Question

Which of the following is a capital receipt in the government budget?

• A. Tax revenue
• B. Interest received on loans
• C. Disinvestment
• D. Dividends from public sector undertakings

Hint:

Revenue Receipts:
• Taxes
• Interest
• Dividends
• Fees Capital Receipts:
• Borrowings
• Recovery of Loans
• Disinvestment

Answer 1

The Correct Option is C

Concept: Government receipts are broadly classified into:
• Revenue Receipts
• Capital Receipts Revenue Receipts neither create liabilities nor reduce assets of the government. Capital Receipts either create liabilities or reduce assets of the government. Disinvestment represents the sale of government ownership in public sector enterprises and therefore reduces government assets. Hence it is treated as a capital receipt.

Step 1: Understand Revenue Receipts.
Revenue receipts are regular receipts of the government. Examples include:
• Tax revenue
• Interest receipts
• Dividends
• Fees and fines These do not affect government assets significantly.

Step 2: Understand Capital Receipts.
Capital receipts include:
• Borrowings
• Recovery of loans
• Disinvestment These receipts either increase liabilities or decrease assets.

Step 3: Understand disinvestment.
Disinvestment means selling shares of public sector enterprises. Suppose the government sells part of its ownership in a public enterprise. The government receives money. However, its ownership stake decreases. Therefore: \[ \text{Government Assets Decrease} \] Hence it is a capital receipt.

Step 5: Choose the correct answer.
Since disinvestment reduces government assets and generates funds: \[ \boxed{\text{Disinvestment}} \] is classified as a capital receipt. Therefore, \[ \boxed{(C)} \]