Rule 104 — GFR 2017
Original Rule Text
Rule 104
Interest rate. Except in special cases
regulated
by
special
orders
of
Government, interest at such rates as
may be specified from time to time shall
be charged in the accounts of all
Commercial Departments or units for
which separate capital and revenue
accounts are maintained within the
Government accounts.
What This Means
This rule explains that certain government departments or units must account for the cost of the money they use by charging interest. This applies specifically to those departments that operate somewhat like businesses, meaning they keep separate records for their initial investments (capital) and their daily earnings and expenses (revenue) within the overall government accounting system.
The interest rate isn't fixed; it will be announced by the government periodically. The main idea is to ensure that these commercial-type government operations acknowledge the cost of the capital they utilize, similar to how a private business would. This helps in getting a clearer picture of their financial performance. However, there can be exceptions if the government issues specific orders for particular situations, allowing some departments to be exempt from charging this interest.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Government departments or units that operate commercially and maintain separate capital and revenue accounts must charge interest.
- 2The interest rates applied will be those officially announced by the government periodically.
- 3This rule aims to reflect the cost of capital used by commercial government entities in their accounts.
- 4Special government orders can provide exceptions to this interest charging requirement for specific cases.
Practical Example
Imagine the "National Infrastructure Development Corporation" (NIDC), a government unit responsible for building and maintaining toll roads. NIDC operates with a significant capital investment provided by the government and maintains distinct capital and revenue accounts to track its assets, project costs, toll collections, and operational expenses. According to Rule 104, NIDC would be required to charge interest on the capital it uses for its projects.
For instance, if NIDC received an initial capital allocation of INR 500 crores from the government to construct a new highway, and the Ministry of Finance has specified an annual interest rate of 7% for such capital, NIDC would need to account for INR 35 crores (7% of 500 crores) as interest payable in its financial statements each year. This accounting entry helps the government understand the true cost of running NIDC and evaluate its financial efficiency, even though the interest might not be a cash outflow to an external lender but rather an internal accounting adjustment.
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.