Revenue receipts: Revenue receipts refer to receipts of the government as a result of which there is neither any creation of liability nor any reduction in assets of the government. Two main sources of revenue receipts of the government:

1. Tax receipts: It refers to the receipts from taxes and other such duties as imposed by the government. Taxes can further be classified as follows:

1. Direct taxes: Direct taxes refer to taxes which are imposed directly on the individual and companies. The burden of such taxes cannot be passed onto others. Examples: Income tax, corporation tax.
2. Indirect taxes: Indirect taxes are taxes which are imposed on the consumption of goods and services. The burden of such taxes can be shifted to others. Examples: Sales tax, service tax.

2. Non-tax receipts: Non-tax receipts refer to various receipts of the government from sources other than taxes. Some major sources of non-tax revenue receipts are interests on loans, fees and fines, licence fees, escheats, forfeitures, gifts and grants etc.

The system of taxation and subsidies by the government can be used to reduce the inequality of income in the economy. This can be done by imposing higher taxes on high-income groups and providing subsidies to low-income groups.
Capital receipts: Capital receipts refer to receipts of the government as a result of which there is either a creation of liability or any reduction in the assets of the government. Three main sources of capital receipts of the government:

1. Recovery of loans: It includes recovery of loans which was given to the state government.
2. Borrowings and other liabilities: It includes government borrowing from the general public, the Reserve Bank of India and rest of the world.
3. Other receipts: It includes disinvestment.