Question 12:Distinguish between revenue receipts and capital receipts of the government, with suitable examples.
The correct answer is – The government’s receipts are divided into two categories: revenue receipts and capital receipts. Revenue receipts refer to the government’s earnings from its regular activities, such as taxes and fees, while capital receipts refer to the government’s earnings from the sale of assets, borrowings, and recoveries of loans. Here are some differences between revenue receipts and capital receipts:
-
Nature of receipts: Revenue receipts are the government’s regular income from its day-to-day operations, while capital receipts are the government’s earnings from non-recurring activities such as borrowing, the sale of assets, and recoveries of loans.
-
Purpose of receipts: Revenue receipts are used to finance the government’s current expenditure, such as salaries, wages, and other administrative expenses, while capital receipts are used to finance the government’s capital expenditure, such as infrastructure development, purchase of equipment, and other capital investments.
-
Examples: Some examples of revenue receipts are income tax, sales tax, excise duty, customs duty, and service tax. These taxes are collected by the government regularly as part of its regular operations. On the other hand, some examples of capital receipts are proceeds from the sale of government-owned assets such as land or buildings, borrowing from the market, and foreign loans. Capital receipts are usually used to finance capital expenditures such as building infrastructure, constructing bridges, or purchasing large equipment.
-
Impact on the economy: Revenue receipts have a short-term impact on the economy and are essential for the smooth functioning of the government. Capital receipts, on the other hand, have a long-term impact on the economy as they are used to finance long-term investments in infrastructure, industries, and other critical sectors.
