicated in in accordance with the procedure laid
sanctions for temporary posts. Orders down in the Delegation of Financial
sanctioning the creation of a temporary post Powers Rules, and orders issued
should, in addition to the sanctioned thereunder from time to time.
duration, invariably specify the date from
which it is to be created (v) All financial sanctions and orders
issued by a Department with the
Rule 28 Powers in regard to certain special matters.— concurrence of the Ministry of Home
Except in pursuance of the general Affairs or Comptroller and Auditor
delegation made by, or with the approval of General of India or Department of
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Chapter – 2
Ministry of Finance
Personnel should specify that the concurrence of the Comptroller and

sanction or orders are issued with the Auditor General of India shall be
concurrence of that Department supplied to the Comptroller and
along with the number and date of Auditor General of India.
relevant communication of that (xi) Copies of all sanctions or orders other
Department wherein the concurrence than the following types should be
was conveyed. endorsed to the Audit Officers:-
(vi) All orders conveying sanctions to (a) Sanctions relating to grant to
expenditure of a definite amount or advances to Central Government
upto a specific limit should express employees.
both in words and figures the amount (b) Sanctions relating to appointment
of expenditure sanctioned. or promotion or transfer of
(vii) Sanctions accorded by a Head of Gazetted and non- Gazetted
Department may be communicated to Officers.
the Accounts Officer by an authorized (c) All sanctions relating to creation or
Gazetted Officer of his Office duly continuation or abolition of posts.
signed by him for the Head of
Department or conveyed in the name (d) Sanctions for handing over charge
of the Head of the Department. and taking over charge, etc.
(viii) All orders conveying sanctions to the (e) Sanctions relating to payment or
grant of additions to pay such as withdrawal of General Provident
Special Allowance, Personal Pay, etc., Fund advances to Government
should contain a brief summary of the servants.
reasons for the grant of such (f) S a n c t i o n s o f c o n t i n g e n t
additions to pay so as to enable the expenditure incurred under the
Accounts Officer to see that it is powers of Head of Offices.
correctly termed as Special (g) Other sanctions of routine nature
Allowance, Personal Pay, etc., as the issued by Heads of Subordinate
case may be. Officers (other than those issued by
(ix) Orders issued by a Department of a Ministries or Departments proper
Union Territory Government where and under powers of a Head of
Audit and Accounts (a) have not been Department).
separated shall be communicated (xii) Sanctions accorded by competent
direct to the Audit authority; (b) have authority to grants of land and
been separated, copies shall be alienation of land revenue, other than
endorsed to the Audit authorities. those in which assignments of land
In case of sanctions in respect of revenue are treated as cash payment,
matters, where reference was made to shall be communicated to the Audit
the Central Government under the and/ or the Accounts Officer, as the
Rules of Business framed under case may be, in a consolidated
Section 46 of the Government of monthly return giving the necessary
Union Territory Act, 1963, the details.
following clause shall be added in the Rule 30 Lapse of Sanctions. A sanction for any fresh
sanction endorsed to Audit:- charge shall, unless it is specifically renewed,
“A reference had been made in this lapse if no payment in whole or in part has
case to the Central Government and been made during a period of twelve months
the above order/letter conforms to the from the date of issue of such sanction.
decision of the Central Government Provided that -
vide Government of India, (i) when the period of currency of the
Ministry/Department of...........Letter sanction is prescribed in the
No…………dated…………..”. departmental regulations or is
(x) Copies of all General Financial specified in the sanction itself, it shall
Orders issued by a Department of the lapse on the expiry of such periods; or
Central Government with the (ii) when there is a specific provision in a
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Chapter – 2
Ministry of Finance
sanction that the expenditure would (b) under assessments which are due
be met from the Budget provision of a to interpretation of the law by the
specified financial year, it shall lapse local authority being overruled by
at the close of that financial year; or higher authority after the expiry of
(iii) in the case of purchase of stores, a the time-limit prescribed under the
sanction shall not lapse, if tenders law, and
have been accepted (in the case of (c) refunds allowed on the ground that
local or direct purchase of stores) or the claims were time-barred:
the indent has been placed (in the (ii) Petty losses of value not exceeding
case of Central Purchases) on the Rupees ten thousand.
Central Purchase Organization within Rule 33 (2) Cases involving serious irregularities shall
the period of one year of the date of be brought to the notice of Financial Adviser
issue of that sanction, even if the or Chief Accounting Authority of the Ministry
actual payment in whole or in part has or Department concerned and the Controller
not been made during the said General of Accounts, Ministry of Finance.
period.
Rule 33 (3) Report of loss contemplated in sub-rule
Rule 31 Notwithstanding anything contained in (1) & (2) shall be made at two stages.—
Rule 30, a sanction in respect of an addition
to a permanent establishment, made from (i) An initial report should be made as
year to year under a general scheme by a soon as a suspicion arises that a loss
competent authority, or in respect of an has taken place.
allowance sanctioned for a post or for a class (ii) The final report should be sent to
of Government servants, but not drawn by authorities indicated in sub rule (1) &
the officer(s) concerned, shall not lapse. (2) after investigation indicating
Rule 32 Remission of disallowances by Audit and nature and extent of loss, errors or
writing off of overpayment made to neglect of rules by which the loss has
Government servants. The remission of been caused and the prospects of
disallowances by Audit and writing off of recovery.
overpayments made to Government servants Rule 33 (4) The complete report contemplated in sub-
by competent authorities shall be in rule 3, shall reach through proper channels
accordance with the provisions of the to the Head of the Department, who shall
Delegation of Financial Powers Rules, and finally dispose of the same under the powers
instructions issued thereunder. delegated to him under the Delegation of
Financial Power Rules. The reports, which he
cannot finally dispose of under the delegated
II. DEFALCATION AND LOSSES powers, shall be submitted to the Finance
Ministry.
Rule 33 (1) Report of Losses. Any loss or shortage of Rule 33 (5) An amount lost through
public moneys, departmental revenue or misappropriation, defalcation,
receipts, stamps, opium, stores or other embezzlement, etc., may be redrawn on a
property held by, or on behalf of, simple receipt pending investigation,
Government irrespective of the cause of loss recovery or write-off with the approval of the
and manner of detection, shall be authority competent to write-off the loss in
immediately reported by the subordinate question.
authority concerned to the next higher Rule 33 (6) In cases of loss to Government on account
authority as well as to the Statutory Audit of culpability of Government servants, the
Officer and to the concerned Principal loss should be borne by the Central
Accounts Officer, even when such loss has Government Department or State
been made good by the party responsible for Government concerned with the transaction.
it. However the following losses need not be Similarly, if any recoveries are made from the
reported: erring Government officials in cash, the
(i) Cases involving losses of revenue due to receipt will be credited to the Central
(a) mistakes in assessments which are Government Department or the State
discovered too late to permit a Government who sustained the loss.
supplementary claim being made, Rule 33 (7) All cases involving loss of Government
15
Chapter – 2
Ministry of Finance
money arising from erroneous or irregular assessment of responsibility for the loss shall
issue of cheques or irregular accounting of be conducted according to the instructions
receipts will be reported to the Controller contained in Appendix 1 and those issued by
General of Accounts along with the the Ministry of Personnel from time to time.
circumstances leading to the loss, so that he Rule 38 Prompt disposal of cases of loss. Action at
can take steps to remedy defects in rules or each stage of detection, reporting, write off,
procedures, if any, connected therewith. final disposal, in cases of losses including
Rule 34 Loss of Government Property due to fire, action against delinquents and remedial
theft, fraud. Departmental Officers shall, in measures should be completed promptly with
addition to taking action as prescribed in special attention to action against
Rule 33, follow the provisions indicated delinquents and remedial measures, taken to
below in cases involving material loss or strengthen the control system
destruction of Government property as a
result of fire, theft, fraud, etc. III. SUBMISSION OF RECORDS AND
All losses above the value of Rupees Fifty INFORMATION
thousand due to suspected fire, theft, fraud,
etc., shall be invariably reported to the Police
for investigation as early as possible. Rule 39 Demand for information by Audit or
Accounts Officer. A subordinate authority
Once the matter is reported to the Police shall afford all reasonable facilities to the
Authorities, all concerned should assist the Audit Officer and Pay and Accounts Officer
Police in their investigation. A formal for the discharge of his functions, and furnish
investigation report should be obtained from fullest possible information required by him
the Police Authorities in all cases, which are for the preparation of any official account or
referred to them. report, payments and internal audit.
Rule 35 Loss of immovable property by fire, flood Rule 40 A subordinate authority shall not withhold
etc. All loss of immovable property any information, books or other documents
exceeding Rupees fifty thousand , such as required by the Audit Officer or Accounts
buildings, communications, or other works, Officer.
caused by fire, flood, cyclone, earthquake or
any other natural cause, shall be reported at Rule 41 If the contents of any file are categorized as
once by the subordinate authority concerned ‘Secret’ or ‘Top Secret’ the file maybe sent
to Government through the usual channel. personally to the Head of the Audit Office
All other losses should be immediately specifying this fact, who will then deal with it
brought to the notice of the next higher in accordance with the standing instructions
authority. for handling and custody of such classified
documents.
Rule 36 Report to Audit and Accounts Officers.
After a full enquiry as to the cause and the
extent of the loss has been made, the detailed
report should be sent by the subordinate
authority concerned to Government through
the proper channel; a copy of the report or an
abstract thereof being simultaneously
forwarded to the Audit officer and Pay and
Accounts Officer
Rule 37 Responsibility of losses. An officer shall be
held personally responsible for any loss
sustained by the Government through fraud
or negligence on his part. He will also be held
personally responsible for any loss arising
from fraud or negligence of any other officer
to the extent to which it may be shown that he
contributed to the loss by his own action or
negligence.
The departmental proceedings for
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Chapter – 3
Ministry of Finance
BUDGET FORMULATION AND IMPLEMENTATION

