🧷 Authentic Classroom Explanation by IAS Monk

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📌 The Question:

Consider the following statements:

I. Capital receipts create a liability or cause a reduction in the assets of the Government.
II. Borrowings and disinvestment are capital receipts.
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 III only
(c) I and III only
(d) I, II and III

✅ Correct Answer: (a) I and II only

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🧠 Curiosity Raiser

Why does the Budget treat borrowing and selling assets differently from taxes and fees?
Because how money comes matters as much as how much comes.

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📘 Enrichment Notes (Budget Basics – Very Testable)

🔹 Capital Receipts

Capital receipts are those receipts which:

• Create a liability, or
• Reduce the financial assets of the Government

Statement-wise analysis

• Statement I ✅ Correct
  ▸ Loans increase future repayment obligation
  ▸ Asset sale reduces government’s financial holdings
• Statement II ✅ Correct
  ▸ Borrowings → create liability
  ▸ Disinvestment → sale of PSU shares reduces assets
• Statement III ❌ Incorrect
  ▸ Interest received on loans is a revenue receipt
  ▸ It does not create liability, rather it is income

Key classification

• Capital Receipts: Borrowings, disinvestment, recovery of loans
• Revenue Receipts: Taxes, dividends, fees, interest receipts

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🧘‍♂️ IAS Monk Whisper

Borrowed money changes tomorrow; earned money sustains today.