{"id":1286,"date":"2025-10-09T11:16:31","date_gmt":"2025-10-09T05:46:31","guid":{"rendered":"https:\/\/currentnewstimes.com\/upscpsir\/?p=1286"},"modified":"2025-10-05T12:14:29","modified_gmt":"2025-10-05T06:44:29","slug":"capital-vs-revenue-receipts-upsc-prelims-2025-economy-pyq-solved","status":"publish","type":"post","link":"https:\/\/currentnewstimes.com\/upscpsir\/capital-vs-revenue-receipts-upsc-prelims-2025-economy-pyq-solved\/","title":{"rendered":"Capital vs Revenue Receipts: UPSC Prelims 2025 Economy PYQ Solved"},"content":{"rendered":"\n<p>Q. Consider the following statements<\/p>\n\n\n\n<p><strong>Statement I:<\/strong> Capital receipts create a liability or cause a reduction in the assets of the Government.<br><strong>Statement II:<\/strong> Borrowings and disinvestment are capital receipts.<br><strong>Statement III:<\/strong> Interest received on loans creates a liability of the Government.<\/p>\n\n\n\n<p>Which of the statements given above are correct?<\/p>\n\n\n\n<p><strong>(a)<\/strong> I and II only<br><strong>(b)<\/strong> II and III only<br><strong>(c)<\/strong> I and III only<br><strong>(d)<\/strong> I, II and III<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>\u2705 Correct Answer: <strong>(a) I and II only<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">\ud83e\udde9 Detailed Explanation of Capital vs Revenue Receipts<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">Understanding Government Receipts<\/h3>\n\n\n\n<p>Government receipts represent the various sources through which the Government raises money. They are broadly classified into two categories:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Revenue Receipts<\/strong><\/li>\n\n\n\n<li><strong>Capital Receipts<\/strong><\/li>\n<\/ol>\n\n\n\n<p>(This PYQ is testing the Basic Economic Concepts)<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Statement-wise Analysis of this Economic PYQ 2025<\/h3>\n\n\n\n<h4 class=\"wp-block-heading\">Statement I \u2014 Capital receipts create liability or reduce assets \u2705<\/h4>\n\n\n\n<p>This statement is <strong>correct<\/strong>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Capital receipts<\/strong> are those receipts of the Government which either <strong>create a liability<\/strong> (for example, borrowings) or <strong>cause a reduction in the assets<\/strong> (for example, disinvestment or recovery of loans).<\/li>\n\n\n\n<li>They are non-recurring and affect the <strong>balance sheet<\/strong> of the Government.<\/li>\n<\/ul>\n\n\n\n<p><strong>Examples:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Loans from the Reserve Bank of India (RBI)<\/li>\n\n\n\n<li>Foreign borrowings<\/li>\n\n\n\n<li>Sale of Government shares in public enterprises (disinvestment)<\/li>\n\n\n\n<li>Recovery of loans previously granted to States or Union Territories<\/li>\n<\/ul>\n\n\n\n<p>Thus, <strong>Statement I is correct<\/strong>.<\/p>\n\n\n\n<p><strong>Also See:<\/strong> <a href=\"https:\/\/currentnewstimes.com\/upscpsir\/taxation-of-agricultural-income-upsc-prelims-2025-question-solved\/\">Taxation of Agricultural Income: UPSC Prelims 2025 Question Solved<\/a><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\">Statement II \u2014 Borrowings and disinvestment are capital receipts \u2705<\/h4>\n\n\n\n<p>This statement is <strong>correct<\/strong>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Borrowings<\/strong> increase Government liabilities because the Government has to repay them with interest.<\/li>\n\n\n\n<li><strong>Disinvestment<\/strong> involves selling Government-owned shares in public sector undertakings (PSUs), which reduces Government assets.<\/li>\n<\/ul>\n\n\n\n<p>Both are, therefore, part of <strong>capital receipts<\/strong>.<\/p>\n\n\n\n<p>Thus, <strong>Statement II is correct<\/strong>.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\">Statement III \u2014 Interest received on loans creates a liability \u274c<\/h4>\n\n\n\n<p>This statement is <strong>incorrect<\/strong>.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Interest received on loans<\/strong> is <strong>a revenue receipt<\/strong>, not a capital receipt.<\/li>\n\n\n\n<li>It represents <strong>income<\/strong> earned by the Government for lending funds, and does <strong>not create any liability<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>Hence, <strong>Statement III is incorrect<\/strong>.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">\ud83d\udcca Classification of Government Receipts<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Type<\/th><th>Definition<\/th><th>Examples<\/th><th>Impact on Assets \/ Liabilities<\/th><\/tr><\/thead><tbody><tr><td><strong>Revenue Receipts<\/strong><\/td><td>Receipts that neither create liabilities nor reduce assets.<\/td><td>Tax revenue, non-tax revenue, interest, dividends, fees, fines<\/td><td>No change in assets or liabilities<\/td><\/tr><tr><td><strong>Capital Receipts<\/strong><\/td><td>Receipts that create liabilities or reduce assets.<\/td><td>Borrowings, recovery of loans, disinvestment<\/td><td>Create liability or reduce assets<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Revenue Receipts in Detail<\/h3>\n\n\n\n<p>Revenue receipts are <strong>current income receipts<\/strong> of the Government from all sources such as taxes, profits of public enterprises, and grants.