Rule 42 Financial Year. Financial year of the wise classification, it may be ensured that
Government shall commence on the 1st day item wise break-up of all major items of tax
of April of each year and end on the 31st day and non-tax revenues are clearly identified
of March of the following year. and depicted in the receipt estimates. This is
Rule 43 (1)Presentation of Budget to Parliament. required to highlight all individual items of
In accordance with the provisions of Article significance. Any major variation in estimates
112 (1) of the Constitution, the Finance with reference to past actuals or/and Budget
Minister shall arrange to lay before both the Estimates shall be supported by cogent
Houses of Parliament, an Annual Financial reasons. The accounting heads under which
Statement also known as the ‘Budget’ major tax and non-tax revenues are collected
showing the estimated receipts and shall be prescribed by the administrative
expenditure of the Central Government in Ministry in consultation with the Budget
respect of a financial year, before the Division in the Finance Ministry.
commencement of that year. Rule 46 Non-Tax Revenues. While the tax revenues,
Rule 43 (2) The receipts and expenditure of the non-debt capital receipts including
Railways being a departmental commercial disinvestments and borrowings are managed
organization form part of the Government’s by the various Departments of the Ministry of
receipts and expenditure and are included in Finance, the non-tax revenues are collected
the Annual Financial Statement. With the through all Ministries/Departments and other
merger of Railway Budget with the General autonomous bodies and implementing
Budget, the Demands for Grants and the agencies and comprise an important source
Statement of Budget Estimates of Railways of revenue for the Government.
shall also be part of the General Budget with Rule 47 User Charges. ‘User Charges’ is an
effect from 2017-18. important component of the non-tax
Rule 43 (3) The provisions for preparation, revenues. Each Ministry/Department may
formulation and submission of budget to the undertake an exercise to identify the ‘user
Parliament are contained in Articles 112 to charges’ levied by it and publish the same on
116 of the Constitution of India. its website.
Rule 43 (4) The Ministry of Finance, Budget Division, (i) While fixing the rates of user charges,
shall issue guidelines for preparation of the Ministries/Departments must
budget estimates from time to time. All the ensure that the user charges recover
Ministries/Departments shall comply in full the current cost of providing services
with these guidelines. with reasonable return on capital
Rule 44 The budget shall contain the following :- investment.
(i) Estimates of all revenues expected to (ii) Any deviation from these principles
be raised during the financial year to shall be specifically recorded with
which the budget relates ; reasons justifying the setting of user
charges lower than the cost recovery
(ii) Estimates of all expenditure for each norms, if any.
programme, scheme and project in
that financial year; (iii) The rates of user charges should be
linked with appropriate price indices
(iii) Estimates of all interest and debt and reviewed at least every three
servicing charges and any repayments years.
on loans in that financial year;
(iv) In order to enable ease of revision of
(iv) Any other information as may be user charges, the rate of user charges
prescribed. shall be fixed, whereever possible
Rule 45 Receipt Estimates. The detailed estimates of through Rules or executive orders and
receipts shall be prepared by the estimating not through a statute.
authorities separately for each Major Head Rule 48 Dividends and Profits. Dividends and
of Account in the prescribed form. For each profits including the transfer of surplus from
Major Head, the estimating authority shall Reserve Bank of India is a major component
give the break-up of the Minor/Subhead/ of the non-tax revenues. The payment of
Detailed wise estimate along with actuals of dividends/profits etc. by the Central Public
the past three years. While doing the head Sector Enterprises shall not be delayed and
17
Chapter – 3
Ministry of Finance
must be paid within an appropriate time expenditure for which vote of Lok Sabha is
frame immediately after the decision on required shall be in the form of Demand for
dividend is taken in the AGM. Ministries or Grants.
Departments shall monitor timely payments Rule 51 (2) Generally, one Demand for Grant is
of dividends and profits. The dividend shall presented in respect of each Ministry or
be payable as per the guidelines issued by Department. However, in respect of large
DIPAM in this regards. Ministries or Departments, more than one
Rule 49 Receipts Portal. The Government has Demand may be presented. Each Demand
provided a public portal for online collection normally includes provisions required for a
of various non-tax revenues including service, i.e. provisions on account of revenue
various fees and user charges through e- expenditure, capital expenditure, grants to
Receipts. All Ministries/Departments,shall the State and Union Territory Governments
take prompt measures for migration to e- and also Loans and Advances relating to the
Receipts, to ensure customer convenience service.
and immediate credit of receipts to the Rule 51 (3) The Demand for Grants shall be
Government account. presented to Parliament at two levels. The
Rule 50 (1) Expenditure estimates. The main Demand for Grants shall be presented
expenditure estimates shall show separately to Parliament by the Ministry of Finance,
the sums required to meet the expenditure Budget Division along with the Annual
Charged on the Consolidated Fund under Financial Statement while the Detailed
Article 112 (3) of the Constitution and sums Demands for Grants, for consideration by the
required to meet other expenditure for which “Departmentally Related Standing
a vote of the Lok Sabha is required under Committee” (DRSC) of the Parliament, are
Article 113(2) of the Constitution. laid on the Table of the Lok Sabha by the
Rule 50 (2) The estimates shall also distinguish concerned Ministries/ Departments, as per
provisions for expenditure on revenue dates approved from time to time.
account from capital account, including on Rule 52 (1) Form of Annual Financial Statement
loans by the Government and for repayment and Demands for Grant. The form of the
of loans, treasury bills, cash management Annual Financial Statement and Demands
bills and ways and means advances. for Grants shall be laid down by the Finance
Rule 50 (3) The detailed estimates of expenditure Ministry and no alteration of arrangement or
shall be prepared by the estimating classification shall be made without the
authorities up to the final unit of approval of that Ministry.
appropriation (Object head) under the Rule 52 (2) The heads under which provision for
prescribed Major and Minor Heads of expenditure shall be made in the Demands
Accounts for both Revenue and Capital for Grants or Appropriation shall be
expenditure. Estimates shall include suitable prescribed by the Finance Ministry in
provision for liabilities of the previous years consultation with the Administrative Ministry
that is to be discharged during the year. or Department. The authorized heads for
Rule 50 (4) The estimates of scheme related and expenditure in a year shall be as shown in the
other expenditures shall be processed in Detailed Demands for Grants passed by
consultation with the Budget Division, Parliament and no change shall be made
Ministry of Finance in accordance with the therein without the formal approval of the
instructions issued by it. Finance Ministry.
Rule 50 (5) The Revised and Budget Estimates of both Rule 52 (3) The major head wise provisions in the
Revenue and Capital expenditure after being Detailed Demands for Grants shall match
scrutinized by the Financial Advisers and with the provision made in the Demands for
approved by the Secretary of the Grants presented by Budget Division, as the
Administrative Ministry or Department appropriations are sought on the basis of
concerned shall be forwarded to the Budget Demands for Grants.
Division in the Ministry of Finance in such NOTE: Detailed instructions for preparation
manner and forms as may be prescribed by it of the budget are available in Appendix 2, 3
from time to time. and 4.
Rule 51 (1) Demands for Grants. The estimates for Rule 53 (1) Acceptance and inclusion of
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Chapter – 3
Ministry of Finance
estimates. The estimates of receipts and Rule 56 Communication and distribution of

