The Union Budget, which is presented by the Finance Minister of India, comprises Capital Budget and Revenue Budget. The Capital Budget is further categorised into capital receipts and capital expenditure.
What are Capital Receipts?
Capital receipts are receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows. Capital receipts can be both non-debt and debt receipts.
Must read: BUDGET TERMINOLOGY
Capital receipts are loans taken by the government from the public, borrowings from foreign countries and institutes, and borrowings from the RBI. Recovery of loans given by the Centre to states and others is also included in capital receipts.
In the balance sheet, capital receipts are mentioned in the liabilities section. The capital receipt has a nature of non-recurrence. All capital receipts are tax-free, unless there is a proviso to tax it.
What are Non-Debt Capital Receipts?
Non-debt receipts are those which do not incur any future repayment burden for the government. Almost 75 per cent of the total budget receipts are non-debt receipts.
Examples of Non-Debt Capital Receipts:
Recovery of loans and advances
Disinvestment
Issue of bonus shares, etc.
What are Debt Capital Receipts?
Debt Receipts have to be repaid by the government. Around 25 per cent of government expenditure is financed through borrowing.
A reduction in debt receipt (or borrowing) can be a big leap for the economy’s financial health. Most of the capital receipts of the government are debt receipts.
Examples of Debt Capital Receipts:
Market loans
Issuance of special securities to public-sector banks
Issue of securities
Short-term borrowings
Treasury bills
Securities against small savings
State provident funds
Relief bonds
Saving bonds
Gold bonds
External debt, etc.
PRACTICE QUESTIONS
QUES . Consider the following statements: UPSC 2025
I. Capital receipts create a liability or cause a reduction in the assets of the Government.
II. Borrowings and disinvestment are capital receipts.
III. Interest received on loans creates a liability of the Government.
Which of the statements given above are correct?
(a) I and II only
(b) II and III only
(c) I and III only
(d) I, II and III
Answer (a) EXPLANATION: Non-tax revenue receipts of the central government mainly consist of interest receipts on account of loans by the central government, dividends and profits on investments made by the government, fees and other receipts for services rendered by the government. They do not create liability. Hence statement III is not correct.
