Profits from public sector undertakings come under:

Question

Accepted Answer

The correct option is 2:

Profits earned by Public Sector Undertakings (PSUs) are classified under "Revenue Receipts" in the government budget. Revenue receipts are those monetary inflows to the government that do not create a liability (debt) nor cause a reduction in the government's assets. PSUs are commercial entities owned by the government, and the profits they generate are part of the government's current income stream derived from its ownership stake. These profits are recurring in nature and are used by the government to finance its revenue expenditure, such as subsidies, salaries, and interest payments. Therefore, because these profits are neither debt nor sale of assets, they are the prime example of non-tax revenue receipts.

The incorrect option is 1 (Public debt): Public debt represents the liabilities or borrowings of the government. PSUs' profits are an income source for the government, not an obligation to repay, making this classification fundamentally wrong.

The incorrect option is 3 (Capital receipts): Capital receipts are government inflows that either create a liability (like borrowing) or reduce the government's assets (like disinvestment/sale of a PSU). Profits are recurring income from an existing asset (the PSU), not a sale of the asset itself, and thus are not capital in nature.

The incorrect option is 4 (Monetized receipts): "Monetized receipts" is not a standard category in government budgeting. Monetization typically refers to converting an asset into money (like selling bonds) or printing money, which is separate from the operational profits earned by state-owned enterprises.