expenditure of each Ministry/Department grants and appropriations. After the
shall be scrutinized in the Budget Division of Appropriation Bill relating to Budget is
the Ministry of Finance. Secretary passed, the Ministry of Finance shall
(Expenditure) may hold meetings with communicate the same to the Ministries /
Secretaries or Financial Advisers of Departments which, in turn, shall distribute
Administrative Ministries or Departments to the same to their subordinate formations. The
discuss the totality of the requirements of distribution so made shall also be
funds for various programmes and schemes, communicated to the respective Pay and
along with receipts of the Ministries or Accounts Officers who shall exercise check
Departments. against the allocation to each subordinate
Rule 53 (2) The estimates initially submitted by the authority.
Departments may undergo some changes as
a result of scrutiny in the Budget Division, II. CONTROL OF EXPENDITURE AGAINST
Ministry of Finance and deliberations in the BUDGET
pre-budget meetings between the Secretary
(Expenditure) and the Secretary or Financial
Adviser of the Department concerned. The Rule 57 (1) Responsibility for control of
final estimates arrived at on the basis of Expenditure. The Departments of the
scrutiny and pre-budget meetings shall be Central Government shall be responsible for
incorporated in the Budget documents. the control of expenditure against the
sanctioned grants and appropriations placed
Rule 54 Outcome Budget. After finalization of the at their disposal. The control shall be
estimates for budgetary allocations, the exercised through the Heads of Departments
Department of Expenditure in consultation and other Controlling Officers, if any, and
with NITI Aayog and the concerned Ministries Disbursing Officers subordinate to them.
shall prepare an Outcome Budget statement
linking outlays against each scheme/project Rule 57 (2) A Grant or Appropriation can be utilised
with the outputs/deliverables and medium only to cover the charges (including liabilities,
term outcomes. The outputs/deliverables if any, of the past year) which are to be paid
shall be mandatorily given in during the financial year of the Grant or
measurable/quantitative terms on the basis Appropriation and adjusted in the account of
of parameters and deliverables decided in the year. No charges against a Grant or
advance, on the basis of projections made in Appropriation can be authorized after the
the Medium Term Expenditure Framework expiry of the financial year.
(MTEF) Statement. Allocations for each Rule 57 (3) No expenditure shall be incurred which
scheme/project shall be against a firm set of may have the effect of exceeding the total
deliverables which shall be adhered to. The grant or appropriation authorized by
performance against specified outcomes Parliament by law for a financial year, except
would form the basis of deciding on the after obtaining a supplementary grant or
continuation of the scheme and the quantum appropriation or an advance from the
of budget allocation. Contingency Fund. Since voted and charged
Rule 55 Vote on Account. If the Appropriation Bill portions as also the revenue and capital
seeking authorization of the Parliament to sections of a Grant/Appropriation are distinct
make expenditure in consonance with the and re-appropriation inter se is not
Budget proposal is likely to be passed after permissible, an excess in any one portion or
the start of the financial year to which it section is treated as an excess in the
corresponds then pending the completion of Grant/Appropriation.
the procedure prescribed in Article 113 of the Rule 57 (4) To have effective control over expenditure
Constitution for the passing of the Budget, by the Departments, Controlling and
the Finance Ministry may need to obtain a Disbursing Officers subordinate to them shall
‘Vote on Account’ to cover expenditure for follow the procedure as given below :-
abrief period in accordance with the (i) For drawal of money the Drawing and
provisions of Article 116 of the Constitution. Disbursing Officer shall (a)
Funds made available under Vote on Prepare and present bills for
Account are not to be utilized for expenditure “charged” and “voted” expenditure
on a ‘New Service’.
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Chapter – 3
Ministry of Finance
separately. (b) Enter on each bill the Controlling Officer finds defects in
complete accounts classifications any of these respects, he shall take
from major head down to the object steps to rectify the defect.
head of account. When a single bill (vi) When all the returns from the
includes charges falling under two or Disbursing Officers for a particular
more object heads, the charges shall month have been received and found
be distributed accurately over the to be in order, the Controlling Officer
respective heads. (c) Enter on each bill shall compile a statement in Form
the progressive total of expenditure GFR 7, in which he shall incorporate -
up-to-date under the primary unit of (a) the totals of the figures supplied by
appropriation to which the bill relates, Disbursing Officers;
including the amount of the bill on
(b) the totals taken from his own
which the entry is made.
registers in Form GFR 5;
(ii) All drawing and disbursing officers
(c) the totals of such adjustments
shall maintain separate registers in
under the various detailed heads
Fo r m G F R 5 , p h y s i c a l l y o r
as communicated to him by the
electronically for allocation under
Accounts Officer on account of
each minor or sub-head of account
transfer entries and expenditure
with which they are concerned.
debited to the grant as a result of
(iii) On the third day of each month, a settlement of inward account
copy of the entries made in this claims and not reckoned by his
register during the preceding month DDOs.
shall be sent by the officer
(vii). If any adjustment communicated by
maintaining it, to the Head of the
the Accounts Officer affects the
Department or other designated
appropriation at the disposal of a
Controlling Officer. This statement
subordinate Disbursing Officer, the
shall also include adjustment of an
fact that the adjustment has been
inward claim, etc., communicated by
made shall be communicated by the
Pay and Accounts Officer directly to
Controlling Officer to the Disbursing
the DDO (and not to his Grant
Officer concerned.
Controlling Officer). If there are no
entries in the register in any month, a (viii). On receipt of all the necessary returns,
‘nil’ statement shall be sent. the Head of the Department shall
prepare a consolidated account in
(iv) The Controlling Officer will maintain
Form GFR 8, showing the complete
a broadsheet in Form GFR 6 to
expenditure from the grant or
monitor the receipt of the return
appropriation at his disposal upto the
prescribed in the foregoing sub-
end of the preceding month.
clause
Rule 57 (5) The Head of the Department and the
(v). On receipt of the returns from
Accounts Officer shall be jointly responsible
Disbursing Officers, the Controlling
for the monthly reconciliation of the figures
Officer shall examine them and satisfy
given in the accounts maintained by the Head
himself :-
of the Department with those appearing in
(a) that the accounts classification the Accounts Officer’s books. The procedure
has been properly given; for reconciliation shall be as follows :-
(b) that progressive expenditure has (I). DDOs shall maintain a Bill Register in
been properly noted and the Form TR 28-A, and note all bills
available balances worked out presented for payment to the PAO in
correctly; the register. As soon as cheques for the
(c) that expenditure up-to-date is bills presented for payment are
within the grant or appropriation; received, and/or status of e-payments
and are verified from the reports available
(d) that the returns have been signed with DDO on PFMS portal these shall
by Disbursing Officers. Where the be noted in the appropriate column of
the Bill Register and the DDOs shall
20
Chapter – 3
Ministry of Finance
ensure that the amounts of cheques Principal Accounts Officers (or the
tally with the net amount of the bills PAO concerned) for reconciliation.
presented. In case any retrenchment The Head of the Department shall
is made by the PAO, a note of such furnish a quarterly certificate to the
retrenchments shall be kept against Principal Accounts Officer certifying
the bill in the remarks column in TR the correctness of the figures for the
28-A. quarter by the 15th of the second
(ii) The PAOs shall furnish to each of the following month after the end of
DDOs including Cheque –drawing quarters April-June, July-September,
DDOs, an extract from the October-December and January-
expenditure control register or from March.
the Compilation Sheet every month Rule 57 (6) The Departments of the Central
indicating the expenditure relating to Government shall obtain from their Heads of
grants controlled by him classified Departments and other offices under them
under the various major-minor the departmental figures of expenditure in
detailed head of accounts. The Form GFR 8 by the 15th of the month
statements for May to March shall also following the month to which the returns
contain Progressive Figures. relate. The figures relating to Revenue and
(iii). On receipt of these extracts from the Capital expenditure shall be separately
PAOs, the DDOs shall tally the figures shown in these returns. The information so
received, excluding book obtained shall be posted in register(s) kept for
adjustments, with the expenditure watching the flow of expenditure against the
worked out for the month in the GFR 5 sanctioned grant or appropriation.
register. Discrepancies, if any, Progressive totals of expenditure shall be
between the two sets of figures shall worked out for the purpose. If the
be promptly investigated by the DDO departmental figures obtained in Form
in consultation with the PAO. He shall GFR 8 and posted in the register(s), require
also note in the GFR 5 register correction in a subsequent month, Heads of
particulars of book adjustments Departments or other offices shall make such
advised by the PAO through the corrections by making plus or minus entries in
monthly statement. Thereafter, the the progressive totals. In case the Accounts
DDO shall furnish to the PAO a Office figures which subsequently become
certificate of agreement of the figures available are found to be higher than
as per his books with those indicated departmental figures, the former shall be
by the PAOs by the last day of the assumed to be the correct figures, as
month following the month of appropriation accounts are prepared on the
accounts. basis of the figures booked in the accounts.
(iv). The Principal Accounts Officer (or PAO Rule 57 (7) The Departments of Central Government
wherever payments, relating to a shall also obtain from the Heads of
grant are handled wholly by a PAO) of Departments and other authorities under
each Ministry, shall send a monthly them, statements showing the details of the
statement showing the expenditure physical progress of the schemes for which
vis-à-vis the Budget provision under they are responsible. This statement shall
the various heads of accounts, in the show the name of the scheme, the Budget
prescribed pro forma, to the Heads of provision for each scheme, the progressive
Departments responsible for overall expenditure on each scheme, the progress of
control of expenditure against grant the scheme in physical terms and the detailed
of the Ministry as a whole. The figures reasons for any shortfalls or excess, both
so communicated by the Principal against physical and financial targets.
Accounts Officer (or the PAO Rule 57 (8) A Broadsheet in Form GFR 9 shall be
concerned) shall be compared by the maintained by the Departments of Central
Heads of Departments with those Government or each Head of Department
consolidated in Form GFR 8 and and other authorities directly under them, to
differences, if any, shall be taken up watch the prompt receipt of the various
by the Heads of Departments with the returns mentioned above from month to
21
Chapter – 3
Ministry of Finance
month and to take necessary measures for financial year, all the anticipated savings
rectifying any defaults noticed. noticed in the Grants or Appropriations
Rule 58 Maintenance of Liability Register for controlled by them. The Finance Ministry shall
effecting proper control over communicate the acceptance of such
expenditure. In order to maintain proper surrenders as are accepted by it to the
control over expenditure, a Controlling Accounts Officer, before the close of the year.
Officer shall obtain from the spending The funds provided during the financial year
authorities liability statements in Form GFR 3- and not utilized before the close of that
A every month, starting from the month of financial year shall stand lapsed at the close
October in each financial year. The of the financial year.
Controlling Officer shall also maintain a Rule 62 (2) The savings as well as provisions that
Liability Register in Form GFR 3. cannot be profitably utilised shall be
Rule 59 Personal attention of the Head of surrendered to Government immediately
Department /Controlling Officer they are foreseen without waiting till the end
required to estimate savings or excesses. of the year. No savings shall be held in
A Head of Department or Controlling Officer reserve for possible future excesses.
shall be in a position to estimate the Rule 62 (3) Rush of expenditure, particularly in the
likelihood of savings or excesses every month closing months of the Financial year, shall be
and to regularize them in accordance with regarded as a breach of financial propriety
the instructions laid down in Rule 62. and shall be avoided. The Financial Advisers
Rule 60 C o n t r o l o f ex p e n d i t u r e a g a i n s t of the Ministries/Departments shall ensure
grant/appropriation and ultimate adherence to the stipulated Monthly
responsibility of the authority Expenditure Plan and the guidelines issued in
administering it. The Accounts Officer this regard by the Budget Division,
shall report to the Head of the Department Department of Economic Affairs, from time to
concerned immediately on the first time.
appearance of any disproportionate Rule 62 (4) The Financial Advisers of the Ministries/
expenditure, particularly in respect of Departments shall ensure adherence to the
recurring items of expenditure under any stipulated Quarterly Expenditure Plan and the
grant or appropriation or a primary unit of guidelines issued in this regard by Ministry of
appropriation thereof. However, the Finance from time to time.
authority administering a grant/ Rule 63 Expenditure on New Service. No
appropriation is ultimately responsible for expenditure shall be incurred during a
the control of expenditure against the financial year on a “New Service” not
grant/appropriation and not the Accounts contemplated in the Annual Budget for the
Officer. year except after obtaining a supplementary
Rule 61 Excess Expenditure. grant or appropriation or an advance from
1. The Accounts Officer shall not allow the Contingency Fund during that year. The
any payment against sanctions in guidelines to determine cases of “New
excess of the Budget provisions unless Service”/”New Instrument of Service” are
there is specific approval of the Chief contained in Annexure-1 to Appendix -3.
Accounting Authority. Rule 64 (1) Additional Allotment for excess
2. The Financial Advisers and Chief expenditure. A subordinate authority
A c c o u n t i n g A u t h o r i t y, b e f o r e incurring the expenditure shall be responsible
according concurrence for excess for seeing that the allotment placed at its
under any Head, shall ensure disposal is not exceeded. Where any excess
availability of funds through over the allotment is apprehended, the
Reappropriation/ Supplementary subordinate authority shall obtain additional
Demands for Grants. allotment before incurring the excess
(Refer Appendix 10) expenditure. For this purpose, the authorities
Rule 62 (1) Surrender of savings. Departments of incurring expenditure shall maintain a
the Central Government shall surrender to ‘Liability Register’ in Form GFR 3.
the Finance Ministry, by the dates prescribed Rule 64 (2) A Disbursing Officer may not, on his own
by that Ministry before the close of the authority, authorize any payment in excess of
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Chapter – 3
Ministry of Finance
the funds placed at his disposal. If the Instrument of Service” not provided in the
Disbursing Officer is called upon to honour a budget, necessary Supplementary Grant or
claim, which is certain to produce an excess Appropriation in accordance with Article 115
over the allotment or appropriation at his (1) of the Constitution shall be obtained
disposal, he shall take the orders of the before payment is authorized (Refer to
administrative authority to which he is Appendix 5).
subordinate before authorizing payment of Rule 67 (1) Advance from Contingency Fund.
the claim in question. The administrative When a need arises to incur unforeseen
authority shall then arrange to provide funds expenditure in excess of the sanctioned grant
either by reappropriation or by obtaining a or appropriation or on a new service not
Supplementary Grant or Appropriation or an provided in Budget and there is not sufficient
advance from the Contingency Fund. time for the voting of the Supplementary
Instructions contained in Note below Demand and the passing of the connected
Appendix 10 may also be kept in view. appropriation bill before close of the
Rule 65 (1) Re-appropriation of Funds. Subject to financial year, an advance from the
the provisions of Rule 10 of the Delegation of Contingency Fund set up under Article 267
Financial Powers Rules, and also subject to (1) of the Constitution shall be obtained
such other general or specific restrictions as before incurring the expenditure.
may be imposed by the Finance Ministry in Rule 67 (2) An advance from the Contingency Fund
this behalf, re-appropriation of funds from shall also be obtained to meet expenditure in
one primary unit of appropriation to another excess of the provisions for the service
such unit within a grant or appropriation, included in an Appropriation (Vote on
may be sanctioned by a competent authority Account) Act.
at any time before the close of the financial Rule 67 (3) The application for an advance from the
year to which such grant or appropriation Contingency Fund shall indicate inter alia the
relates. The Primary unit in this regard shall particulars of the additional expenditure
be the final unit of appropriation i.e. the involved and the sanction to the advance has
Object head of account. also to indicate the sub-head and the primary
Rule 65 (2) Re-appropriation of funds shall be made unit of the Grant to which the expenditure
only when it is known or anticipated that the appropriately relates. In case, however, any
appropriation for the unit from which funds difficulty is felt, the matter shall be referred to
are to be transferred shall not be utilized in the Finance Ministry for clarification.
full or that savings can be effected in the Rule 67 (4) The procedure for obtaining an advance
appropriation for the said unit. from the Contingency Fund and recoupment
Rule 65 (3) Funds shall not be re-appropriated from of the Fund shall be as laid down in the
a unit with the intention of restoring the Contingency Fund of India Rules, 1952, as
diverted appropriation to that unit when amended from time to time. For ready
savings become available under other units reference, rules have been placed at
later in the year. Appendix - 6 to this volume.
Rule 65 (4) An application for re-appropriation of Rule 68 Inevitable Payments.
funds shall ordinarily be supported by a (i) Subject to the provisions of Article 114
statement in Form GFR 1 or any other special (3) of the Constitution, money
form authorized by departmental regulations indisputably payable by Government
showing how the excess is proposed to be shall not ordinarily be left unpaid.
met. In all orders, sanctioning
reappropriation, the reasons for saving and (ii) Suitable provision for anticipated
excess of Rupees 1 lakh or over and the liabilities shall invariably be made in
primary units (secondary units, wherever Demands for Grants to be placed
necessary), affected shall be invariably before Parliament.
stated. The authority sanctioning the Rule 69 For easy reference an extract relating to
reappropriation shall endorse a copy of the procedures followed in the Accounts Office
order to the Accounts Officer. for check against provision of funds as a part
Rule 66 Supplementary Grants. If savings are not of pre-check of bills has been placed at
available within the Grant to which the Appendix 10.
payment is required to be debited, or if the Rule 70 Duties and Responsibilities of the Chief
expenditure is on “New Service” or “New
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Chapter – 3
Ministry of Finance
Accounting Authority. The Secretary of a

