Differentiate between Revenue Receipts and Capital Receipts.

Difference between Revenue Receipts and Capital Receipts. Government receipts are divided into two groups — Revenue Receipts and Capital Receipts.
Basis of classification—All government receipts which either create liability or reduce assets of the government are treated as capital receipts whereas receipts which neither create liability nor reduce assets of the government are called revenue receipts.
(i)    Revenue Receipts. Government receipts which neither (a) create liabilities, nor
(b)    reduce assets are called revenue receipts. These are proceeds of taxes, interest and dividends on government investments, cess and other receipts for services rendered by government. Thus these are current income receipts of the government from all sources. Government revenue is the means for government expenditure in the same way as production is means for consumption. 
(ii)    Capital Receipts. Government receipts which either (i) create liabilities (of returning loans), or (ii) reduce assets (on disinvestment) are called capital receipts. Two main examples of capital receipts which create liability are (a) Borrowing, and (b) Raising of funds from PPF and Small Saving Deposits. Borrowing is treated capital receipts because it creates liability of returning loans. Similarly, funds raised from Post Office deposits, Public Provident Fund, NSS deposits, etc. are also treated as capital receipts because government has to repay these amounts.
Two main examples which reduce assets are (a) Recovery of loan, and (b) Disinvestment. How? Recovery of loan is treated as capital receipt because it causes reduction in assets. For example, a loan of र 100 crores given by Central government to State government (say UP govt.) is central govt. assets because it owns money that it lends. If UP government repays say र 20 crores to Central govt., it means reduction in assets of Central govt, to the time of र 20 crores. Thus recovery of loan by Central govt. is treated as capital receipt. Similarly, disinvestment by the govt. in the form of selling whole or part of its shares of public sector enterprises to private enterprises is treated capital receipt because it reduces govt. assets. In short, when government raises funds either by incrurring a liability or by disposing of assets,it is called a capital receipt. In government budget capital receipts are classified in three groups, namely, (i) Borrowings (ii) Recovery of loans, and (iii) Disinvestment and other receipts.
Difference. The main difference between revenue receipts and capital receipts is that in case of revenue receipts, government is under no future obligation to return the amount, i.e., they are non-redeemable. But in case of capital receipts which are borrowings, government is under obligation to return the amount alongwith interest.
Debt creating and non-debt creating capital receipts. Capital receipts may be debt creating or non-debt creating. Examples of debt creating receipts are: Net borrowing by government at home, loans received from foreign governments, borrowing from RBI. Examples of non-debt capital receipts are: Recovery of loans, proceeds from sale of public enterprises (i.e., disinvestment, etc.). These do not give rise to debt.