F Literacy

Financial Literacy: An
Introduction
Dr. Sanjeev Kumar

Assistant Professor
Department of Economics
Hansraj College
University of Delhi
Course Objectives
 Familiarity with different aspects of “Financial Literacy” such as

savings, investment, taxation, and insurance.
 Apply the concept of investment planning.
 Able to analyze the different products of banking and insurance.
 Personal tax planning.

SYLLABUS OF FINANCIAL LITERACY
UNIT- I Financial Planning and Financial Products
 Introduction to Saving
 Time value of money
 Management of spending and financial discipline
UNIT- II Banking and Digital Payment
 Banking products and services

 Digitization of financial transactions: Debit Cards {ATM Cards) and
Credit Cards., Net banking and UPI, digital wallets
 Security and precautions against Ponzi schemes and online frauds
SYLLABUS OF FINANCIAL LITERACY
UNIT- Ill Investment Planning and Management
 Investment opportunity and financial products

 Insurance Planning: Life and non-life, including medical
insurance schemes
UNIT- IV Personal Tax
 Introduction to basic Tax Structure in India for personal taxation

 Aspects of Personal tax planning
 Exemptions and deductions for individuals
 e-filing
Introduction to Financial Planning
What is financial planning?
 Financial planning is the process of managing your money

wisely to achieve your financial goals.
 It involves evaluating your current financial situation, setting

realistic objectives (like saving for a home or retirement),
and creating a strategy to meet those goals.
 Financial planning covers budgeting, saving, investing, and

managing risks.
Financial planning is a broader term and cover all the

aspects of the client’s financial well-being,
 From wealth creation to wealth protection,

 Selecting products to suit specific needs,
 Monitoring and reviewing the financial situation on a
regular basis and
 Revise the plan if required.
Example:
Imagine Sarah, a 30-year-old, who wants to save for three

main goals:
1. Emergency Fund: Save $10,000 for unexpected expenses.
2. Buy a House: Save $50,000 for a down payment in 5 years.
3. Retirement: Save $500,000 by age 60.

Steps in Sarah’s Financial Plan
1. Assess Current Situation: Sarah calculates her income, expenses,

and current savings.
2. Set Goals: She decides on the amounts she needs for her
emergency fund, house, and retirement.
3. Create a Budget: Sarah adjusts her monthly spending to save

more, like cutting down on unnecessary expenses.
4. Invest Wisely: Sarah invests part of her income in a retirement

fund and a savings account for her house.
5. Monitor and Adjust: Over time, Sarah reviews her progress and
adjusts her plan if necessary, like increasing savings or changing
investments.
These may be:
 Savings to buy a car costing around 10 lakh after 3 years.

 Purchasing a flat after 6 years with accumulated funds of Rs 20 lakh
and balance with loan.
 Investing for higher education of children where the money is required
after 10 and 12 years.
 Protecting the family through insurance.
 Planning for retirement to meet the expenses for 25 years after
retirement.
 Managing debt.
 Investing to save taxes in an efficient manner.
 Passing on the wealth to the next generation.
It also includes
Using a monthly spending plan or budget to keep

finances on track.
Making decisions about the job and its benefits.
Saving and investing money
Controlling expenses and staying out of debt
Planning for estate transfer
Need for financial planning
 Planning finances is essential for everyone,

whether a school-going kid or a retired citizen. The
more early you begin to manage your money, the
better it is.
 Let’s suppose you choose not to plan and keep

spending as and when you like, and one day you
wish to purchase a house, but then you cannot as
you hardly have any savings left.
 This happens when you don’t plan and end up

overspending.
 Another essential reason why financial

planning is required is the changes in the
financial market over the last few years.
 Equity and debt markets have become dynamic

and more volatile due to global and local
factors.
 Indian markets have become more integrated

with the global financial markets, thus calling
for constant monitoring of the market as well as
the financial situation of a client.
 Investment options are growing, and bank

deposits, bonds, mutual funds, equities,
derivatives, gold, real estate, and equities of
foreign companies.
 The universe of investment options is likely to

expand further.
 Reforms have put more money in the hands of

investors, but only a few people have the time
and expertise to make a complete financial plan
for themselves.
 Hence, there is a need to get help from a

