Which of the following adds to the "Capital receipts" in government budget?
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: Sale of shares of SBI to HDFC bank
Capital receipts refers to those receipts which either result in creation of liability or in reduction of assets. Thus, sale of shares of SBI to HDFC bank will result in the reduction of assets of the government. Increase in income tax slab, interest received from Malaysia and dividends received from a PSU are revenue receipts. Revenue receipts are those receipts that do not lead to a claim on the government. They neither create liability nor reduces the assets of the government.
Here’s how the options fit into the concept of capital receipts:
-
Increase in income tax slabs by 5%: This is a change in tax policy, not a receipt. It affects revenue but does not directly involve capital receipts.
-
Interest received against the loans given to Malaysia: This is a form of revenue receipt, not capital receipt. It is income generated from loans previously given.
-
Sale of shares of SBI to HDFC bank: This represents the sale of government assets. The proceeds from selling shares are considered capital receipts as they involve a one-time influx of funds.
-
Dividends received from a PSU: This is a form of revenue receipt. It is income from government-owned public sector enterprises.