Ministry/Department who is the Chief
Accounting Authority of the Ministry/
Department shall: —
(i) be responsible and accountable for
financial management of his Ministry
or Department.
(ii) ensure that the public funds
appropriated to the Ministry or
Department are used for the purpose
for which they were meant.
(iii) be responsible for the effective,
efficient, economical and transparent
use of the resources of the Ministry or
Department in achieving the stated
project objectives of that Ministry or
Department, whilst complying with
performance standards.
(iv) appear before the Committee on
Public Accounts and any other
Pa r l i a m e n t a r y C o m m i t t e e f o r
examination.
(v) review and monitor regularly the
performance of the programmes and
projects assigned to his Ministry to
determine whether stated objectives
are achieved.
(vi) be responsible for preparation of
expenditure and other statements
relating to his Ministry or Department
as required by regulations, guidelines
or directives issued by Ministry of
Finance.
(vii) shall ensure that his Ministry or
Department maintains full and proper
records of financial transactions and
adopts systems and procedures that
shall at all times afford internal
controls.
(viii) shall ensure that his Ministry or
Department follows the Government
procurement procedure for execution
of works, as well as for procurement of
services and supplies, and
implements it in a fair, equitable,
transparent, competitive and cost-
effective manner;
(ix) shall take effective and appropriate
steps to ensure his Ministry or
Department : -
(a) collects all moneys due to the
Government and
(b) avoids unauthorized, irregular and
wasteful expenditure.
24
Chapter – 4
Ministry of Finance
GOVERNMENT ACCOUNTS
Rule 71 Preparation and presentation of Comptroller and Auditor General of India,
Accounts. Accounts of the Union the transactions in Government accounts
Government shall be prepared every year shall represent the actual cash receipts and
showing the receipts and disbursements disbursements during a financial year as
for the year, surplus or deficit generated distinguished from amounts due to or by
during the year and changes in Government during the same period.
Government liabilities and assets. The Rule 75 Period of Accounts. The annual accounts
accounts shall be prepared by Controller of the Central Government shall record
General of Accounts, certified by the transactions which take place during a
Comptroller and Auditor General of India financial year running from the 1st April to
and along with the report of the the 31st March thereof.
Comptroller and Auditor General of India Rule 76 Currency in which Accounts are kept.
on these accounts, shall be submitted to The accounts of Government shall be
the President of India, preferably within six maintained in Indian Rupees. All foreign
months of close of the Financial Year, who currency transactions and foreign aid shall
shall cause them to be laid before each be brought into account after conversion
House of Parliament. into Indian Rupees.
Rule 72 Form of Accounts. By virtue of the Rule 77 Main Divisions and structure of
provisions of Article 150 of the Accounts. The accounts of Government
Constitution, the Accounts of the Union shall be kept in three parts, Consolidated
Government shall be kept in such form as Fund (Part-I), Contingency Fund (Part-II)
the President may, on the advice of the and Public Account (Part-III).
Comptroller and Auditor General of India,
prescribe. Part-I – Consolidated Fund is divided into
two Divisions, namely, ‘Revenue’ and
The Controller General of Accounts in the ‘Capital’ divisions. The Revenue Division
Ministry of Finance (Department of comprises the following sections:
Expenditure) is responsible for prescribing
the form of accounts of the Union and ‘Receipt Heads (Revenue Account)’ dealing
States, and to frame, or revise, rules and with the proceeds of taxation and other
manuals relating thereto on behalf of the receipts classified as revenue and the
President of India in terms of Article 150 of section ‘Expenditure Heads (Revenue
the Constitution of India, on the advice of Account)’ dealing with the revenue
the Comptroller and Auditor General of expenditure met therefrom. The Capital
India. Division comprises three sections, viz.,
‘Receipt Heads (Capital Account)’,
Rule 73 Principles of Accounting. The main ‘Expenditure Heads (Capital Account)’ and
principles according to which the accounts ‘Public Debt, Loans and Advances, etc.’.
of the Government of India shall be These sections are in turn divided into
maintained are contained in Government sectors such as ‘General Services’, ‘Social
Accounting Rules, 1990; Accounting Rules and Community Services’, ‘Economic
for Treasuries; and Account Code Volume- Services’, etc., under which specific
III. Detailed rules and instructions relating functions or services are grouped
to the forms of the initial and subsidiary corresponding to the sectors of
accounts to be kept and rendered by classification and which are represented by
officers of the Department of Posts and Major Heads (comprising Sub-Major
other technical departments are laid down Heads wherever necessary).
in the respective Accounts Manuals or in
the departmental regulations relating to In Part-II – Contingency Fund- are
the Departments concerned. recorded transactions connected with the
Contingency Fund set up by the
Rule 74 Cash based Accounting. Government Government of India under Article 267 of
accounts shall be prepared on cash basis. the Constitution or Section 48 of
With the exception of such book Government of Union Territories Act,
adjustments as may be authorised by 1963. There shall be a single Major Head
Government Accounting Rules, 1990 or by to record the transactions thereunder,
any general or special order issued by the which will be followed by Minor, Sub
Central Government on the advice of the and/or Detailed Heads.
25
Chapter – 4
Ministry of Finance
In Part-III – Public Account- transactions them in consultation with the Budget

relating to debt (other than those included Division of the Ministry of Finance. Their
in Part-I), reserve funds, deposits, Principal Accounts Offices may open
advances, suspense, remittances and cash Sub/Detailed Heads required under the
balances shall be recorded. Minor Heads falling within the Public
Rule 78 Classification of transactions in Account of India subject to the above
Government Accounts. As a general stipulations.
rule, classification of transactions in The Object Heads have been prescribed
Government Accounts, shall have closer under Government of India’s Orders
reference to functions, programmes and below Rule 8 of Delegation of Financial
activities of the Government and the object Power Rules. The power to amend or
of revenue or expenditure, rather than the modify these Object heads and to open
department in which the revenue or new Object Heads rest with Department of
expenditure occurs. Expenditure of Ministry of Finance on the
Major Heads (comprising Sub-Major advice of the Comptroller and Auditor
Heads wherever necessary) are divided General of India.
into Minor Heads. Minor Heads may have Rule 80 Conformity of budget heads with rules
a number of subordinate heads, generally of classification. Budget Heads exhibited
known as Sub Heads. The Sub Heads are in estimates of receipts and expenditure
further divided into Detailed Heads framed by the Government or in any
followed by Object Heads. appropriation order shall conform to the
The Major Heads of account, falling within prescribed rules of classification.
the sectors for expenditure heads, Rule 81 Responsibility of Departmental
generally correspond to functions of officers. Every officer responsible for the
Government, while the Minor Heads collection of Government dues or
identify the programmes undertaken to expenditure of Government money shall
achieve the objectives of the functions see that proper accounts of the receipts
represented by the Major Head. The Sub and expenditure, as the case may be, are
Head represents schemes, the Detailed maintained in such form as may have been
Head denotes sub scheme and Object prescribed for the financial transactions of
Head represent the primary unit of Government with which he is concerned
appropriation showing the economic and tender accurately and promptly all
nature of expenditure such as salaries and such accounts and returns relating to them
wages, office expenses, travel expenses, as may be required by Government,
professional services, grants-in-aid, etc. Controlling Officer or Accounts Officer, as
The above six tiers are represented by a the case may be.
unique 15 digit numeric code. Rule 82 Classification should be recorded in all
Rule79 Authority to open a new Head of the bills and challans by Drawing
Account. The List of Major and Minor Officers. Suitable classification shall be
Heads of Accounts of Union and States is recorded by Drawing Officers on all bills
maintained by the Ministry of Finance drawn by them. Similarly, classification on
(Department of Expenditure – Controller challans crediting Government money into
General of Accounts) which is authorised the Bank shall be indicated or recorded by
to open a new head of account on the Departmental Officers responsible for the
advice of the Comptroller and Auditor collection of Government dues, etc. In
General of India under the powers flowing cases of doubt regarding the Head under
from Article 150 of the Constitution. It which a transaction should be accounted,
contains General Directions for opening the matter shall be referred to the Principal
Heads of Accounts and a complete list of Accounts Officer of the Ministry/
the Sectors, Major, Sub-Major and Minor Department concerned for clarification of
Heads of Accounts and also some the Ministry of Finance and the Controller
Sub/detailed heads, authorised to be so General of Accounts, wherever necessary.
opened. Rule 83 Charged or Voted Expenditure. The
Ministries/Departments may open Sub- expenditure covered under Article 112 (3)
Heads and Detailed Heads as required by of the Constitution of India is charged on
26
Chapter – 4
Ministry of Finance
the Consolidated Fund of India and is not laid down in the Memoranda of
subject to vote by the legislature. All other Instructions issued by the Reserve Bank of
expenditure met out of the Consolidated India.
Fund of India is treated as Voted Rule 86 Public Financial Management System
e x p e n d i t u r e . C h a r g e d o r Vo t e d (PFMS).—
Expenditure shall be shown separately in (1) Public Financial Management System
the accounts as well as in the Budget (PFMS), an integrated Financial
documents. Management System of Controller
Rule 84 Capital or Revenue Expenditure. General of Accounts, Government of
Significant expenditure incurred with the India, shall be used for sanction
object of acquiring tangible assets of a preparation, bill processing, payment,
permanent nature (for use in the receipt management, Direct Benefit
organisation and not for sale in the Transfer, fund flow management and
ordinary course of business) or enhancing financial reporting.
the utility of existing assets, shall broadly (2) All the ministries sanctioning grant-in-
be defined as Capital expenditure. aid shall register all implementing
Subsequent charges on maintenance, agencies till last level of
repair, upkeep and working expenses, implementation on PFMS to track fund
which are required to maintain the assets flow and unspent balances.
in a running order as also all other (3) All the payment, to the extent possible,
expenses incurred for the day to day shall be released ‘just-in-time’ by the
running of the organisation, including Ministries through PFMS.
establishment and administrative
expenses shall be classified as Revenue (4) Detailed Demand for Grants (DDG),
expenditure. Capital and Revenue as approved, must be uploaded on
expenditure shall be shown separately in PFMS at the start of each Financial
the Accounts. Year.
Rule 85 Banking Arrangements. The Reserve (5) All the re-appropriation orders,
Bank of India (RBI) shall be the banker to surrender order shall be generated
the Government. It shall maintain cash through PFMS system.
balance of the Government and provide (6) All grantee institutions shall submit
banking facilities to the Ministries and Utilisation Certificates on PFMS.
subordinate or attached offices either Rule 87 Direct Benefit Transfer.
directly through its own offices or through (1) Transfer of benefits should be done
its agent banks. For this purpose, RBI shall, directly to beneficiaries under various
in consultation with the Controller General Government Schemes and
of Accounts, nominate a bank to function Programmes using Information and
as Accredited Bank of a Ministry or Communication Technology (ICT).
Department. Pay & Accounts offices and Necessary process reengineering to
Cheque Drawing and Disbursing Officer minimise intermediary levels and to
shall have assignment accounts with the reduce delay in payments to intended
identified branches of the Accredited Bank beneficiaries with the objective of
of the Ministry. All payments shall be made minimising pilferage and duplication
through these identified bank branches. should be done for all Government
These branches shall also collect Schemes and Programmes. The
departmental and other receipts. Tax process for implementation of DBT as
revenues of the Government shall be prescribed should be adopted.
collected by the RBI through its own offices (2) DBT should include in-kind and cash
or through the nominated branches of its transfers to beneficiaries as well as
agent banks. transfers/honorariums given to
Note: Detailed procedure to be followed various enablers of government
for remittance of Government receipts into schemes like community workers, etc.
Government cash balance and for successful implementation of the
reimbursement of payments made on schemes.
behalf of Government by the banks are
27
Chapter – 4
Ministry of Finance
(3) Transfer of cash benefits from be submitted to Parliament, shall be

