Where does the cash grants in aid from foreign countries are classified?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. non-tax revenue.
Cash grants-in-aid received from foreign countries are classified under non-tax revenue in government finance. Non-tax revenue includes all government receipts other than tax revenues, such as fees, fines, dividends, interest, and grants. Grants-in-aid from foreign countries are financial aids given without any obligation to repay and are used to support various government schemes or developmental projects. Since these are not earned through taxation or exchange of goods and services, they fall under non-tax revenue. Such funds help supplement the government’s budget for social, economic, and infrastructure development without increasing the tax burden on citizens.