Question

Which of the following is not an example of revenue receipts of the government?

• A. Income tax
• B. Goods and services tax
• C. Recovery of loans
• D. Interest received on loans

Answer 1

The Correct Option is C

Recovery of loans is a capital receipt because it involves repayment of previous lending.

Answer 2

Recovery of loans is classified as a capital receipt because it involves the repayment of loans previously provided by the government. Unlike revenue receipts, which are generated through regular income sources such as taxes and duties, capital receipts are non-recurring in nature.

When the government recovers loans, it is essentially receiving back the money that it had lent out earlier. This does not contribute to the government's regular income but rather represents the return of previously invested funds. As a result, it is considered a capital receipt rather than a revenue receipt.

Therefore, the recovery of loans serves to replenish the government's capital and is an important part of its overall financial management strategy.