financial planner.
Who is the financial
planner
 A financial planner is a professional who works with
clients to manage their financial affairs, develop
financial goals and create strategies to achieve those
goals.
 Financial planners offer expertise and guidance for

budgeting, investing, retirement, tax planning,
insurance and estate planning.
Here are several types of financial planners and
advisers, along with their average salaries and
duties:
•Personal banker.
•Certified debt counselor.
•Estate planning lawyer.
•Accountant.
•Personal financial specialist.
•Investment representative.
•Financial coach.
•Enrolled agent.
Remuneration of financial planners
 Financial planners may be of the following types
 Commission-based financial planners: who act as

brokers/ mutual fund advisors/ insurance advisors.
 Fee-based financial planners: who charge a fee for

making a comprehensive financial plan and do not
get commission from the institutions.
 Combined of both
Who needs the financial planning
 Anybody with goals or dreams to achieve something

needs to plan.
 Any person who earns money either in the form of

salary income or in any other form
 Financial planners can provide a model portfolio,

allocate assets depending upon risk and rewards
trade-offs and help the client to achieve various goals
over a period of time.
Types of Financial Goals
 Short-term goals. These can be reached within a year and

are for relatively smaller things, like buying a computer or TV,
paying for a vacation or setting up an emergency fund.
 Mid-term goals. These can be done short term but often take
up to five years. Little more expensive than everyday goals,
they are still achievable with discipline and hard work. Paying
off a credit card balance, a loan and saving for a down
payment on a car are midterm goals.
 Long-term goals. Indicate wants and desires for a time period

of more than 5 years out to the next 30 and 40 years.
Develop a Financial Goals
Developing a financial goal chart is a good way to begin this process. Here are
five steps you should follow in order to set up a goal chart.
 Write down one personal financial goal. It should be specific, measurable,

action-oriented, realistic and it should have a timeline.
 Decide whether your goal is short-term, Midterm, or long-term.
 Decide how much money you need to save to reach your goal and separate
the amount month-wise or year-wise.
 Think of all the ways you can achieve that goal. Including saving cutting
expenses, earning extra money or finding extra resources.
 Decide which is the best combination of the ways to reach out your goals
and write down.
Steps to Set Financial Goals
Be clear about the objectives.

Keep them realistic
Account for inflation
Short term vs long-term
Financial goals are your not inspired by
others
Financial Planning
The importance of Financial Planning cannot be ignored. It is not just
limited to increasing your savings and reducing your expenses. The
financial planning is a lot more than that.
This includes achieving your future goals, such as:
 Enjoy a better standard of living.
 Be prepared for emergencies.
 Attain peace of mind.

 Saving tax
 Manage your money in a best possible manner

 Increase saving
Principles of Good Personal
Financial Planning
 Make saving a habit.
 Maintain a personal diary.
 Prepare a budget
 Have separate files for each essential
item
 Diversify your investment
 Enjoy present
 Help others when you can
Thank You
Time value of money (TVM)
 The time value of money (TVM)
is the concept that a sum of
money is worth more now than
the same sum will be at a
future date due to its earnings
potential in the interim.
 A sum of money in the hand

has greater value than the
same sum to be paid in the
future.
 This principle is based on the

idea that you can invest money
and earn interest or returns
 For example, let's say you can either receive a

$100,000 payout today or $10,000 per year for
the next ten years totalling $100,000.
 Ignoring taxes, the $100,000 payout today is

worth more, according to the TVM principle,
because you can put your money to work.
 $100,000 can be doubled in the next 10 years.

 With future money, there is the additional risk that the
money may never actually be received for one or
another reason.
 TVM concepts explain why the interest is paid on

money borrowed.
 TVM can work for you or against you.
 For example, deciding between buying a new phone

for 50,000 or investing in the stock market that yields
10% yearly. If you buy the phone, you have just
incurred an opportunity cost of 10%.
Why Time Value of Money is Important?
Opportunity to earn interest:
 Money invested today can grow through interest or

returns.
 If you wait to receive money, you miss out on this
opportunity.
Inflation:
 Over time, prices tend to rise, meaning the purchasing

power of money decreases.
 $100 today buys more than $100 in the future.
Future Uncertainty:
 Future events are not guaranteed. Therefore, it is

important to consume today rather than future.
Investment Opportunity:
 If an investment produces regular cash flow, periodic

returns can be reinvested to earn even higher returns.
Consumer Preferences:
 If the amount of satisfaction is the same, people choose

to consume now rather than in future.
 Most people are willing to forgo their current

consumption if they discover they will be able to
consume more in future.
 It is a tool to make better financial decisions.

