Income tax 2022-2023 latest Urgent Urgent

• 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.

Capital Receipts vs. Revenue Receipts (Comparison Table)

Features of Capital Receipts

1. Capital Receipts do not arise during the ordinary course of business
2. They are of non-recurring nature
3. Appear in the Balance Sheet
4. 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

1. These receipts are of recurring nature.
2. They result from normal business activities.
3. Such receipts are for general purposes.
4. 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.
5. 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

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

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.