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What is the difference between revenue expenditure and capital expenditure? Explain how taxes and government expenditure can be used to influence distribution of income in the society.

Or

What is the difference between direct tax and indirect tax? Explain the role of government budget in influencing allocation of resources.

Answer:

Difference between Revenue expenditure and capital expenditure:
Revenue Expenditure		Capital Expenditure
1.	Revenue expenditure refers to the expenditure that does not result in the creation of assets or reduction of liabilities.	1.	Capital expenditure refers to the expenditure which leads to creation of assets or reduction in liabilities.
2.	It is used for normal running of government departments and maintenance.	2.	It is used for acquiring capital assets.
3.	The recurring expenditure is of two types: (a) Plan revenue expenditure. (b) Non?plan revenue expenditure.	3.	The capital expenditure is also of two types: (a) Plan capital expenditure. (b) Non?plan capital expenditure.
4.	Its recurring expenditure incurred regularly.	4.	It is not recurring in nature.
5.	It is short-period expenditure.	5.	It is long period expenditure.
6.	Examples: Salaries of govt. employees, pensions, interest payments etc.	6.	Examples: defence capital, purchasing land, building, machinery etc.
To reduce inequalities of income and wealth, government can influence distribution of income by levying taxes on the rich people and granting subsidies to the poor people. Government levies higher rate of tax on rich and lowers the rate on the low income group people. Government provides subsidies and amenities to people whose income level is low. Fiscal instruments like taxation, subsidies and public expenditure can be made use of to influence distribution of income in the society.
Or
Difference between Direct tax and Indirect tax
	Direct		Indirect Tax
1.	When the liability to pay tax and the falls on the same person, it is called direct tax. Or we can say when impact & incidence of tax is on same person.	1.	When the liability to pay tax is on one person and the burden of that tax falls on some other person, the tax is called an indirect tax. Hence impact and incidence is on different persons.
2.	A direct tax is the tax whose burden is borne by the person on whom it is imposed.	2.	Indirect tax is a tax whose burden can be shifted to others
3.	It is progressive in nature	3.	It is regressive in nature.
4.	Eg: Income tax, wealth tax	4.	Eg: Excise duty, custom duty.
Role of government budget in influencing allocation of resources:
To achieve the social and economic objectives, government provides more resources into socially productive sectors like rural electrification, education, health, etc. Moreover government allocates more funds in the production of socially useful products and draws resources from some other areas to promote balanced economic growth of regions.