What are Capital Receipts

it means all receipts of Govt which create liability or Reduce Financial Assets

Example of Capital Receipts which Increase Liability

Borrowings from Public

(Loan raised from Public by issuing govt bonds)

Borrowings from RBI, Financial Institutions and Banks

(This is done through sale of treasury bonds)

Borrowings from Foreign Govt and International Institutions

(Example -Loan taken from Japan to make bullet Train)

Saving Schemes

(Sale of National Savings certificate, Post office savings schemes)

Example of Capital Receipts which Reduce Financial Assets

Recovery of Loan Granted by Central Govt

Suppose loan granted by Central govt to State govt

It is Asset in books of Central Govt

Suppose State govt repays this loan

It is Reduction Of Financial Assets of Central govt

So it is a capital receipt

Disinvestment

Disinvestment means Sales of shares of public sector undertakings (PSU)

Govt owns shares of various companies like SBI, ONGC, BHEL

So these are asset to Central Govt

Suppose govt sells these shares, it is reduction of financial asset

Hence it is a capital receipt

NCERT Questions

No questions in this part

Other Books

question 1

In the following questions, select the correct answers:

Capital Receipts include:

1. Tax Revenue
2. Non-tax revenue
3. Recovery of loans
4. Borrowings

Question 2

Which one is a Capital Receipt?

1. Funds raised through National Savings Certificate
2. Financial help received from Microsoft for flood victims
3. Sale of 40% shares of PSU to a private enterprise
4. Profit of LIC, a public enterprise

Question 3

Which one of the followings statements is incorrect?

1. Revenue receipts are recurring in nature.
2. Revenue receipts are non-redeemable in nature.
3. Capital receipts create an asset or reduce liabilities of the government
4. Borrowings are treated as capital receipt as they lead to decrease in liability.

Question 4

Disinvestment by government means:

1. Selling of its fixed capital assets
2. Selling of shares of PSU held by it
3. Selling of its buildings
4. All of the above

Oswaal Questions

Question 1

Which of the following sources of receipts in government budget increases its liabilities?

1. Direct taxes
2. Recovery of loans
3. Borrowings
4. Dividend from public sector undertakings