Ministries/Departments should be prepared annually by the Controller
done (a) directly to beneficiaries from General of Accounts by consolidating the
Ministries/Departments; (b) through aforesaid Appropriation Accounts.
State Treasury Account; or (c) through Appropriation Accounts pertaining to
any Implementing Agency as Departments of Posts and Defence Services
appointed by Centre/State shall be prepared and signed by the
Governments. Secretaries to the Government of India in
(4) In-kind Transfer to Individual the Department of Posts and Ministry of
Beneficiary/ Household/Service Defence respectively and that of Ministry of
provider includes schemes or Railways by the Chairman, Railway Board.
components of schemes where in-kind Rule 89 Finance Accounts. Annual accounts of
benefits are given by the Government the Government of India (including
or through any Implementing Agency transactions of Department of Posts and
as appointed by Centre/State Ministries of Defence and Railways and
Governments to Individual transactions under Public Account of India
Beneficiary/Household/Service of Union Territory Governments), showing
providers. under the respective Heads the annual
(5) Ministries/Departments will use PFMS receipts and disbursements and statement
platform for processing of payments of balances for the purpose of the Union,
for cash / in kind transfers to called Finance Accounts, shall be prepared
individual beneficiaries as per and signed by the Controller General of
framework laid down by Department Accounts countersigned by the Secretary
of Expenditure, Ministry of Finance. (Expenditure), Ministry of Finance.
(6) I m p l e m e n t i n g A g e n c i e s s h a l l Rule 90 Presentation of Annual accounts. The
generate Electronic Utilisation Appropriation and Finance accounts
Certificate (E-UCs) on PFMS portal mentioned above, shall be prepared by the
and submit them online. E-UCs shall respective authorities on the dates mutually
be used to certify that money was agreed upon with the Comptroller and
actually utilized for the purpose for Auditor General of India, in the forms
which it was sanctioned to eliminate prescribed by the President on the advice of
the need for physical generation of the Comptroller and Auditor General of
UCs. India and sent to the latter for recording
(7) Transaction charges for the financial his/her certificate. The certified Annual
intermediaries facilitating DBT Accounts and the Reports relating to the
payments shall be paid as stipulated accounts shall be submitted by the
by Ministry of Finance. Comptroller and Auditor General of India
to the President in accordance with the
provisions of Section 11 of the Comptroller
II. ANNUAL ACCOUNTS and Auditor General’s (Duties, Powers and
Conditions of Service) Act, 1971 and
Rule 88 Appropriation Accounts. Appropriation Clause (1) of Article 151 of the Constitution
Accounts of Central Ministries (other than of India.
Ministry of Railways) and of Central Civil Rule 91 Administrative Ministries / PSUs /
Departments (excluding Department of Subordinate / Statutory / Autonomous
Posts and Defence Services) shall be Bodies may have financial stakes in Public
prepared by the Principal Accounts Private Partnerships (PPP)/ Production
Officers of the respective Ministries and Sharing Contracts (PSCs)/ Joint Ventures
Departments (under the guidance and (JV’s)/ Subsidiary companies etc. In such
supervision of the Controller General of case details of the financial stakes of the
Accounts) and signed by their respective Government or other entities mentioned
Chief Accounting Authorities i.e., the above, should be disclosed in the Annual
Secretaries in the concerned Ministries or Report of the Administrative Ministry.
Departments. Union Government
Appropriation Accounts (Civil) required to
28
Chapter – 4
Ministry of Finance
III. PROFORMA ACCOUNTS Rule 95 Maintenance and submission of

Rule 92 Subsidiary Accounts of Government subsidiary accounts and statements by
Departments undertaking commercial department units. The Head of the unit
activities. Where the operations of certain shall arrange to obtain the orders of
Government Departments working on a Government regarding the nature and
commercial or quasi-commercial basis form of subsidiary accounts and
e.g., an industrial factory or a store cannot statements, if any. Such accounts and
be suitably brought within the cash based statements shall be submitted to the
Government accounting system, the Head Accounts Officer on such date as may be
of the units shall be required to maintain required by him. The same shall be
such subsidiary proforma accounts in appended to the Appropriation Accounts
commercial form as may be agreed of each year.
between Government and Comptroller
and Auditor General of India. This IV. PERSONAL DEPOSIT ACCOUNTS
includes the maintenance of suitable
Manufacturing, Trading, Profit & Loss
Accounts and Balance Sheet. Rule 96 Personal Deposit Account. Personal
Deposit Account is a device intended to
Rule 93 Methods and principles on which facilitate the Designated Officer thereof to
subsidiary accounts in commercial credit receipts into and effect withdrawals
form are to be kept. The methods and directly from the account, subject to an
principles in accordance with which overall check being exercised by the bank
subsidiary and proforma accounts in in which the account is authorised to be
commercial form are to be kept shall be opened. The Designated Officer shall
regulated by orders and instructions ensure (with the help of a personal ledger
issued by Government in each case. account to be maintained by the bank for
Note 1. Proforma accounts of regular the purpose) that no withdrawal will result
Government Workshops and Factories in a minus balance therein. Only
shall be kept in accordance with the Government officers acting in their official
detailed rules and procedure prescribed in or any other capacity shall be the
the departmental regulations. Proforma Designated Officer thereof.
accounts relating to Public Works shall be Rule 97 (1) Authority to open Personal Deposit
prepared by the Accounts Officers in Account. The Personal Deposit Account
accordance with the instructions contained shall be authorised to be opened by a
in Account Code for Accountants General. special order by the concerned Ministry or
Note 2. The Heads of Account (which Department in consultation with the
should, as far as possible, be common to Controller General of Accounts. Such
the Government accounts and the special order or permission shall be issued
General Ledger maintained by a or granted by the Ministry or Department
Commercial Undertaking) shall be concerned after it is satisfied that the initial
selected with due regard to the principles accounts of the moneys to be held in a
of Governmental and Commercial personal deposit account and disbursed,
accounting so that the monthly classified shall be arranged to be maintained
account of income and expenditure of the properly and shall be subject to audit.
undertaking may be prepared readily Every personal deposit account so
from the General Ledger maintained by it. authorised to be opened, shall form part of
Rule 94 Adequate regulations to be framed to the Government Account and be located in
ensure cost deduced is accurate and the Public Account thereof. The provisions
true. Where commercial accounts are relating to “Personal Deposit Account” are
maintained for the purpose of assessment contained in para 16.7 of Civil Accounts
of the cost of an article or service, the Head Manual and Rule 191 to 194 of Central
of the unit shall ensure that adequate Government Account (Receipts and
regulations are framed with the approval Payments) Rules.
of Government in order to ensure that the Rule 97 (2) Personal Deposit accounts shall
cost deduced from the accounts is generally be authorised to be opened in
accurate and true. the following types of cases:
29
Chapter – 4
Ministry of Finance
(a) in favour of a Designated Officer considered as a capital expenditure and

