Question

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.

Hint:

Capital receipts generally involve changes in assets or liabilities, while revenue receipts do not.

Answer 1

- 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.