What are Capital Receipts? Important aspects to know

  • Updated on: 25 Jun 2024
  • Published on: 22 Feb 2024
What are Capital Receipts? Important aspects to know

Capital receipts are non-business income that either reduces the assets or increases the liabilities of a business. Simply put, these are receipts for income generated through occasional capital activities and not routine operating activities.

It is also a written record of payment made in exchange for goods or services. Because of the capital nature of these receipts, they are a part of the balance sheet of an organisation and not the profit and loss statement. 

Read on to better understand capital receipts with examples, their types, features, and differences from revenue receipts. 

What are Capital Receipts? 

These receipts help in maintaining a business’s cash inflows from financial activities apart from business operations. These are not the business’s main source of income and may lead to reduced assets or increases in liabilities. You must record these receipts on accrual basis, and since they are non-recurring, you cannot use them for the distribution of profits. 

Types of Capital Receipts

These receipts primarily fall into two categories, as stated below: 

  • Debt Capital Receipts: This is when they are generated from borrowing outside of organisation capital. It leads to an increase in liability on the balance sheet, as the income must be repaid with interest. 
  • Non-Debt Capital Receipts: This is when they are generated not from borrowing but from selling or liquidating fixed assets. As such, there’s no increase in liability but a reduction in assets. 

Features of Capital Receipts

Knowing these features will help you distinguish these receipts from other capital gains.

  • These receipts are non-recurring and from non-operational activities
  • They either reduce the fixed assets of a company or increase the liabilities 
  • Since they are not related to business activities, they have no effect on profit and loss  
  • They do affect a company’s balance sheet 

Capital Receipts Example

Here are some other financial activities that fall under this category:

  • Sum received from the insurance company after a claim 
  • Funds received from the sale of company stocks or shares
  • Returns from equity investment 
  • Interest earned from fixed deposits 
  • Cash received from an investor 
  • Funds from debentures and other debt instruments
  • Funds from the sale of land, workspace, plant, furnishing, equipment, tools, fixtures, etc. 
  • Government grants 
  • Funds from savings schemes like Kisan Vikas Patra, Sukanya Samriddhi Scheme, National Saving Certificates, etc. 

Differences Between Capital and Revenue Receipts

As opposed to capital receipts, revenue receipts are income generated from the key resource for a company. Here are the differences between them:

Particulars Capital ReceiptsRevenue Receipts
Meaning Funds generated from the financial activities Funds generated from the operational activities
Example The amount received from the loan, disinvestment, insurance claim, etc.The amount received from sales, services, and other day-to-day activities 
Nature of FundsThey are non-recurring They are recurring 
Shown in They are recorded in the balance sheetThey are recorded in the income statement
Impact on profitThey do not impact the business’s profit or lossRevenue generated from business activities directly affects the profit
TermThey have short-term benefits for the companyThis has long-term benefits for the company
Impact on Financial StatementsThese show an increase in the cash flow and liabilities These result in an increase or decrease in the company’s income
Tax Usually, they are not subject to income tax, but in some cases, capital gains tax may applyThese are subject to income tax

After knowing these differences, it’s easy to understand the role of capital and revenue receipts in tracking a business’s cash flow. A lucrative alternative to get funds for maintaining cash flow is an Instant Personal Loan from Fibe. 

With Fibe, you can easily borrow between ₹8,000 and ₹5 lacs for any urgent or unexpected business needs without selling your assets. Choose a tenure of up to 36 months for comfortable EMIs and prepay anytime without any foreclosure or prepayment charges. Download the Fibe Personal Loan App or go to our website to apply online now! 

FAQs on Capital Receipts

How many types of capital receipts are there?

These receipts can be classified into two types – debt and non-debt, depending on whether they increase the liability or reduce the assets of the company.

Why are capital receipts not taxable?

The taxation of these receipts depends on how they are generated. If they are from the transfer of capital assets, they will be subject to capital gain taxation. If there is no asset involved, they are not taxed.


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