Revenue versus Capital Receipts

Definition

Two classes of government income: revenue receipts neither create a liability nor reduce an asset, while capital receipts either create a liability (borrowing) or reduce an asset (disinvestment).

Key points

• Revenue receipts split into tax revenue (direct and indirect taxes) and non-tax revenue (interest, dividends, fees, fines).
• Capital receipts include borrowings (which create a liability), recovery of loans, and proceeds from disinvestment of public-sector shares (which reduce an asset).
• Disinvestment receipts are capital receipts because the government sells an asset; see concept disinvestment.
• The fiscal deficit equals total expenditure minus (revenue receipts plus non-debt capital receipts); borrowings are the financing item, not a non-debt receipt.
• Non-debt capital receipts (recovery of loans, disinvestment) are the only capital receipts that do not add to debt.

Why it matters for CAPF

The tax-versus-non-tax split, the debt-versus-non-debt capital receipt distinction, and the placement of disinvestment are recurring budget facts.

Common confusion

Revenue receipts (no liability, no asset reduction) versus capital receipts (borrowing or asset sale); borrowings are capital receipts that create debt, while recovery of loans and disinvestment are non-debt capital receipts.

Parent note

budget and fiscal policy