Why (TVM) is
Important?
 TVM is a useful tool in helping you to understand the worth of
money in relation to time.
 With the help of TVM investors can better understand the

value of money as it compares to its value in the future.
 Investors can make more informed decisions about what to

do with their money.
 TVM can help you understand which option is best based on

interest, inflation, risk and return.
 It can also be used to help you understand how much money

to save in an account if you have a certain goal in mind.
Components of
TVM
Future Value Time periods Present

(FV) (n) Value (PV)
Interest/discount Instalments/Annui
Rate (i) ty (PMT)
The interest rate
Definition: The percentage rate at which money grows

per period. This could be an interest rate on savings,
investments, or loans.
Example: If you invest $1,000 at an interest rate of 5%

per year, the money grows by $50 in the first year.
Importance: The interest rate determines how quickly

money grows over time.
Time (t)
Definition: The length of time money is invested or borrowed.
Or It refers to the whole number of periods for which we want to
calculate the present or future value of a sum.
These periods can be annually, semi-annually, quarterly, monthly,

weekly etc.
Example: If you save $200 for 5 years at 8% interest, the period

(5 years) plays a crucial role in how much your investment will
grow.
Importance: The longer the time, the greater the potential for the
investment to grow due to compounding.
Present Value
(PV)
 Present value is the concept that states an amount
of money today is worth more than that same
amount in the future.
 In other words, money received in the future is not

worth as much as an equal amount received today.
 Receiving $1,000 today is worth more than $1,000

five years from now is the best example of PV.
Future value (FV)
 Future value (FV) is the value of a current asset at a

future date based on an assumed rate of growth.
 For example, assume a $1,000 investment is held for

five years in a savings account with 10% simple
interest paid annually.
 In this case, the FV of the $1,000 initial investment is

$1,000 × [1 + (0.10 x 5)], or $1,500.
Instalments/Annuity (PMT)
 It represents payments to be paid periodically or

during each period.
 The value is positive when payment has been

received and becomes negative when payment is
made.
Tehcniques of TVM
Techniques of TVM
 This calculation is useful for investors and businesses

who want to know the future value of their potential
investments to make a good decision.
 This formula requires only three things to give us a

future value:
1. What amount of money do we have right now? (PV)

2. What is the assumed interest rate at which it will grow?
(r) and,
3. After how many years will we need the money? (n)
Techniques of TVM
 Example: if we are investing Rs 100000 now. What is the

future value after 1 year, 10 years and 30 years if the
interest rate is 10%?
 After 1 year = 1,10, 000

 After 10 years= 2,59, 000
 After 30 years = 17,50000
 Example: find out the future value if we are investing Rs

6000 for 3 years at 9 per cent compounded annually.
 After 3 years = 7770

Techniques of TVM
Techniques of TVM
Techniques of TVM
Answer Part-1:as the compounding is done

quarterly, m =4
Techniques of TVM
Techniques of TVM
Techniques of TVM
Net banking and
UPI
Net banking and
UPI
 Understand the concept of net banking, its features and
services available in net banking.
 Explore the advantages and disadvantages of net
banking,
 Analyze the different types of fund transfers using
Internet banking.
 Understand the concept of e-banking.
 Understand the workings of UPI, features, advantages,
and disadvantages.
Net banking and
UPI
 Internet banking, also known as online banking,
e-banking or virtual banking.
 It is an electronic payment system that enables

customers of a bank or other financial institution
to conduct a range of financial transactions
through the financial institution's website.
 Net banking portals are secured by unique

