CUET Preparation Today
Which of the following is a debt creating capital receipt of the government? |
Proceeds from the sale of PSUs. Recovery of loans Receipt of interest on loan. Borrowings |
Borrowings |
The correct answer is Option (4) → Borrowings A debt-creating capital receipt is any government receipt that creates a liability or a repayment obligation for the government. Borrowings: When the government borrows money (by issuing bonds, treasury bills, or taking loans), it creates a future liability to repay the principal amount along with interest. Therefore, borrowings are the primary example of a debt-creating capital receipt. Proceeds from the sale of PSUs (Disinvestment): This is a non-debt creating capital receipt. It reduces the government's assets (its ownership stake in a PSU) without creating a future repayment liability. Recovery of loans: This is a non-debt creating capital receipt. When the government recovers a loan it had previously given, it reduces its financial assets (the outstanding loan amount) and does not create a new liability.
Receipt of interest on loan: This is a revenue receipt. Interest received on loans given by the government is a form of regular income (non-tax revenue) that neither creates a liability nor reduces an asset (as it's distinct from the principal loan recovery). |
