Introduction

• Capital receipts are those receipts which either create liabilities or reduce the asset value of the government.
• They are basically the loans raised by the government from various sources to fund long-term developmental needs. 
• They are non-recurring in nature.

Classification of Capital Receipts

Debt-capital receipts

• A majority of the capital receipts of the government are debt capital receipts. 
• Debt capital receipts include – market loans, issuance of special securities to public-sector banks, securities issues, short-term bank debt, treasury bills, securities against small savings, state pension schemes, relief bonds, saving bonds, gold bonds, external debt, and other debt capital receipts are all examples of debt capital receipts.
• It is the liability of the government to pay back the debt receipts. 
• A decrease in debt receiving (or borrowing) can make a significant difference in the economy’s financial stability.

Non-Debt receipts

• These are the receipts which do not create any liability of the government to repay in the future. 
• Recovery of loans and advances, disinvestment, and the issuance of bonus shares are all examples of non-debt capital receipts.
• Generally accounts for over 75% of total budget receipts.

Capital Receipts in-terms of Private Entities 

• Capital receipts of a firm/company/corporations are the funds received that are not revenue in nature and lead to an overall increase in the total capital. 
• These are funds generated from non-operating activities of a business hence are not shown inside the income statement instead they are shown inside a balance sheet.
• Capital receipts are not used to create reserve funds. 

Examples of Capital Receipts of a company are: Funds received from issue of shares or debentures, cash from sale of fixed assets, borrowings such as loans, insurance claims, disinvestments, additional capital introduced by the proprietors, etc.