Q.Distinguish between Revenue Receipts and Capital Receipts, giving two examples of each.
Revenue Receipts are receipts that neither create a liability for the government nor cause any reduction in its assets. Examples: tax revenue such as income tax, corporation tax, and GST; and non-tax revenue such as fees, fines, and dividends received from public sector undertakings.
Capital Receipts are receipts that either create a liability or reduce an asset. Examples: market borrowings and loans raised from foreign governments/institutions (debt-creating — a future liability to repay); and recovery of loans given earlier, or disinvestment of shares in a public sector undertaking (non-debt-creating — an existing asset is reduced or given up).
| Basis | Revenue Receipts | Capital Receipts |
|---|---|---|
| Effect on liabilities/assets | No liability created, no asset reduced | Creates a liability, or reduces an asset |
| Recurring nature | Regular, recurring | Often one-time or occasional |
| Examples | Income tax, fees, dividends | Public borrowings, loan recovery, disinvestment |
Revenue Receipts: e.g. income tax collected, fees received — no liability created, no asset reduced. Capital Receipts: e.g. loans raised from the public, disinvestment proceeds — create a liability or reduce an asset.
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