The Union Budget, which is presented by the Finance Minister of India, comprises Capital Budget and Revenue Budget. The Capital Budget is further categorised into capital receipts and capital expenditure.
What are Capital Receipts?
Capital receipts are receipts that create liabilities or reduce financial assets. They also refer to incoming cash flows. Capital receipts can be both non-debt and debt receipts. Loans from the general public, foreign governments and the Reserve Bank of India (RBI) form a crucial part of capital receipts.
Understanding capital receipts
Capital receipts are loans taken by the government from the public, borrowings from foreign countries and institutes, and borrowings from the RBI. Recovery of loans given by the Centre to states and others is also included in capital receipts. In the balance sheet, capital receipts are mentioned in the liabilities section. The capital receipt has a nature of non-recurrence.
All capital receipts are tax-free, unless there is a proviso to tax it. Capital receipts can be both non-debt and debt receipts
Non-debt capital receipts
Non-debt receipts are those which do not incur any future repayment burden for the government. Almost 75 per cent of the total budget receipts are non-debt receipts.
Examples of non-debt capital receipts: Recovery of loans and advances, disinvestment, issue of bonus shares, etc
Debt capital receipts
Debt Receipts have to be repaid by the government. Around 25 per cent of government expenditure is financed through borrowing. A reduction in debt receipt (or borrowing) can be a big leap for the economy's financial health. Most of the capital receipts of the government are debt receipts
Examples of debt capital receipts: Market loans, issuance of special securities to public-sector banks, issue of securities, short-term borrowings, treasury bills, securities against small savings, state provident funds, relief bonds, saving bonds, gold bonds, external debt, etc, are all example of debt capital receipts.