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Rule 99 - Capital Expenditure Approval | KartavyaDesk

GFR 2017

Original Rule Text

in cases specifically authorised by the President on the advice of the Comptroller and Auditor General of India, be debited to a Capital Head. Rule 100 Allocation between capital and revenue expenditure: The allocation between capital and revenue expenditure on a Capital Scheme for which separate Capital and Revenue Accounts are to be kept, shall be determined in accordance with such general or special orders as may be prescribed by the Government after consultation with the Comptroller and Auditor General of India. Rule101 Capital receipts during construction mainly to be utilised in reduction of capital expenditure: Capital receipts in so far they relate to expenditure previously debited to Capital accruing during the process of construction of a project, shall be utilised in reduction of capital expenditure. Thereafter their treatment in the accounts will depend on circumstances, but except under special rule or order of Government, they shall not be credited to the revenue account of the department or undertaking. Rule 102 Receipts and recoveries representing recoveries of expenditure previously debited to Capital Major Head: Receipts and recoveries on Capital Account in so far as they represent recoveries of expenditure previously debited to a Capital Major Head shall be taken in reduction of expenditure under the Major Head concerned except where, under the rules of allocation applicable to a particular department, such receipts have to be taken to Revenue. Rule 103 Conversion of outstanding loans into equity investments or grants-in-aid. Government takes from time to time, suitable measures to strengthen/ restructure the Capital base of public sector enterprises so that these enterprises can improve their performance and productivity. As a part of the package scheme, financial relief in the form of conversion of outstanding loans into equity investments or grantsin-aid are also agreed to. Where loans outstanding against Public Sector Undertakings are proposed to be converted into equity investments in or as grants-in-aid to the Public Sector Undertakings, the approval of the Parliament to such proposals, shall be obtained by including a token provision in the relevant Demands for Grants or Supplementary Demands for Grants as may be found expedient. The details of

What This Means

Rule 99 of the General Financial Rules (GFR) 2017 deals with when expenses can be charged to a 'Capital Head' instead of a 'Revenue Head'. Think of it this way: Capital expenses are like buying a long-term asset (like a building), while revenue expenses are for day-to-day operations (like salaries). Normally, you can't just decide to call something a capital expense.

This rule says that only the President of India, acting on the advice of the Comptroller and Auditor General (CAG) of India, can authorize an expense to be charged to a Capital Head. This is a big deal because it affects how the government's finances are reported and how projects are funded. It ensures that capital expenditures are properly scrutinized and approved at the highest level, maintaining financial discipline and accountability.

Essentially, it's a safeguard to prevent departments from misclassifying expenses to make their budgets look better or to circumvent spending limits. It ensures that only truly long-term investments are treated as capital expenditures, based on expert financial advice and presidential approval.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Expenses can only be debited to a Capital Head if specifically authorized by the President.
  • •The President's authorization must be based on the advice of the Comptroller and Auditor General (CAG) of India.
  • •This rule aims to prevent misclassification of expenses and ensure proper accounting of capital expenditures.
  • •It ensures high-level scrutiny and approval for classifying expenses as capital investments.
  • •The rule promotes financial discipline and accountability in government spending.

Practical Example

The Ministry of Rural Development wants to build a large irrigation canal system. They believe the project should be classified as a capital expenditure because it's a long-term asset. However, under normal circumstances, certain components might be considered revenue expenditure (e.g., initial maintenance). To classify the entire project, including these components, as a capital expenditure, the Ministry must seek the advice of the CAG. If the CAG agrees, they will recommend it to the President. Only if the President approves, based on the CAG's advice, can the entire cost of the irrigation canal system be debited to a Capital Head. Without this presidential approval, the project's expenses would have to be allocated according to standard accounting practices, potentially splitting it between capital and revenue heads. This ensures that the decision to treat the entire project as a capital investment is made at the highest level, with expert financial oversight.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What is a 'Capital Head' and why is it important?▼
A 'Capital Head' refers to the accounting classification for long-term investments, like infrastructure projects. It's important because it affects how the government's assets and liabilities are reported and how projects are funded over time.
Who is the Comptroller and Auditor General (CAG) of India and what is their role?▼
The CAG is the head of the Indian Audit and Accounts Department. They are responsible for auditing the accounts of the Union and State governments and providing independent assessments of government financial management. Their advice is crucial for ensuring financial accountability.
What happens if an expense is wrongly debited to a Capital Head?▼
If an expense is wrongly debited to a Capital Head, it can distort the government's financial statements and potentially lead to misallocation of resources. It can also be flagged during audits by the CAG, leading to corrective action and potential disciplinary measures.
Does this rule apply to all government departments?▼
Yes, Rule 99 of GFR 2017 applies to all government departments and agencies under the Union Government.
What kind of expenses typically require presidential approval to be debited to a Capital Head?▼
Expenses that are borderline between capital and revenue, or those that involve significant amounts of expenditure, are more likely to require presidential approval. These often involve complex projects or situations where the classification is not straightforward.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Rule 99 of the General Financial Rules, 2017, under what specific condition can an expense be debited to a Capital Head?

Related Rules

Rule 271General Financial Rules 2017 (amended July 2024) - Rule 271 - Chapter 10Rule 109General Financial Rules 2017 (amended July 2024) - Rule 109Rule 146General Financial Rules 2017 (amended July 2024) - Rule 146 - Chapter 6Rule 169General Financial Rules 2017 (amended July 2024) - Rule 169 - Chapter 6Rule 215General Financial Rules 2017 (amended July 2024) - Rule 215 - Chapter 6

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