Rule 30 — GAR
Original Rule Text
30. Criteria for determining whether expenditure should be classified under heads of Capital Section or Revenue Section of the Consolidated Fund.
(1) Expenditure of a capital nature: to be classified in the Capital Section shall broadly be defined as expenditure incurred with the object of either increasing concrete assets of a material and permanent character.
NOTE:- Expenditure on a temporary: asset or expenditure on Grants-in-aid to local bodies or institutions (for the purpose of creating assets which will belong to these locai bodies or institutions) cannot ordinarily be classifiable as capital expenditure, and: shall not, except in cases specifically authorised by the President on the advice of: Comptrolier and Auditor General be debited to a capital head of account.
(2) Expenditure of a Capital nature shall be distinguished from Revenue expenditure both in the Budget Estimates and in Government Accounts.
NOTE:- Capital expenditure is generally met from receipts of a capital, debt, deposit or banking character as distinguished from ordinary revenue derived from taxes, duties, fees, fines and: similar items of current income including extra-ordinary receipts. It is open to the Government to meet Capital expenditure from ordinary revenues provided there are: sufficient revenue resources to cover this libiiity.
(3) Expenditure of a Capital nature as defined above shall not be classed as Capital expenditure in the Government accounts unless the classification has been expressly authorised by general or special orders of Government.
What This Means
Rule 30 provides the legal definition of 'capital expenditure' for government accounting purposes and sets out the conditions under which expenditure can be classified as capital rather than revenue. This is one of the most practically important classification rules because misclassifying revenue expenditure as capital (or vice versa) distorts the financial picture of government and can result in audit objections.
Capital expenditure is broadly defined as money spent with the aim of creating or increasing concrete assets that are material and permanent in nature. The key qualifiers are: the asset must be tangible (not a service), it must be permanent (not temporary), and it must belong to the government (not to some other body). Therefore, grants-in-aid to local bodies or institutions for them to create their own assets do not qualify as capital expenditure — even though assets are being created — because the government does not own those assets. Similarly, expenditure on a temporary asset (like a contractor's site office) is not capital expenditure.
The rule also specifies how capital expenditure is financed. While it is normally funded from capital receipts, debt, deposits, or banking operations (rather than from ordinary tax revenue), the government may meet capital expenditure from ordinary revenue if there are sufficient resources. This flexibility prevents a rigid separation that would create cash-flow problems. However, there is a critical compliance point: no expenditure may be classified as capital in the accounts unless the classification has been expressly authorised by a general or special order of Government. A department cannot unilaterally decide to capitalise an expenditure — it needs formal sanction.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Capital expenditure is defined as spending to create or increase concrete, material, and permanent assets owned by the Government.
- 2Grants-in-aid to local bodies or institutions for asset creation do not qualify as capital expenditure because the assets belong to those bodies, not the Government.
- 3Expenditure on temporary assets is also not capital expenditure under this rule.
- 4Capital and revenue expenditure must be shown separately in both Budget Estimates and Government Accounts.
- 5Capital expenditure is normally financed from capital receipts, debt, or deposits — but can be met from ordinary revenue if resources permit.
- 6No expenditure may be classified as capital in the accounts unless expressly authorised by general or special orders of Government — unilateral capitalisation is not permitted.
Practical Example
The National Highways Authority of India (NHAI) is seeking to construct a new expressway at a cost of Rs. 1,200 crore. The project will create a permanent road infrastructure asset owned by the Central Government. The Ministry of Road Transport correctly classifies this as Capital Expenditure under the appropriate Capital head (5054 — Capital Outlay on Roads and Bridges), with specific authorisation in the general orders that govern highway construction. The classification as capital has been authorised through the relevant general financial rules and project sanction.
In the same ministry, a proposal is received to provide a grant of Rs. 50 crore to a Municipal Corporation to build a bus terminal. Even though the bus terminal is a permanent physical asset, the expenditure cannot be classified as capital expenditure — the asset will belong to the Municipal Corporation, not the Government of India. The PAO correctly classifies the grant as a revenue expenditure under Grants-in-aid. If the accounts officer were to classify this as capital, it would be a misclassification under Rule 30, exposing the ministry to audit objection.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
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This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.