Classify the following as Revenue receipts or Capital receipts. Give valid arguments in support of your answer:
(i) Interest received on loan.
(ii) Disinvestment receipts from the sale of a government company.
(iii) Financial assistance by the Government of USA for promoting girl education in India.
(i) Interest received on loan.
(ii) Disinvestment receipts from the sale of a government company.
(iii) Financial assistance by the Government of USA for promoting girl education in India.
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Solution and Explanation
- Interest received on loan: Revenue Receipt. Revenue receipts are non-redeemable and arise during the normal course of government operations. Interest earned on loans is a recurring income.
- Disinvestment receipts from the sale of a government company: Capital Receipt. Disinvestment proceeds are non-recurring and lead to a reduction in the government’s asset base.
- Financial assistance by the Government of USA: Revenue Receipt. Grants and aid are non-redeemable and classified as revenue receipts as they do not create liabilities or reduce assets.
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