User/Customer IDs and Passwords.
Net banking and

UPI
Internet banking is getting more common in India with every
passing day.
 It is growing at a faster rate after the demonetization.
 Most banks have launched their internet banking and mobile

banking websites to facilitate the customers with online
availability of almost all banking products like OPENING OF
FD, PAYING TAXES, RECHARGING MOBILES, ORDERING
CHEQUE BOOK and much more.
 It is a common mode of secure and convenient banking

services.
 COVID duration most transaction was done online.
Special features of Net
banking
 Provide access to financial as well as non-financial banking
services
 Facility to check bank balance at any time
 Make bill payments and fund transfers to other accounts.
 Keep a check of mortgage, loans, and savings A/Cs linked to the
bank account.
 Safe and secure mode of banking.
 Protected with a unique ID and password.
 Any time ATM chequebook can be applied without visiting the
branch.
 Buy general insurance.
 Keep a record of investments linked to the bank account.
Services Available through Net
banking
A/C Balance Check View Bank statement NEFT & RTGS Transfer
IMPS fund Transfer Utility bill payment Start a Deposit
Open or close a fixed Make merchant Insurance of Check book

account payments
Starts investments Buy general Insurance Recharge Mobile/DTH
Check mortgage, Loans Set Up/cancel automatic Manage/Change

payments account details
Book Online Tickets Buy sell on E-commerce Invest and conduct trade
platforms
Advantage of Net
banking
Type of Fund transfer
Using Net banking
Real Time
National
Gross
Electronic Fund
Settlement
Transfer (NEFT)
(RTGS)
Immediate
Payment System
(IMPS)
National Electronic Fund
Transfer (NEFT)
 NEFT is a popular electronic payment system used

in India that enables individuals and businesses to
transfer funds between banks securely and
efficiently.
 NEFT service is available 24×7 and 365 days a

year ON INTERNET BANKING.
 NEFT is completed within 30 minutes.
Features of NEFT
 NEFT is a one-to-one payment facility
 NEFT transactions can only be processed between the banks offering

NEFT-enabled services.
 Transactions made through NEFT do not take place in real-time, implying

that it takes a few days for NEFT transactions to complete.
 Before December 2019, RBI had fixed timings during which NEFT
transactions could be processed.
 Any NEFT transaction will be processed between 8:00 AM and 6:30 PM

from Monday to Friday and 8:00 AM to 12:00 PM on Saturdays.
 However, from 2020, NEFT transactions can be performed 24*7
 No fee to promote digital payments.

Features of NEFT
 To transfer funds through NEFT, you must add

beneficiaries on the Internet banking portal of your
required bank.
 There are no limits on the amount of NEFT transactions.
 As per RBI guidelines, the payments made via NEFT are

processed and settled in batches of half-hour.
Real Time Gross Settlement
(RTGS)
 It is a money transfer system that allows the transfer of
funds from one bank account to another in real time
and on a gross settlement basis.
 The term ‘real-time’ implies that transactions through

RTGS are processed right when the sender initiates
them,
 and ‘gross settlement’ means that the instructions

regarding the transfer of funds occur on a one-to-one
basis.
Features of
RTGS
 High-value transactions: RTGS is primarily designed for large-value and
high-priority transactions. There is usually a minimum threshold for
transaction value, which varies depending on the jurisdiction.
 Instant availability of funds: Once a transaction is processed through

RTGS, the funds become immediately available to the recipient. This
feature makes RTGS suitable for time-sensitive payments, such as
interbank transfers, large business transactions, securities settlements,
and government payments.
 Continuous operation: RTGS systems typically operate continuously

throughout business hours, allowing transactions to be processed and
settled at any time during operating hours. This ensures efficient and timely
processing of payments.
Features of
RTGS
 Secure and reliable: RTGS systems employ robust security
measures to protect the integrity and confidentiality of transactions.
They also have built-in error detection, correction, and reconciliation
mechanisms to ensure accuracy and reliability.
 Settlement finality: Once a transaction is settled through RTGS, it

is considered final and irrevocable. This feature provides certainty
and reduces counterparty risk in financial transactions.
 Centralized control: RTGS systems are usually operated and

regulated by a central bank or a designated authority to maintain
stability and oversight over the financial system.
Fees and Charges for RTGS
Transactions
 In the case of online transfers, no charges are

levied for RTGS transactions.
 In case the RTGS transaction is completed at a

bank branch, a charge of Rs. 15 plus GST is
levied.
 Like NEFT, RTGS is also available online 24*7.

