What are Receipts?
A receipt is a written acknowledgement of the transfer of something valuable from one party to another. In addition to the receipts that are normally given to customers by vendors and service providers, receipts are also given in business-to-business entities as well as stock market transactions. However, receipts are classified into two types. They are:
- Revenue receipts
- Capital receipts
Revenue receipts are those receipts that do not lead to a claim on the government. They are hence termed non-redeemable. They are classified into tax and non-tax revenues. Tax revenues, a vital component of revenue receipts, have been bifurcated into direct taxes (personal income tax) and enterprises (corporation tax), indirect taxes like customs duties (taxes imposed on commodities imported into and exported out of India), excise taxes (duties levied on commodities manufactured within the nation), and service taxes.
Other direct taxes such as gift tax, wealth tax, and estate duty (now eradicated) have never brought a large amount of revenue, hence they are known as paper taxes.
The government also gets money in terms of loans or from the sale of its assets. Loans must be given back to the agencies from which they have borrowed. Hence, they establish liability. The sale of government assets, such as the sale of shares in Public Sector Undertakings (PSUs) that is known as Public Sector Undertakings disinvestment, minimises the total amount of financial assets of the government.
Likewise, when the government sells an asset, it is understood that its earnings from that asset will vanish in the future. Hence, these receipts can be debt establishing or non-debt establishing. All the receipts of the government that establish liability or minimise financial assets are known as capital receipts. When the government takes loans, it means that these loans will have to be given back and interest will have to be financed on these loans in the future.
The above-mentioned is the concept that is explained in detail about Classification of Receipts for the class 12 students. To know more, stay tuned to our website.