<br>They do <strong>not<\/strong> either create liability or reduce assets.<\/p>\n\n\n\n<p><strong>Also See:<\/strong> <a href=\"https:\/\/currentnewstimes.com\/upscpsir\/business-responsibility-sustainability-report-upsc-prelims-question-2025\/\">Business Responsibility and Sustainability Report: UPSC Prelims Question 2025<\/a><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Classification of Revenue Receipts<\/h4>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Category<\/th><th>Description<\/th><th>Examples<\/th><\/tr><\/thead><tbody><tr><td><strong>Tax Revenue<\/strong><\/td><td>Compulsory payments made by individuals and firms to the Government without any direct benefit in return.<\/td><td>Income Tax, Goods and Services Tax (GST), Customs Duty, Excise Duty<\/td><\/tr><tr><td><strong>Non-Tax Revenue<\/strong><\/td><td>Income from sources other than taxes.<\/td><td>Fees, fines, interest receipts, dividends, profits from public sector undertakings<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Capital Receipts in Detail<\/h3>\n\n\n\n<p>Capital receipts include those items that either <strong>increase liabilities<\/strong> or <strong>reduce assets<\/strong>.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Major Sources of Capital Receipts<\/h4>\n\n\n\n<h5 class=\"wp-block-heading\">Borrowings<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Domestic Borrowings:<\/strong> Issuance of Government securities, Treasury Bills, or borrowings through Public Provident Fund (PPF) and National Savings Schemes.<\/li>\n\n\n\n<li><strong>External Borrowings:<\/strong> Loans from foreign governments or international institutions such as the <strong>World Bank<\/strong>, <strong>International Monetary Fund (IMF)<\/strong>, and <strong>Asian Development Bank (ADB)<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>\ud83d\udca1 <em>Borrowings create a liability as they must be repaid with interest.<\/em><\/p>\n\n\n\n<p><strong>Also See:<\/strong> <a href=\"https:\/\/currentnewstimes.com\/upscpsir\/key-government-directorates-under-department-of-revenue-upsc-prelims-2025-q3-set-a\/\">Key Government Directorates under Department of Revenue<\/a><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h5 class=\"wp-block-heading\">Recovery of Loans<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Central Government often provides loans to State Governments and Union Territories.<\/li>\n\n\n\n<li>When these loans are repaid, the government recovers its assets in the form of cash. Since these receipts involve <strong>repayment of loans<\/strong> rather than revenue from regular operations, they are classified as <strong>capital receipts<\/strong>.<\/li>\n\n\n\n<li>When government receives interest on the loans given to state governments, then it comes under revenue receipts, because there is no change in assets of the government, but when it receives the whole loan given, then it is considered as Capital Receipt, because there is reduction in liabilities of the government.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h5 class=\"wp-block-heading\">Disinvestment<\/h5>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Disinvestment means <strong>selling Government ownership in public sector undertakings (PSUs)<\/strong>.<\/li>\n\n\n\n<li>Since it reduces Government assets, it is a <strong>capital receipt<\/strong>.<\/li>\n<\/ul>\n\n\n\n<p>\ud83d\udcd8 <em>Example:<\/em><br>The sale of Government shares in Bharat Petroleum Corporation Limited (BPCL) or Life Insurance Corporation (LIC) constitutes disinvestment.<\/p>\n\n\n\n<p><strong>Also See: <\/strong><a href=\"https:\/\/currentnewstimes.com\/upscpsir\/income-of-rbi-upsc-prelims-2025\/\">Sources of Income of RBI: UPSC Prelims 2025 Question 2<\/a><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">\ud83e\uddee Summary Table: Capital vs. Revenue Receipts<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Feature<\/th><th>Revenue Receipts<\/th><th>Capital Receipts<\/th><\/tr><\/thead><tbody><tr><td>Nature<\/td><td>Regular and recurring<\/td><td>Non-recurring<\/td><\/tr><tr><td>Creates Liability<\/td><td>\u274c No<\/td><td>\u2705 Yes<\/td><\/tr><tr><td>Reduces Assets<\/td><td>\u274c No<\/td><td>\u2705 Yes<\/td><\/tr><tr><td>Examples<\/td><td>Taxes, Fees, Fines, Interest<\/td><td>Borrowings, Disinvestment, Loan Recovery<\/td><\/tr><tr><td>Impact on Government Balance Sheet<\/td><td>No change<\/td><td>Change in assets\/liabilities<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">\ud83e\udde0 Mnemonic to Remember<\/h3>\n\n\n\n<p>\ud83d\udc49 <strong>&#8220;R\u00b2 C\u00b2&#8221; \u2014 Revenue = Regular, Recurring; Capital = Creates or Cuts assets<\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Also See:<\/strong> <a href=\"https:\/\/currentnewstimes.com\/upscpsir\/alternative-investment-funds-upsc-prelims-2025\/\">Alternative Investment Funds \u2013 UPSC Prelims 2025 \u2014 Q1 (Set A)<\/a><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">\ud83d\udcdd Prelims Practice Questions<\/h2>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Q1. Which of the following best describes the difference between capital and revenue receipts?<\/h3>\n\n\n\n<p>(a) Capital receipts are those that create liabilities or reduce assets; revenue receipts do neither.<br>(b) Capital receipts are recurring in nature; revenue receipts are non-recurring.