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Income tax 2022-2023 latest Urgent Urgent

Sujana (92 Points)

20 May 2023

CAN ANYONE POST DIFFERENCES BETWEEN CAPITAL AND REVENUE RECEIPTS UNDER PROFITS AND GAINS OF INCOME TAX ACT 1961? *ATLEAST 20 DIFFERENCES URGENT URGENT URGENT URGENT URGENT URGENT

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5 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 20 May 2023

Capital receipts are non-recurring in nature; on the other hand, revenue receipts are recurring in nature.
Without capital receipts, a business can survive, but there is no chance that a business will perpetuate without revenue receipts
Capital receipts can’t be used to distribute profits; revenue receipts can be distributed after deducting the expenses incurred to earn the revenue.
Capital receipts can be found in the balance sheet. Revenue receipts can be found in the income statement.
Capital receipts either reduce the company’s assets or create liability for the company. Revenue receipts are the opposite. They neither create liability for the company nor do they reduce the company’s assets.
Capital receipts are non-routine. Revenue receipts are routine.
Capital receipts are sources from non-operational sources. On the other hand, revenue receipts are sourced from operational sources.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 20 May 2023

Capital Receipts vs. Revenue Receipts (Comparison Table)

Basis for Comparison – Capital Receipts vs. Revenue Receipts	Capital Receipts	Revenue Receipts
1. Inherent meaning	Capital Receipts are receipts that don’t affect the profit or loss of business.	Revenue Receipts are receipts that affect the profit or loss of business.
2. Source	Capital Receipts stem from non-operational sources.	Revenue Receipts stem from operational sources.
3. Nature	Capital Receipts are non-recurring.	Revenue Receipts are recurring in nature.
4. Reserve funds	Capital Receipts can’t be saved for creating reserve funds.	Revenue Receipts can be saved for creating reserve funds.
5. Distribution	Not available for distribution of profits.	Available for distribution of profits.
6. Loans – Capital Receipts vs. Revenue Receipts	Capital Receipts can be loans raised from banks/financial institutions.	Revenue Receipts are not loans, but the amount received from operations.
7. Found in	Balance Sheet.	Income Statement.
8. Example – Capital Receipts vs. Revenue Receipts	Sales of fixed assets.	Sale of products of the business;

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 20 May 2023

Features of Capital Receipts

Capital Receipts do not arise during the ordinary course of business
They are of non-recurring nature
Appear in the Balance Sheet
Creates liability

Examples

Capital contributed by members
Loans Raised
Legacies
Donations for specific purposes
Money received by issuing share capital
Compensation for the surrender of certain rights
Proceeds from selling fixed assets, even if it is received in instalment
Compensation for premature termination of the agreement
Government grants
Life membership fees
Receipts of proceeds of a LIC policy when it matures.
Receipt of insurance money over original cost, which is destroyed in an accident
Sale of scrap
Receipt of premium on issue of shares

Features of Revenue Receipts

These receipts are of recurring nature.
They result from normal business activities.
Such receipts are for general purposes.
They appear in the profit and loss account for calculating the financial year’s income. This means these receipts are matched against the revenue expenses for the period to determine the profit earned or loss sustained by the business.
Revenue receipts do not result in the creation of liabilities.

Examples

Proceeds from the sale of goods
Entrance fee
Locker Rent
Sale of old newspaper
Donations of general nature
Discounts and commissions received
Annual subscripttions
The amount received from debtors.
Bad debts recovered
Interest in investments received from UTI
Receipt of compensation on account of loss of stock in trade
Receipt in substitution of income
Compensation for loss of profit.
Money received from the government for stock in trade was destroyed due to civil disturbances.
Subsidy or cash assistance which the company receives for export promotion scheme.
Income from wasting assets
Profit on sale of shares if MOA authorizes it.
Receipt on the transfer of floating assets

Sujana (92 Points)
Replied 21 May 2023

Sir is this differences come under Profits and Gains of Business and Profession?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 21 May 2023

Correct...

The aggregate difference between revenue receipts and payments is called profits or loss in business, but not the differences of capital receipts or payments.