Question

Distinguish between `Revenue Receipts' and `Capital Receipts' in a Government Budget.

Hint:

Simple test: Ask ``Does this receipt create a future obligation (liability) or sell off a government asset?'' If yes $\rightarrow$ Capital Receipt. If no $\rightarrow$ Revenue Receipt.

Answer 1

Step 1: Understanding the Concept:
Budget receipts are categorized by how they affect the government's balance sheet (assets and liabilities).
Step 2: Detailed Explanation:
Revenue Receipts:
1. They neither create any liability nor cause any reduction in the assets of the government.
2. They are regular and recurring.
3. Examples: Taxes (Income Tax, GST) and Non-tax receipts (Fees, Fines, Dividends).
Capital Receipts:
1. They either create a liability or cause a reduction in the assets of the government.
2. They are non-recurring and irregular.
3. Examples: Borrowings (create liability), Disinvestment/sale of PSU shares (reduce assets), Recovery of loans (reduce assets).
Step 3: Final Answer:
Revenue receipts do not change what the government owns or owes, while capital receipts do.