Which of the following is not an example of revenue receipts of Government ?

Question

Accepted Answer

The correct option is 4:

In government budgeting, receipts are broadly classified into two categories: Revenue Receipts and Capital Receipts. Revenue receipts are those which neither create a liability nor cause a reduction in the assets of the government. They are regular and recurring in nature, financing the government’s daily expenditure. Conversely, Capital Receipts are those that either create a liability (the government has to pay it back) or cause a reduction in the government’s financial assets (like disinvestment). A Loan received from the World Bank clearly falls under the category of Capital Receipts because it is a borrowing, which creates a future repayment liability for the government. Since the question asks for an item that is *not* a revenue receipt, a loan, which is a capital receipt, is the correct answer.

The incorrect option is 1:
Direct taxes (like Income Tax or Corporate Tax) are considered revenue receipts because they are obligatory payments to the government that do not create any future repayment liability for the government. They are a primary and regular source of government income.

The incorrect option is 2:
Indirect taxes (like Goods and Services Tax or Customs Duties) are also definitive revenue receipts. Similar to direct taxes, they are mandatory payments that do not impose a liability on the government, thus funding its general administrative and developmental expenses.

The incorrect option is 3:
Dividends on investments made by the Government (such as profits from Public Sector Undertakings or PSUs) are non-tax revenue receipts. They are regular, non-repayable income earned by the government on its assets, hence classifying them as revenue receipts.