<br>(c) Both capital and revenue receipts create liabilities.<br>(d) Revenue receipts reduce assets while capital receipts create income.<\/p>\n\n\n\n<p><strong>Answer:<\/strong> (a)<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">\u2753 Frequently Asked Questions (FAQ)<\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1759646220916\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Q1. Why is interest on loans a revenue receipt?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Because it represents <strong>income<\/strong> earned by the Government, and does <strong>not<\/strong> involve any creation of liability or reduction in assets.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1759646237343\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Q2. What is the main difference between borrowing and disinvestment?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p><strong>Borrowing<\/strong> increases Government liabilities.<br \/><strong>Disinvestment<\/strong> reduces Government assets.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1759646253453\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Q3. Is recovery of loans also a capital receipt?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Yes. Since it reduces the Government\u2019s outstanding loans (assets), it is categorized as a <strong>capital receipt<\/strong>.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1759646273183\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Q4. What are examples of non-tax revenue?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Fees, fines, interest receipts, dividends, profits from public enterprises, and license charges.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1759646289494\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">Q5. Why are capital receipts non-recurring?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Because they arise from occasional transactions such as borrowings, disinvestment, or loan recovery\u2014not from regular income sources.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n<h3 class=\"wp-block-heading\"><\/h3>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><\/h3>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><\/h3>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><\/h3>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Q. Consider the following statements Statement I: Capital receipts create a liability or cause a reduction in the assets of the Government.Statement II: Borrowings and disinvestment are capital receipts.Statement III: Interest received on loans creates a liability of the Government. Which of the statements given above are correct? (a) I and II only(b) II and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1287,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"disabled","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[8,10,9],"tags":[],"class_list":["post-1286","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-upsc-prelims","category-economics","category-prelims-2025"],"uagb_featured_image_src":{"full":["https:\/\/currentnewstimes.com\/upscpsir\/wp-content\/uploads\/2025\/10\/capital-vs-revenue-receipt.jpg",2048,2048,false],"thumbnail":["https:\/\/currentnewstimes.com\/upscpsir\/wp-content\/uploads\/2025\/10\/capital-vs-revenue-receipt-150x150.jpg",150,150,true],"medium":["https:\/\/currentnewstimes.com\/upscpsir\/wp-content\/uploads\/2025\/10\/capital-vs-revenue-receipt-300x300.jpg",300,300,true],"medium_large":["https:\/\/currentnewstimes.com\/upscpsir\/wp-content\/uploads\/2025\/10\/capital-vs-revenue-receipt-768x768.jpg",768,768,true],"large":["https:\/\/currentnewstimes.com\/upscpsir\/wp-content\/uploads\/2025\/10\/capital-vs-revenue-receipt-1024x1024.jpg",1024,1024,true],"1536x1536":["https:\/\/currentnewstimes.com\/upscpsir\/wp-content\/uploads\/2025\/10\/capital-vs-revenue-receipt-1536x1536.jpg",1536,1536,true],"2048x2048":["https:\/\/currentnewstimes.com\/upscpsir\/wp-content\/uploads\/2025\/10\/capital-vs-revenue-receipt.jpg",2048,2048,false]},"uagb_author_info":{"display_name":"Varun Jain","author_link":"https:\/\/currentnewstimes.com\/upscpsir\/author\/pushkaragarwal\/"},"uagb_comment_info":0,"uagb_excerpt":"Q. Consider the following statements Statement I: Capital receipts create a liability or cause a reduction in the assets of the Government.Statement II: Borrowings and disinvestment are capital receipts.Statement III: Interest received on loans creates a liability of the Government. Which of the statements given above are correct? (a) I and II only(b) II and&hellip;","_links":{"self":[{"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/posts\/1286","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/comments?post=1286"}],"version-history":[{"count":1,"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/posts\/1286\/revisions"}],"predecessor-version":[{"id":1288,"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/posts\/1286\/revisions\/1288"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/media\/1287"}],"wp:attachment":[{"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/media?parent=1286"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/categories?post=1286"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/currentnewstimes.com\/upscpsir\/wp-json\/wp\/v2\/tags?post=1286"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}