appointed for the purpose of shall not, except in cases specifically
administering monies tendered by or authorised by the President on the advice
on behalf of wards and attached of the Comptroller and Auditor General of
estates under Government India, be debited to a Capital Head.
management. It shall also be ensured Capital expenditure is generally met from
that proper arrangements are made receipts of capital nature, as distinguished
for the maintenance and audit of from ordinary revenues derived from
connected initial accounts; taxes, duties, fees, fines and similar items
(b) in relation to Civil and Criminal of current income including extraordinary
Courts’ deposits, in favour of the receipts. It is open to the Government to
Chief Judicial Authority concerned; meet capital expenditure from ordinary
revenues, provided there are sufficient
(c) where, under certain regulatory
revenue resources to cover this liability.
activities of the Government, receipts
are realised and credited to a Fund or Expenditure of a Capital nature as defined
Account under the provisions of an Act above, shall not be classed as Capital
to be utilised towards expenditure expenditure in the Government Accounts
thereunder and no outgo from the unless the classification has been expressly
Consolidated Fund is involved. authorised by general or special orders of
Government.
(d) where a personal deposit account is
required to be created by a law or Expenditure of a Capital nature shall be
rules having the force of law and distinguished from the Revenue
certain liabilities devolve on the Expenditure both in the Budget Estimates
Government out of the special and in Government Accounts.
enactments; Rule 99 Principles for allocation of expenditure
(e) officers commanding units and others between Capital and Revenue. The
concerned in the administration of following are the main principles
public funds in the Defence governing the allocation of expenditure
Departments can be authorised to between Revenue and Capital:
open personal deposit accounts for (a) Capital shall bear all charges for the
such funds. first construction and equipment of a
project as well as charges for
intermediate maintenance of the work
V. CAPITAL AND REVENUE ACCOUNTS
while not yet opened for service. It
shall also bear charges for such
Rule 98 Capital Expenditure. Significant further additions and improvements,
expenditure incurred with the object of which enhance the useful life of the
acquiring tangible assets of a permanent asset, as may be sanctioned under
nature (for use in the organisation and not rules made by competent authority.
for sale in the ordinary course of business) (b) Subject to Clause (c) below, revenue
or enhancing the utility of existing assets, shall bear subsequent charges for
shall broadly be defined as Capital maintenance and all working
expenditure. Subsequent, charges on expenses. These embrace all
maintenance, repair, upkeep and working expenditure on the working and
expenses, which are required to maintain upkeep of the project and also on
the assets in a running order as also all renewals and replacements and
other expenses incurred for the day to day additions, improvements or
running of the organisation, including extensions that are revenue in nature
establishment and administrative as per rules made by Government.
expenses, shall be classified as Revenue
(c) In the case of works of renewal and
expenditure. Capital and Revenue
replacement, which partake
expenditure shall be shown separately in
expenditure both of a capital and
the Accounts.
revenue nature, the allocation of
Expenditure on a temporary asset or on expenditure shall be regulated by the
grants-in-aid cannot ordinarily be
30
Chapter – 4
Ministry of Finance
broad principle that Revenue should Rule 101 Capital receipts during construction
pay or provide a fund for the mainly to be utilised in reduction of
adequate replacement of all capital expenditure :
wastage or depreciation of property Capital receipts in so far they relate to
originally provided out of capital expenditure previously debited to Capital
grants. Only the cost of genuine accruing during the process of construction
improvements, which enhance the of a project, shall be utilised in reduction of
useful life of the asset whether capital expenditure. Thereafter their
determined by prescribed rules or treatment in the accounts will depend on
formulae, or under special orders of circumstances, but except under special
Government, may be debited to rule or order of Government, they shall not
Capital. Where under special orders be credited to the revenue account of the
of Government, a Depreciation or department or undertaking.
Renewals Reserve Fund is established Rule 102 Receipts and recoveries representing
for renewing assets of any commercial recoveries of expenditure previously
department or undertaking, the debited to Capital Major Head: Receipts
distribution of expenditure on and recoveries on Capital Account in so far
renewals and replacements between as they represent recoveries of expenditure
Capital and the Fund shall be so previously debited to a Capital Major
regulated as to guard against Head shall be taken in reduction of
overcapitalisation on the one hand expenditure under the Major Head
and excessive withdrawals from the concerned except where, under the rules of
Fund on the other. allocation applicable to a particular
(d) Expenditure on account of reparation department, such receipts have to be taken
of damage caused by extraordinary to Revenue.
calamities such as flood, fire, Rule 103 Conversion of outstanding loans into
earthquake, enemy action, etc., shall equity investments or grants-in-aid.
be charged to Capital, or to Revenue, Government takes from time to time,
or divided between them, depending suitable measures to strengthen/
upon whether such expenditure results restructure the Capital base of public
in creation/acquisition of new assets sector enterprises so that these enterprises
or whether it is only for restoring the can improve their performance and
condition of the existing assets, as productivity. As a part of the package
may be determined by Government scheme, financial relief in the form of
according to the circumstance of each conversion of outstanding loans into equity
case. investments or grants-in-aid are also
(e) Expenditure on a temporary asset agreed to.
cannot ordinarily be considered as a Where loans outstanding against Public
capital expenditure and shall not, Sector Undertakings are proposed to be
except in cases specifically authorised converted into equity investments in or as
by the President on the advice of the grants-in-aid to the Public Sector
Comptroller and Auditor General of Undertakings, the approval of the
India, be debited to a Capital Head. Parliament to such proposals, shall be
Rule 100 Allocation between capital and obtained by including a token provision in
revenue expenditure : The allocation the relevant Demands for Grants or
between capital and revenue expenditure Supplementary Demands for Grants as
on a Capital Scheme for which separate may be found expedient. The details of
Capital and Revenue Accounts are to be such conversion of loans may be explained
kept, shall be determined in accordance in the relevant Budget/Supplementary
with such general or special orders as may Demand documents. After obtaining the
be prescribed by the Government after approval of the Parliament, the balances
consultation with the Comptroller and under loans and the progressive
Auditor General of India. expenditure of the Capital Heads of
Accounts shall be corrected proforma in
the relevant Accounts of the Union
31
Chapter – 4
Ministry of Finance
Government, under the Loan/Capital VII. ADJUSTMENT WITH GOVERNMENT

Major Heads concerned. DEPARTMENTS ETC
VI. INTEREST ON CAPITAL Rule 108 Adjustments with State Governments.

Subject to the relevant provision of the
Rule 104 Interest rate. Except in special cases Constitution or of law made by Parliament
regulated by special orders of or any orders issued thereunder,
Government, interest at such rates as may adjustments in respect of financial
be specified from time to time shall be transactions with State Governments shall,
charged in the accounts of all Commercial unless otherwise provided for, be made in
Departments or units for which separate such manner, and to such extent as may be
capital and revenue accounts are mutually agreed upon between the Central
maintained within the Government Government and the State Government
accounts. concerned. However, adjustments with
State Government in respect of the matters
Rule 105 (1) Charging of interest on capital
mentioned below shall be regulated by the
outlay met out of specific loans raised
rules contained in Appendix-5 to the
by Government. For capital outlay met
Government Accounting Rules, 1990. The
out of specific loans raised by
rules are based on reciprocal
Government, the interest shall be charged
arrangements made with the State
at such rate as may be prescribed by
Governments and are, therefore, binding
Government, having regard to the rate of
on all of them:-
interest actually paid on such loans and
the incidental charges incurred in raising (i) Pay and Allowances, other than Leave
and managing them. Salaries.
By specific loans are meant loans that are (ii) Leave Salaries.
raised in the open market for one specific (iii) Pensions.
purpose which is clearly specified in the (iv) Expenditure involved in Audit and
prospectus and in regard to which definite keeping Accounts.
information is given at the time of raising (v) Cost of Police functions on Railways
of the loans. including the cost of protecting
Rule 105 (2) For capital outlay provided otherwise, Railway Bridges.
interest shall be charged at the rate of (vi) Cost of Forest Surveys carried out by
interest to be determined each year by the the Survey of India, and Forest maps
Department of Economic Affairs, Ministry prepared by that Department.
of Finance.
(vii) L e a v e S a l a r y a n d P e n s i o n
Rule 106 Method of calculation of interest. The Contributions recovered in respect of
interest shall be calculated on the direct Government servants lent on Foreign
capital outlay at the end of the previous Service
year plus half the outlay of the year itself,
Rule 109 Re-audit. As a convention, a period of
irrespective of whether such outlay has
three years has been accepted by the
been met from current revenues or from
Central and State Governments for the re-
other sources.
audit of past transactions involving errors
Rule 107 How interest charged to capital is to be in classification
written back. When under any special
Rule 110 W h e n a d j u s t m e n t n e c e s s a r y.
orders of Government, charges for interest
Adjustment shall always be made unless
during the process of construction of a
otherwise agreed upon —
project are temporarily met from capital,
the writing back of capitalised interest shall (a) If a commercial department or
form the first charge on any capital undertaking or a regularly organised
receipts or surplus revenue derived from store department or store section of a
the project when opened for working. department is concerned, or
(b) If under the operation of any rule or
order, an adjustment would have been
made if the particular transaction with
32
Chapter – 4
Ministry of Finance
State Government were a transaction of the Governments incurring the

between two departments of the expenditure initially
Central Government. Rule 114 Claims of State Governments on
Rule 111 Petty and isolated claims for services account of the extra cost of agency
rendered not to be preferred. The functions. Claims of State Governments,
Central Government (which includes on account of the extra cost of agency
Union Territories) and the State functions entrusted to them under Article
Governments have agreed under 258 of the Constitution shall be dealt with
reciprocal arrangements not to prefer and settled in accordance with such
petty and isolated claims for an amount directions as may be issued by the
not exceeding Rupees ten thousand President in this regard from time to time
against one another Rule 115 The following principles shall be generally
Rule 112 Criteria in determining whether a observed in dealing with claims preferred
particular claim is covered by the by State Governments under Clause (3) of
reciprocal arrangement. The significant Article 258 of the Constitution: —
criterion in determining whether a (i) If the agency work involves the
particular claim is covered by the employment of a State Commercial
reciprocal arrangement mentioned Department, it would be open to that
above, will be that the claim shall be both department to charge its normal
petty and of an occasional character and commercial costs.
shall cover services rendered and not
(ii) Public Works Department agency costs
supplies made unless the latter forms part
shall be represented by such
of service. The term “service rendered” will
percentage charges on the cost of
be taken to mean an individual act of
Central Works executed by the State as
service, like providing police escort to a
may be agreed between the Central
high dignitary and will not apply to supply
and the State Government concerned,
of stores etc. Claims relating to
works outlay being treated as an
Commercial undertakings under the
amount placed at the disposal of the
Government of India or the State
State Government for actual
Governments such as those of the
expenditure on the execution of the
Railways, the Department of Post, the
work.
Electrical undertakings, etc., shall fall
outside the purview of the proposed (iii) The cost of regular joint establishment
reciprocal arrangements and shall shall be shared as far as practicable
continue to be settled as hitherto. on the basis of fixed annual sums
settled in agreement with the State
If a doubt arises as to whether a particular
Government concerned.
claim would fall within or outside the
purview of the proposed arrangement, it (iv) In other cases, the following
shall be decided by mutual consultation. procedure shall be adopted unless
The above arrangements will remain in there are special orders to the
force without any time limit in respect of all contrary:-
State Governments. (a) Details of claims preferred by
Rule 113 Projects jointly executed by several State Governments shall be
State Governments. In the case of ascertained.
Projects, jointly executed by several (b) If the work has been performed by
Governments, where the expenditure is to the State Government in the past,
be shared by the participating the charges shall be compared
Governments in agreed proportions, but with those charged in the past but
the expenditure is ab-initio incurred by one it is not necessary to be meticulous
Government and shares of other in the matter.
participating Governments recovered (c) If the charges are found to be
subsequently; such recoveries from other reasonable and do not exceed
Governments shall be exhibited as Rupees Fifty thousand per annum
abatement of charges under the relevant for any individual item (or
expenditure Head of Account in the books connected group of items), a five
33
Chapter – 4
Ministry of Finance
years contract shall be offered to concerned Demand of the Ministry

