[Answered] Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets.

Budget is an Annual Financial Statement of yearly estimated receipts and expenditures of the government in respect of every financial year. 

Capital Budget Revenue Budget 
Capital budget is a statement of the government’s estimated capital receipts and capital expenditure. Capital budget covers capital items which are of non-recurring nature. 

 

Revenue budget is a statement of the government’s estimated revenue receipts and revenue expenditure for a period of one financial year. Revenue budget covers revenue items which are of recurring nature and are nonredeemable.  
Capital Budget has two components: Capital receipt and Capital expenditure. Revenue Budget has two components: Revenue receipt and Revenue expenditure. 
Capital receipts are receipts of the government which create liabilities or reduce financial assets, e.g., market borrowing, recovery of loan, etc.  

 

Capital expenditure is the expenditure of the government which either creates assets or reduces liability like creation of an asset, investment. 

The revenue receipts include both tax revenue like income tax, excise duty and non-tax revenue like interest receipts, profits. 

 

Revenue expenditure is expenditure for normal running of the government department and various services, interest charges on debt incurred by government, subsidies etc. 

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