UPSC Prelims 2025 · Question 40 of 100
UPSC Prelims 2025 question on Capital Receipts
- ExamUPSC CSE
- Year2025
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicPublic Finance
- DifficultyMedium
- TypeStatement
Consider the following statements:
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?
Show answer
Answer: A. I and II only
Verdict
Statements I and II are correct → Option (a).
Statement by statement
Statement I – CORRECT: The government receives money by way of loans or from the sale of its assets. Loans create liability (must be returned). Sale of government assets (like PSU disinvestment) reduces total financial assets of the government. All those receipts which create liability or reduce financial assets are termed as capital receipts. Hence Statement I is correct.
Statement II – CORRECT: Borrowings create liability and hence are capital receipts. Disinvestment (sale of shares in Public Sector Undertakings) reduces total financial assets of the government and hence is also a capital receipt. Hence Statement II is correct.
Statement III – INCORRECT: Interest received on loans is a non-tax revenue receipt, not a capital receipt. 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, fees and other receipts. They do NOT create liability. Hence Statement III is not correct.