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Q. Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (150 words, 10 Marks)
2021 0
Answer:
Introduction
- Mention that these terms are part of the Union Budget
Body
- Mention the differences between Capital and Revenue Budget along with explanation of the components.
Conclusion
- Conclude suitably.
Introduction:
The Union Budget is referred to as the Annual Financial Statement (AFS) under the Constitution. It is a statement of the estimated receipts and expenditure of the Government in a financial year.
Body:
Components of government budgets:
Capital Budget | Revenue Budget |
Capital budget is a statement of the government’s estimated capital receipts and capital expenditure. | Revenue budget is a statement of the government’s estimated revenue receipts and revenue expenditure for a period of one financial year. |
Capital budget covers capital items which are of non-recurring nature. It is usually a one-time expenditure for a long period of time. | Revenue budget covers revenue items which are of recurring nature (on a yearly basis) |
Capital receipts are receipts of the government which create liabilities or reduce financial assets, e.g., market borrowing, recovery of loan, disinvestment, etc. | The revenue receipts include both tax revenue like income tax, excise duty and non-tax revenue like interest receipts, dividends, profits, etc. |
Capital expenditure is the expenditure of the government which either creates assets or reduces liability like creation of an asset, investment, repayment of loan, etc. | Revenue expenditure is expenditure for normal running of the government department and various services, interest payments, subsidies, etc. |
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