Consider the following statements:
1. The expenditure which does not result in creation of assets for Government of India is generally treated as revenue expenditure
2. All grants given to State Governments/Union Territories are treated as revenue expenditure
Which among the above is / are correct statements?

Answer: [C] Both 1 & 2

Revenue Budget consists of the revenue receipts of Government (tax revenues and other revenues) and the expenditure met from these revenues. Tax revenues comprise proceeds of taxes and other duties levied by the Union. The estimates of revenue receipts shown in the Annual Financial Statement take into account the effect of various taxation proposals made in the Finance Bill. Other receipts of Government mainly consist of interest and dividend on investments made by Government, fees, and other receipts for services rendered by Government. Revenue expenditure is for the normal running of Government departments and various services, interest payments on debt, subsidies, etc. Broadly, the expenditure which does not result in creation of assets for Government of India is treated as

revenue expenditure. All grants given to State Governments/Union Territories and other parties are also treated as revenue expenditure even though some of the grants may be used for creation of assets.

This question is a part of GKToday's Integrated IAS General Studies Module