the State Government during administratively concerned with the
which the Central Government subject. In computing the extra cost,
would pay the fixed sum per the element of leave and pensionary
annum for the work. The amount charges can also be included,
will be subjected to review at the provided the relevant service and
end of each period of five years. financial rules of the State
(d) If the amount agreed upon Governments provide for this.
exceeds Rupees Fifty thousand, it (ii) The expenditure on work entrusted
shall be necessary to have an to the State Government, such as
annual statement of proposed expenditure on construction and
charges from the State maintenance of National
Government at the time of Highways, expenditure on Defence
preparation of the Budget. Works, Aviation Works, etc.-The
However, if in any individual case, expenditure directly connected with
the charges are obviously static, the execution of the scheme or work
then the contract system may be entrusted to the State Government
adopted in these cases also. such as expenditure on the
(v) In exceptional cases in which construction or maintenance of
arbitration has to be resorted to, the National Highways etc., will be
Ministry of Finance will make the adjusted direct in the accounts of the
requisite arrangement in the matter. Central Government under the
(vi) The Ministry of Finance shall be relevant Head of Account. The
consulted on all matters arising under question of including the estimates in
Article 258 (3) of the Constitution. this regard in the Budget of the State
Governments and subjecting them to
Rule 116 Principles governing transactions in
the vote of the State Legislature will not
connection with the agency functions
arise. The expenditure will be adjusted
entrusted to State Government. The
under the Head “8658 – Suspense
following procedure shall be followed in
Accounts –PAO Suspense” in the
regard to transactions arising in
Remittance Section of the State
connection with the agency functions
Accounts in the first instance pending
entrusted to the State Governments under
their eventual clearance in accordance
Article 258 of the Constitution:
with the prescribed procedure.
(i) The expenditure on extra staff or
Note: In the converse case relating to the
contingencies which the State
entrustment of a State function to the
Government have to incur-The
Central Government under Article258-A
extra cost to the State Government
of the Constitution, a procedure similar to
arising mainly in respect of the
that indicated in the Rule 116 above shall
additional staff employed or
be followed. The extra cost on staff and
contingent and other expenditure, as
other contingent expenditure, etc., will
in the case of work devolving on the
accordingly have to be provided in the
State Governments in connection with
Budget of the Central Government in the
the administration of the Census Act,
usual manner and recovery made in
is reimbursable under Article 258 (3)
lumpsum from the State Government
of the Constitution. Expenditure in this
concerned. The other expenditure on
regard shall be provided in the State
execution of the work proper should be
Budget in the first instance and
debited to the State Government
adjusted in the accounts of the State
concerned directly and the question of
Governments under the normal
obtaining a vote of the Parliament for the
Heads of Accounts. These will be
same will not arise.
reimbursed in lumpsum to the State
Governments, necessary provision Rule 117 Crucial date for closure of Inter-
being made under a distinct sub-head Governmental adjustments. Inter-
”Amounts paid to other Governments, Governmental adjustments can be carried
Departments, etc.”, under the out upto the 15th of April on which date the
34
Chapter – 4
Ministry of Finance
books of the Reserve Bank are closed for country is regulated by the following
the month of March. Every endeavour principles;
must, therefore, be made to settle as far as (i) Maintenance – Half the maintenance
possible all transactions with State charges will be borne by the Central
Governments before the close of the year. Government, the other half being
Rule 118 Adjustments with foreign recovered, as far as practicable, from
Governments, outside bodies, etc. the foreign country, failing which the
Unless exempted by Government by foreign country’s share will also be
general or special orders, services shall borne by the Central Government.
not be rendered to any foreign (iii) Demarcation and Disputes – Charges
Government or non-Government body or relating to demarcation of boundaries
institution or to a separate fund constituted and boundary disputes will be borne
as such except on payment. by the Central Government under
Rule 119 Recoveries of expenditure for services Entry 10 of the Union List, subject to
rendered to non-Government parties. such recovery as shall be made from
Recoveries of expenditure for services the Foreign Country.
rendered or supplies made to non- (iii) Where streams or other watercourses
Government parties or other form the boundaries and where the
Governments (including local funds and ordinary principle of median line
Governments outside India), shall in all applies, the Government concerned
cases, be classified as receipts of the (i.e., Foreign Country or India) will
Government rendering such services. bear the cost of maintenance of the
Rule 120 Recoveries of expenditure for services boundary line on its side. Where a
rendered as an agent. When a separate set of survey marks is
Government undertakes a service merely maintained by each of the two
as an agent of a private body, the entire Governments on its side, the cost of
cost of the service shall be recovered from maintenance of the survey marks shall
that body so that the net cost to be borne by the Government
Government is nil. The recoveries shall be concerned.
taken as reduction of expenditure. Exception:
Explanation: The term ‘recovery’ is used (a) The arrangement in (i) above in its
in these rules to denote repayment of, or application to Nepal will be
payment by non-Government parties or subject to special arrangements
other Governments towards charges worked out in consultation with
initially incurred and classified by a the Nepal Government.
Central Government Department in the
(b) The share of the Bhutan
account, as final expenditure by debit to a
Government for maintenance
Revenue or Capital Head of Account.
and demarcation of and disputes
Recoveries towards establishment
over boundaries will be borne by
charges, tools and plants, fees for
the Central Government for the
procurement of inspection of stores or
present
both etc., effected at percentage rates or
otherwise, are some examples.
Rule 121 Payments to outside body or fund to be VIII. INTER-DEPARTMENTAL
through grant-in-aid. Any relief in ADJUSTMENTS
respect of payment for services rendered
or supplies made to any outside body or Rule 123 Inter-Departmental Adjustments. Save
fund shall ordinarily be given through a as expressly provided by any general or
grant-in-aid rather than by remission of special orders, a Service Department shall
dues. not charge other Departments for services
Rule 122 Charges relating to the maintenance rendered or supplies made which falls
and demarcations and disputes over within the class of duties for which the
boundaries. The incidence of charges former Department is constituted.
relating to the maintenance and However, a commercial Department or
demarcations and disputes over
boundaries between India and a foreign
35
Chapter – 4
Ministry of Finance
undertaking shall ordinarily charge and departmental adjustments. The

