CA Foundation · Business Economics · Public Finance
In the context of the Government Budget, which of the following is correctly classified as a capital receipt?
Recovery of loans previously granted to state governments is a capital receipt because it reduces the government's financial assets. Taxes, interest and dividends are revenue receipts, as they neither create a liability nor reduce any asset of the government.
- ACorporation tax collected from companies
- BInterest received on loans given to state governments
- CRecovery of loans previously granted to state governmentsCorrect
- DDividends received from public sector undertakings
Explanation
Capital receipts either create a liability or reduce the assets of the government. Recovery of loans reduces a financial asset (loans receivable), so it is a capital receipt. Corporation tax is a tax revenue, while interest and dividends are non-tax revenue receipts because they do not alter assets or liabilities.
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