alleryStart learning →A government receipt is classified as a capital receipt when it
Ais received as a cash grant-in-aid
Bcreates a liability or reduces assets
Carises from indirect taxation
Dis spent within the same year
Answer & Solution
Correct answer: B. creates a liability or reduces assets
1. Loans must be repaid, so they create a liability.
2. Selling a PSU stake reduces the government's financial assets.
3. Any receipt that **creates a liability or reduces financial assets** is a capital receipt.
4. Grants-in-aid from abroad create no liability, so they sit under non-tax revenue receipts instead.
_Source: syllabus Introductory Macroeconomics, Ch 5 "Government Budget and the Economy", section 5.1.2 Classification of Receipts_
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