be charged for any supplies made and s e t t l e m e n t o f i n t e r- d e p a r t m e n t a l
services rendered to, or by, other adjustments shall be regulated by the
departments of Government. directions contained in Chapter 4 of
Rule 124 Principles for division of Departments Government Accounting Rules, 1990.
for purposes of inter-departmental Rule 127 Inter-departmental and other
payments. For purposes of inter- adjustments to be made in the account
Departmental payments, the Departments year. Under the directions contained in the
of a Government shall be divided into Account Code for Accountants General,
service Departments and commercial Inter-departmental and other adjustments
departments according to the following are not to be made in the accounts of the
principles:- past year, if they could not have been
(i) Service Departments. -These are reasonably anticipated in time for funds
constituted for the discharge of those being obtained from the proper authority.
functions which either- In all cases, where the adjustment could
have reasonably been anticipated as, for
(a) Are inseparable from and form example, recurring payments to another
part of the idea of Government Government or department and payments
e.g. Departments of which, though not of fixed amount, are of a
Administration of Justice, Jails, fixed character, etc., the Accounts Officer
Police, Education, Medical, Public will automatically make the adjustment in
Health, Forest, Defence; or the accounts before they are finally closed.
(b) Are necessary to, and form part The onus of proving that the adjustments
of, the general conduct of the could not have been reasonably
business of Government e.g. anticipated should lie with the Controlling
D e p a r t m e n t s o f S u r v e y, Officer.
Government Printing, Stationery, As between different Departments of the
Public Works (Building and Roads same Government, the recoveries effected
Branch), Central Purchase for services rendered shall be classified as
Organisation (Director-General deductions from the gross expenditure.
of Supplies and Disposals, New However, recoveries made by a
Delhi). Commercial Department, e.g., Railways,
(ii) C o m m e r c i a l D e p a r t m e n t s o r Posts or a departmental commercial
Undertakings.-These are established undertaking in respect of services rendered
mainly for the purposes of rendering in pursuance of the functions for which the
services or providing supplies, of Commercial Department is constituted
certain special kinds, on payment for shall be treated as receipts of the
the services rendered or for the Department but where it acts as an agent
articles supplied. They perform for the discharge of functions not germane
functions, which are not necessarily to the essential purpose of the Department,
governmental functions. They are the recoveries shall be taken as reduction
required to work to a financial result of expenditure.
determined through accounts Exception.-Recoveries of fees for
maintained on commercial principles. purchase, inspection, etc., effected by the
Rule 125 Period for preferment of claims. All Central Purchase Organizations of
claims shall ordinarily be preferred Government of India, are treated as
between Departments, both commercial receipts of the Department concerned.
and non-commercial of the Central NOTE 1.-The term ‘recovery’ is used in this
Government, within the same financial rule to denote repayment of/or payment by
year and not beyond three years from the one Department of the same Government
date of transaction. This limitation, towards charges initially incurred and
however, may be waived in specific cases classified by another Department in its
by mutual agreement between the accounts as final expenditure by debit to a
departments concerned. Revenue or Capital Head of Account.
Rule 126 Procedure for settlement of inter- Recoveries towards establishment charges,
36
Chapter – 4
Ministry of Finance
tools and plants, fees for procurement or pension as prescribed in the appropriate
inspection of stores or both, etc., effected order issued from time to time under
at percentage rates or otherwise, are some Appendix-II of Fundamental and
examples. Supplementary Rules.
NOTE 2.-Recoveries effected from another
Department of the same Government
which are to be classified as deduction
from the gross expenditure, shall be shown
in the relevant Demand for Grant as
“below the line” recovery under the
appropriate Major Head of Account etc.
Recovery actually effected, irrespective of
the year to which it relates shall be
adjusted in accounts in the schedule of
recovery to be attached to the
Appropriation Account of the year in which
the recovery is effected.
Rule 128 Adjustment of Pensionary Charges of
certain Commercial Departments.
Except as otherwise provided, the
pensionary liability of commercial
departments and undertakings, for which
pro forma commercial accounts are
maintained, shall be assessed on a
contribution basis at such rates as may be
fixed by Government from time to time. In
the case of departments and
undertakings, for which no regular
commercial accounts are maintained
either within or outside the regular
Government accounts but which are
allowed to charge for their products or
services rendered, the pensionary liability
shall be taken into account in the estimate
of overhead charges and manufacturing
costs for the purpose of calculating the
issue price of goods manufactured or fees
for services rendered. The calculation shall
be made at rates prescribed for the
purpose by Government.
NOTE: The Railways, Posts and Defence
Departments are regarded as separate
Governments for the purpose of
adjustment of pensionary charges.
Rule: 129 Pensionary liability in the case of
Government Departments/
Undertakings declared as commercial.
In the case of Government Departments
and Undertakings declared as
commercial, adjustment of Pensionary
liability shall be made in the regular
accounts by charging the average of the
percentage for 15th year of service based
on the rates of monthly contribution of
37
Chapter – 5
Ministry of Finance
WORKS
Rule 130 Original works means all new estimated to cost above Rupees thirty Lakhs
constructions, site preparation, additions and original works of any value to:
and alterations to existing works, special (i) any Public Sector Undertaking set up
repairs to newly purchased or previously by the Central or State Government to
abandoned buildings or structures, carry out civil or electrical works or
including remodelling or replacement. (ii) t o a n y o t h e r C e n t r a l / S t a t e
Minor works mean works which add Government organisation /PSU which
capital value to existing assets but do not may be notified by the Ministry of
create new assets. Urban Development (MoUD) for such
Repair works means works undertaken to purpose after evaluating their
maintain building and fixtures. Works will financial strength and technical
also include services or goods incidental competence.
or consequential to the original or repair For the award of work under this sub-rule,
works. the Ministry/ Department shall ensure
Rule 131 Administrative control of works competition among such PSUs/
includes: Organisations. This competition shall be
(i) assumption of full responsibility for essentially on the lump sum service
construction, maintenance and charges to be claimed for execution of
upkeep; work.
(ii) proper utilization of buildings and In exceptional cases, for award of work
allied works; under (i) and (ii) above, on nomination
(iii) provision of funds for execution of basis, the conditions contained in Rule 194
these functions. would apply. The work under these
circumstances shall also be awarded only
Rule 132 Powers to sanction works. The powers on the basis of lump sum service charge
delegated to various subordinate
authorities to accord administrative Rule 134 Work under the administrative control
approval, sanction expenditure and re- of the Public Works Departments.
appropriate funds for works are regulated Works not specifically allotted to any
by the Delegation of Financial Powers Ministry or Department shall be included in
Rules, and other orders contained in the the Grants for Civil Works to be
respective departmental regulations. administered by Central Public Works
Department. No such work may be
Rule 133 (1) A Ministry or Department at its financed partly from funds provided in
discretion may directly execute repair departmental budget and partly from the
works estimated to cost up to Rupees Thirty budget for Civil works as mentioned
Lakhs after following due procedure above.
indicated in Rule 139, 159 & 160.
Rule 135 (1) General Rules. Subject to the
Rule 133 (2) A Ministry or Department may, at its observance of these general rules,
discretion, assign repair works estimated (including Rule 144)the initiation,
to cost above Rupees thirty Lakhs and authorization and execution of works
original/minor works of any value to any allotted to a particular Ministry or
Public Works Organisation (PWO) such as Department shall be regulated by detailed
Central Public Works Department rules and orders contained in the
(CPWD), State Public Works Department, respective departmental regulations and
others Central Government organisations by other special orders applicable to them.
authorised to carry out civil or electrical
works such as Military Engineering Service Rule 135 (2) Ministry or Department shall put in
(MES), Border Roads Organisation (BRO), place, as far as possible, empowered
etc. or Ministry/Department’s construction project teams for all large value projects
wings of Ministries of Railways, Defence, and these teams should be tasked only with
Environment & Forests, Information & project execution and not given other
Broadcasting and Departments of Posts, operational duties.
and Space etc. Rule 136 (1) No works shall be commenced or
Rule 133 (3) As an alternative to 133(2), a Ministry liability incurred in connection with it until:
or Department may award repair works (i) administrative approval has been
38
Chapter – 5
Ministry of Finance
obtained from the appropriate applied to carry out additional work not
authority in each case. contemplated in the original project.
(ii) sanction to incur expenditure has Rule 139 Procedure for Execution of Works. The
been obtained from the competent broad procedure to be followed by a
authority. Ministry or Department for execution of
(iii) a properly detailed design has been works under its own arrangements shall be
sanctioned; while designing the as under :-
projects etc, principles of Life Cycle (i) the detailed procedure relating to
cost may also be considered. expenditure on such works shall be
(iv) estimates containing the detailed prescribed by departmental
specifications and quantities of regulations framed in consultation
various items have been prepared on with the Accounts Officer, generally
the basis of the Schedule of Rates based on the procedures and the
maintained by CPWD or other Public principles underlying the financial and
Works Organisations and sanctioned. accounting rules prescribed for similar
(v) funds to cover the charge during the works carried out by the Central Public
year have been provided by Works Department (CPWD);
competent authority. (ii) preparation of detailed design and
(vi) tenders invited and processed in estimates shall precede any sanction
accordance with rules. for works;
(vii) a Work Order issued. (iii) no work shall be undertaken before
Rule 136 (2) On grounds of urgency or otherwise, if Issue of Administrative Approval and
it becomes necessary to carry out a work or Expenditure Sanction by the competent
incur a liability under circumstances when Authority on the basis of estimates
the provisions set out under sub rule 1 of framed;
rule 136 cannot be complied with, the (iv) Open tenders will be called for works
concerned executive officer may do so on costing Rs. Five lakh to Rs. Thirty lakh;
his own judgement and responsibility. (v) limited tenders will be called for works
Simultaneously, he should initiate action to costing less than Rupees five lakhs;
obtain approval from the competent (vi) execution of Contract Agreement or
authority and also to intimate the Award of work should be done before
concerned Accounts Officer. commencement of the work;
Rule 136 (3) Any development of a project (vii) final payment for work shall be made
considered necessary while a work is in only on the Personal Certificate of the
progress, which is not contingent on the Officer-in-charge of execution of the
execution of work as first sanctioned, shall work in the format given below:
have to be covered by a supplementary
“I …... Executing Officer of (Name of
estimate.
the Work), am personally satisfied that
Rule 137 For purpose of approval and sanctions, a the work has been executed as per the
group of works which forms one project, specifications laid down in the
shall be considered as one work. The Contract Agreement and the
necessity for obtaining approval or workmanship is up to the standards
sanction of higher authority to a project followed in the Industry.”
which consists of such a group of work
Rule 140 For original/minor works and repair works
should not be avoided because of the fact
entrusted as per Rule 133(2) or Rule
that the cost of each particular work in the
133(3), the Administrative Approval and
project is within the powers of such
Expenditure Sanction shall be accorded
approval or sanction of a lower authority.
and funds allotted by the concerned
This provision, however, shall not apply in
authority under these rules and in
case of works of similar nature which are
accordance with the Delegation of
independent of each other.
Financial Power Rules. The Public Works
Rule 138 Any anticipated or actual savings from a Organisation or the Public Sector
sanctioned estimate for a definite project, Undertaking or any Organisation allotted
shall not, without special authority, be
39
Chapter – 5
Ministry of Finance
work shall then execute the work entrusted

to it in accordance with the rules and
procedures prescribed in that
organisation. A Memorandum of
Understanding (MoU) may be drawn with
Public Works Organisation or the Public
Sector Undertaking for proper execution
of work.
Rule 141 Review of Projects. After a project costing
Rs. 100 crore or above is approved, the
Administrative Ministry or Department will
set up a Review Committee consisting of a
representative each from the
Administrative Ministry, Finance (Internal
Finance Wing) and the Executing Agency
to review the progress of the work. The
Review Committee shall have the powers
to accept variation within 10% of the
approved estimates. For works costing
less than Rs. 100 crore, it will be at the
discretion of the Administrative
Ministry/Department to set up a suitable
mechanism for review and acceptance of
variation within 10% of the approved
estimates.
40
Chapter – 6
Ministry of Finance
PROCUREMENT OF GOODS AND SERVICES

PROCUREMENT OF GOODS b) not indicate a requirement for a
particular trade mark, trade name
Rule 142 This chapter contains the general rules or brand.
applicable to all Ministries or (ii) the specifications in terms of quality,
Departments, regarding procurement of type etc., as also quantity of goods to
goods required for use in the public be procured, should be clearly spelt
service. Detailed instructions relating to out keeping in view the specific needs
procurement of goods may be issued by of the procuring organisations. The
the procuring departments broadly in specifications so worked out should
conformity with the general rules meet the basic needs of the
contained in this Chapter. organisation without including
Rule 143 Definition of Goods. The term ‘goods’ superfluous and non-essential
used in this chapter includes all articles, features, which may result in
material, commodity, livestock, furniture, unwarranted expenditure.
fixtures, raw material, spares, instruments, (iii) Where applicable, the technical
machinery, equipment, industrial plant, specifications shall, to the extent
vehicles, aircraft, ships, medicines, practicable, be based on the national
railway rolling stock, assemblies, sub- technical regulations or recognized
assemblies, accessories, a group of national standards or building codes,
machineries comprising of an integrated wherever such standards exist, and in
production process or such other category their absence, be based on the
of goods or intangible products like relevant international standards. In
software, technology transfer, licenses, case of Government of India funded
patents or other intellectual properties projects abroad, the technical
purchased or otherwise acquired for the specifications may be framed based
use of Government but excludes books, on requirements and standards of the
publications, periodicals, etc. for a library. host beneficiary Government, where
The term ‘goods’ also includes works and such standards exist.
services which are incidental or Provided that a procuring entity may,
consequential to the supply of such goods, for reasons to be recorded in writing,
such as, transportation, insurance, adopt any other technical
installation, commissioning, training and specification.
maintenance. (iv) Care should also be taken to avoid
Rule 144 Fundamental principles of public purchasing quantities in excess of
buying (for all procurements including requirement to avoid inventory
procurement of works). Every authority carrying costs.
delegated with the financial powers of (v) offers should be invited following a
procuring goods in public interest shall fair, transparent and reasonable
have the responsibility and accountability procedure.
to bring efficiency, economy, and
(vi) the procuring authority should be
transparency in matters relating to public
satisfied that the selected offer
procurement and for fair and equitable
adequately meets the requirement in
treatment of suppliers and promotion of
all respects.
competition in public procurement.
(vii) the procuring authority should satisfy
The procedure to be followed in making
itself that the price of the selected offer
public procurement must conform to the
is reasonable and consistent with the
following yardsticks :-
quality required.
(i) The description of the subject matter
(viii) at each stage of procurement the
of procurement to the extent
concerned procuring authority must
practicable should -
place on record, in precise terms, the
a) be objective, functional, generic considerations which weighed with it
and measurable and specify while taking the procurement
technical, qualitative and decision.
performance characteristics.
(ix) a complete schedule of procurement
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PREFACE

Appendix Subject Page

Form Description Page

authority; (xxxi) CAPEX model: In the CAPEX Model,

GENERAL SYSTEM OF FINANCIAL MANAGEMENT

Ministry or Department. A confirmation to the President, a subordinate authority shall

Personnel should specify that the concurrence of the Comptroller and

BUDGET FORMULATION AND IMPLEMENTATION

estimates. The estimates of receipts and Rule 56 Communication and distribution of

Accounting Authority. The Secretary of a

In Part-III – Public Account- transactions them in consultation with the Budget

(3) Transfer of cash benefits from be submitted to Parliament, shall be

III. PROFORMA ACCOUNTS Rule 95 Maintenance and submission of

(a) in favour of a Designated Officer considered as a capital expenditure and

Government, under the Loan/Capital VII. ADJUSTMENT WITH GOVERNMENT

VI. INTEREST ON CAPITAL Rule 108 Adjustments with State Governments.

State Government were a transaction of the Governments incurring the

years contract shall be offered to concerned Demand of the Ministry

undertaking shall ordinarily charge and departmental adjustments. The

work shall then execute the work entrusted

PROCUREMENT OF GOODS AND SERVICES

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