Which of the following is the correct explanation of the term 'Capital Receipts'?
- A.The receipts that do not lead to a claim on the government
- B.The receipts of the government which create liability or reduce financial assets
- C.The receipts of the grants given to state governments and other parties
- D.The receipts of the government which result in the reduction of financial liabilities
Correct answer
Explanation
The correct answer is B, The receipts of the government which create liability or reduce financial assets. In the Union Budget, money coming to the government is split into revenue receipts and capital receipts, and the test is exactly this one. Borrowings from the market, loans from the Reserve Bank or from abroad, and small savings and provident fund collections all create a liability, because the money has to be returned. Recovery of loans given earlier and disinvestment of shares in public sector units reduce the government's financial assets. Both kinds are capital receipts and are shown in the capital account. A is wrong because a receipt that creates no claim on the government is the definition of a revenue receipt, such as tax, fee, fine or dividend. C is wrong because grants to state governments are expenditure for the Centre, not a receipt. D is wrong because it reverses the rule; capital receipts add to liabilities rather than reduce them. Exam tip: capital receipts = borrowings + recovery of loans + disinvestment.
Practice Questions
View allAccording to the law of diminishing marginal utility, as the amount of a good consumed increases, the marginal utility of that good tends to
- A.improve
- B.diminish
- C.remain constant
- D.first diminish and then improve
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Each extra unit of a good gives a consumer less additional satisfaction than the unit before it, so marginal utility falls as consumption rises.
Read the full explanation →Consider the following statements about impact of tax : 1. A tax is shifted forward to consumers if the demand is inelastic relative to supply. 2. A tax is shifted backward to producers if the supply is relatively more inelastic than demand. Which of the statements given above is/are correct?
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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The burden of a tax falls more heavily on whichever side of the market is less elastic, the side that cannot easily walk away.
Read the full explanation →UBI, as an alternative for subsidies in poverty alleviation, stands for
- A.Union Basic Income
- B.Undefined Basic Income
- C.Unconditional Basic Income
- D.Universal Basic Income
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UBI is the idea of paying every citizen a fixed sum of money regularly, without conditions, in place of a large number of separate subsidies and welfare schemes.
Read the full explanation →Who among the following is the Chairman of the Fourteenth Finance Commission?
- A.C. Rangarajan
- B.Vijay Kelkar
- C.Y. V. Reddy
- D.Rakesh Mohan
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The Fourteenth Finance Commission, set up in 2013 for the award period 2015-2020, was chaired by Y. V. Reddy, a former Governor of the Reserve Bank of India.
Read the full explanation →Why was constitutional amendment needed for introducing GST?
- A.States were not willing to agree with the Union for introduction of GST without amendment in the Constitution.
- B.GST was to be implemented on concurrent base and Article 246 was inadequate for such a case.
- C.The Empowered Committee of Finance Ministers had recommended for constitutional amendment.
- D.The GST Council had recommended for constitutional amendment so that its power enhances.
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GST is levied by the Union and the States together on the same supply, and Article 246, which splits taxing powers between them through separate lists, did not allow such a concurrent tax.
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