Read the following statements - Assertion (A) and Reason (R):
Assertion (A): Capital Receipts involve the money received by way of loans or from the sale of assets by government.
Reason(R): Capital Receipts are termed as non-redeemable.
From the given alternatives choose the correct one:
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: Assertion (A) is true but Reason (R) is false.
Assertion (A) is correct. Capital receipts include money received by the government from loans (both domestic and international) and from the sale of assets or disinvestment. These are receipts that lead to an increase in the government’s liabilities or a reduction in its assets.
Reason (R) is incorrect. Capital receipts are not non-redeemable but they are redeemable. For example, loans taken by the government must eventually be repaid (redeemable). Revenue Receipts are termed as non-redeemable. These are the receipts that do not lead to a claim on the government. They are hence termed non-redeemable.