Capital Receipts Vs. Revenue Receipts
Capital Receipts Vs. Revenue Receipts
Income tax is levied on the total income of the tax payer; the method of computing tax on different sources of receipts is different. Often revenue receipts are considered as business income and it is arises because of business transactions. While calculating net income of a person only the expenses in revenue nature are allowed to deduct from the revenue receipts. Whereas capital receipts are non-business income and it arises independently, that are not considered as business income and treated as capital gain. This gives a clear distinction between the capital and revenue receipts.
Criteria to distinguish
It is difficult to say the difference between capital receipts and revenue receipts. Based on certain points usually the income-tax and accounting authorities used to differentiate the receipts.
Nature of receipts
If a receipt is related to fixed asset, the receipts are considered as capital receipts. Fixed asset is giving the long-term benefit to the proprietor. It has long life for example land and buildings, plant and machinery etc. If the income is arises out of sale of fixed assets is taken as capital receipts. Perhaps the income earned in the form of selling plant and machinery by the motor dealer is taken as business income, hence included in revenue receipt.
Revenue receipt is related with the current or circulating assets, it is derived from the sale of the circulating asset. It is the main purpose of the business. For example the income arises through buying yarn and selling the same in the form of cloth is revenue receipt.
Termination income
Salary received from the employer is a revenue receipt in the hands of the employee. But when this extended to compensation received at the time of termination of the employee from services is deemed as capital receipt. The income from the premature termination of lease or contract also capital receipt.
Income from sale of shares
Buying and selling of shares is the common activity for all. But for income-tax point of view, the income earned from the buying and selling of share is treated as business income as well as capital gain. If the shares held by any person for the purposes of his business or profession and any profit arises from this purchase of sale it is revenue receipts. If the share is not connected with his business or profession it is capital receipt.
Capital receipts
The following are the best examples of capital receipts.
Insurance claim received as compensation for the damaged asset.
Conversion of capital asset into business asset. The difference between the market value and cost price is taken as capital receipt.
Any other income received apart from the regular business is deemed as capital receipt.
Revenue receipts
The following is the example of revenue receipts.
Any income received by the way discharging usual business is revenue profit.
Questions and Answers
For computing profits of a business taxable under this act, only revenue expenses are allowed to be deducted in profit and loss account. Hence it becomes essential to distinguish revenue expenditure from a capital expenditure.
The Income Tax Act 58 of 1962 provides for the taxation to be levied on income received. However, the source of the income sometimes constitutes a problem. The law is easily applicable when the income is received from a legal source. Though, the nature of life nowadays and the activities in which taxpayers are involved are not always in line with the law. However, the dispositions of S23(o) prohibit the deduction of expenditure related to corruption, corrupt activities, a fine or penalty.
This article looks at the Nairobi Stock Exchange (NSE) to identify which from a number of strategies would produce winning stocks on a consistent basis. The article involves a study in which six hypothetical investment dates are considered between 2008 and 2010...The strategies include a dividend yield strategy, a capital growth strategy and a total return (hybrid) strategy to identify which among these would provide the highest number of winners in the period following the investment dates.
Businesses today are finding themselves short of cash for a myriad of reasons and are seeking new ways secure needed working capital. But, to succeed, businesses must first understand how working capital works in conjunction with their operating cycle.
Hey all, I have an 8890 thats in need of repair (screen issue). I bought the phone last August, but I cant find the receipt. I bought it from an Internet store listed on , but I cant recall the name of it. I tried looking it up on Yahoo, but cant find the order. When I first called Nokia customer service, they didnt mention anything about a receipt, but I think the website says something about including it. Is the receipt necessary for warranty work? The phone has the purchase date in its memory
The golden shower plant has a finest management insight for the corporate those who believe that giving advertisement ......
A present or a gift can be described as voluntary transfer of goods, money etc. to someone without any expectation in return. It depicts love and affection between the person giving and the person receiving gifts. In personal life, people give away gifts & mementos in birthdays, marriage anniversaries, festivals and other special occasions to their loved ones to express the warmth of their relationship.
There are still quite a number of company owners out there that do not exactly understand how name badges can help improve their businesses, and sadly, these owners are missing out. Name tags or name badges are awesome little tools that will help promote professionalism among your staff.
The UAE has surged ahead in the past few years to emerge as a strong contender for the hottest investment destination sobriquet. The entire procedure for doing business in UAE has been simplified to attract the brightest minds in the industry.
Mumbai is one of the largest urban agglomerations in the world. The strategic location of the city makes it a major business hub with the presence of several businesses on large as well as small scale.
Marketing is one of the business function most dramatically affected by emerging information technologies. Companies can use the web to provide ongoing information, service and support, creating positive interaction with customers that can serve as the foundation for long term relationships and encourage repeat purchases. Even cyber shopping allows customers to sit in the comfort of their homes and purchase their goods.
this helps the students pursuing B.Com., M.Com., BBA., MBA., etc for understanding the format about comparative statement and commen size balance sheet. A detailed formulae presentation is included it is also highly useful to the students.
Generally a fund is interpreted as working capital. Thus, funds flow is change in working capital. Hence, the changes in working capital is called as flow, the flow may be inflow or outflow. The term working capital has two concepts, gross working capital and net working capital. Gross working capital is the total of all current assets, whereas net working capital is the excess of current assets over current liabilities.
Often this question is asked from many business people. They strongly stress the factors of production is our creation; we bought it for a cost. No one provided this and no one protected this, we provided and protected, then why should I pay tax?
Financial inclusion is the availability of banking services at an affordable cost to poor, uneducated and rural groups. In India the basic concept of financial inclusion is having a saving or current account with any bank. In reality it includes loans, deposits, fund transfer, insurance services and much more. Over the last few decades, access to basic financial services has become a necessary precondition for participating fully in the economic and social life of a modern society. In particular
Discuss this Article
