Union Budget 2026–27: Revenue Budget vs Capital Budget—Explained

Finance Minister Nirmala Sitharaman is expected to present the 2026–27 Union Budget on February 1, 2026. As the government plans its main budget for the year, it is important to know how its different parts work and why they matter.

One of the most common distinctions in the Union Budget is between the Revenue Budget and the Capital Budget because each plays a distinct role in managing the country’s finances.

Revenue Budget deals with the government’s everyday income and expenses, while the Capital Budget focuses on assets, investments and long-term financial decisions.

The Revenue Budget mainly includes revenue receipts and revenue spending. Revenue receipts are the money the government earns from taxes, such as income tax, corporate tax, customs duties and excise duties. It also includes non-tax income (such as dividends from government companies), service fees and interest from earlier loans.

Revenue expenditure also includes the government’s everyday activities, such as running ministries, paying salaries, giving subsidies, providing grants to states, and paying interest on loans. Importantly, revenue expenditure does not create assets. A revenue deficit happens if the government’s income from revenue is less than its spending.

The Capital Budget handles capital receipts and capital expenditure. Capital receipts are funds that either create a liability or reduce an asset. They include loans raised from the public, loans from foreign governments or institutions, and repayments of earlier loans given to states or other bodies. These funds help the government cover big expenses beyond day-to-day spending.

Capital expenditure refers to spending that create long-term assets. This includes building roads and infrastructure, constructing buildings, buying equipment, and supporting government companies. Loans and advances given by the central government are also part of it. Capital expenditure is important because it helps the economy grow and supports future development.

The difference between the Revenue Budget and the Capital Budget is important for clear and proper financial planning. As the Union Budget 2026–27 comes closer, knowing these parts shows where the government’s money comes from, how it is spent, and how it helps both daily needs and long-term projects.