Budget Expenditure and Budget Receipts

Budget Expenditure: Expenditure Budget shows the revenue and capital disbursements of various ministries/departments and presents the estimates in respect of each under ‘Plan’ and ‘Non-Plan’.

Description: It gives a detailed analysis of various types of expenditure and broad reasons for the variations in estimates. Demand for grants from the Central government is also a part of the Expenditure Budget.

Budget Receipts: Budget receipts refer to the estimated money receipts of the government from all sources during a given fiscal year. Budget receipts may be further classified as:

(i) Revenue receipts;

(ii) Capital receipts.

Revenue Receipts: Revenue receipts refer to those receipts which neither create any liability nor cause any reduction in the assets of the government. They are regular and recurring in nature and the government receives them in its normal course of activities.

Revenue Receipts A receipt is a revenue receipt if it satisfies the following two essential conditions:

(i) The receipt must not create a liability for the government. For example, taxes levied by the government are revenue receipts as they do not create any liability. However, any amount, borrowed by the government, is not a revenue receipt as it causes an increase in Satisfies both the Conditions the liability in terms of repayment of borrowings.

(ii) The receipt must not cause a decrease in the assets. For example, a receipt from the sale of shares of a public enterprise is not a revenue receipt as it leads to a reduction in assets of the government.

Two Sources of Revenue Receipts:

Revenue receipts of the government are generally classified under two heads:

(i) Tax Revenue (ii) Non-Tax Revenue

Tax Revenue: Tax revenue refers to the sum total of receipts from taxes and other duties imposed by the government. Tax is a compulsory payment made by people and companies to the government without reference to any direct benefit in return. It means, there are two aspects of taxes:

(i) Tax is a compulsory payment, i.e., no one can refuse to pay it;

(ii) Tax receipts are spent by the government for the common benefit of people in the country. A taxpayer cannot expect that the tax amount will be used for his direct benefit.

Tax revenue is the main source of regular receipts of the government. The government collects various kinds of taxes from the public to meet its day-to-day expenditures and there is strict action against anyone who fails to pay the taxes. Tax Revenue can be further classified as:

(i) Direct Taxes (ii) Indirect Taxes

Revenue and Capital Receipts:

Capital Receipts are the income generated from the non-operating sources, which are having a long term effect. On the other hand, Revenue Receipts are the major source of income of the enterprise, without which a business may not survive for a long time.

Definition of Capital Receipt: Capital receipts are the income received by the company which is non-recurring in nature. They are generally part of financing and investing activities rather than operating activities. The capital receipt either reduces an asset or increases a liability. The receipts can be generated from the following sources:

1. Issue of Share.

2. Issue of debt instruments such as debentures.

3. Loan taken from a bank or financial institution.

4. Government grants.

5. Insurance Claim.

6. Additional capital introduced by the proprietor

Definition of Revenue Receipt: Revenue Receipts are the receipts which arise through the core business activities. These receipts are a part of normal business operations that is why they occur again and again however its benefit can be enjoyed only in the current accounting year as its effect is short term. The income received from the day to day activities of business includes all the operations that bring cash into the business like:

1. Revenue generated from the sale of inventory

2. Services Rendered.

3. Discount Received from the creditors or suppliers.

4. Sale of waste material/scrap.

5. Interest Received.

6. Receipt in the form of dividend.

7. Rent Received

Revenue receipts and Revenue expenditure of the Government:

Under Article 112 of the Constitution of India, the Annual Financial Statement has to distinguish expenditure of the Government on revenue account from other expenditures. Government Budget, therefore, comprises of Revenue Budget and Capital Budget.

Revenue Budget consists of the revenue receipts of Government (tax revenues and other revenues like interest and dividend on investments made by Government, fees, and other receipts for services rendered by Government) and the expenditure met from these revenues.

Revenue expenditure is for the normal running of Government departments and various services, interest payments on debt, subsidies, etc. Broadly, the expenditure which does not result in creation of assets for Government of India is treated as revenue expenditure. All grants given to State Governments/Union Territories and other parties are also treated as revenue expenditure even though some of the grants may be used for creation of assets.