What is IMPS in
banking?
 IMPS full form is Immediate Payment Service. It is an
instant electronic fund transfer service that allows inter
and intra-bank transfers.
 In simple words, IMPS helps customers transfer

money instantly from one account to another.
 Also, you can initiate an IMPS fund transfer using your

bank’s net banking portal, mobile banking facility,
ATM, or even through SMS.
What are the Features and Benefits of IMPS?
Instant Fund Available 24x7 . Instant

Transfer Notifications
Safe and Secure Minimum Multiple

Information Applications
utility bills,
insurance
premiums, make
online purchases,
and more
Cost Effective
How to register for Internet Banking?
 Download the application form from the bank’s

official website, and fill the same. You can also visit
the bank directly and fill out the application form for
net banking.
 Submit the application at the bank.
 After the verification, you will receive a unique User

ID and password using which you can log in to
Internet banking.
E-
banking
It refers to all the forms of banking services and
transactions performed through electronic means.
It allows individuals, institutions, and business to

access their accounts, transact business, or obtain
information on various financial products and
services via a public or private network including the
Internet.
Popular types of E-
banking
Services in India
Internet Banking Mobile Banking
ATM Debit Cards
Telephone Banking Bills Payments
Smart Cards Investing
Shopping Electronic Clearing
Services
Precautions Using Net
Banking
Ponzi
scheme
 A Ponzi scheme is an investment fraud that pays
existing investors with funds collected from new
investors.
 Ponzi scheme organizers often promise to invest

your money and generate high returns with little or
no risk.
 But in many Ponzi schemes, the fraudsters do not

invest the money.
 The scheme is named after Charles Ponzi, who defrauded

investors in the 1920s with a fake postage stamp investment
Some characteristics of a Ponzi
scheme
 High returns: Promoters promise high returns with little or no
risk.
 No real investment: The promoter rarely invests the money,

instead using it to pay off previous investors and keep some for
themselves.
 The constant flow of new money: The scheme requires a

continual flow of new money to pay out earlier investors.
 Collapse: The scheme collapses when it becomes difficult to

recruit new investors or when existing investors cash out.
 Investor losses: Most investors lose much or all of their

money, and in some cases, the promoter disappears with the
money.
Before investing, you should:
 Research the people, companies, and investments
 Understand how the scheme works and how you make
money
 Consider if it's realistic to participate long-term
 Consider if it aligns with your values
 Understand how the promoter generates funds to pay
returns
A famous example of a Ponzi scheme in India is
the Saradha Group Ponzi scheme
How it worked
 The scheme was run by the Saradha Group, a chit-fund company

based in West Bengal, and targeted lower-income groups and
small towns.
 The scheme promised investors a 50% annual return on their

investment, which would double their initial investment in three
years.
 The scheme was run through a network of over 230 shell

companies to avoid detection by SEBI.
 A chit fund is a financial arrangement where a group of people

agree to contribute a fixed amount of money at regular intervals.
 Shell Company: a company that does not itself do or own

anything, but is used to hide a person's or another company's
How it ended
 The scheme collapsed in 2013 when the group ran

out of funds to pay out agents and investors.
 The scheme left millions of investors in distress.

Investigations
 The Supreme Court of India transferred the

investigation into the Saradha scam to the Central
Bureau of Investigation (CBI) in May 2014.
 The CBI arrested many prominent people for their

alleged involvement in the scam, including two
Members of Parliament (MPs) and the former West
Bengal Director General of Police.
What is
phishing?
 Phishing is first and foremost a cybercrime.
 In a phishing scam, a target is contacted by email, telephone

or text message by someone posing as a close personal
contact or on behalf of a legitimate institution.
 The objective is to get people to reveal sensitive data such as

their account numbers, home address, banking/credit card
details and usernames/passwords.
 The information is then used to access important accounts and

can result in identity theft and financial loss.
What are the types of phishing
attacks?
 Email Phishing aka "deceptive phishing" refers to a
fraudster who creates and sends false emails with the
goal of obtaining sensitive financial and personal
information.
 The emails are typically designed to look exactly like

the ones sent by legitimate companies.
 These emails contain links that often lead to “fake” or

“fooled” websites where visitors are asked to provide
personal information.
 Text Phishing, aka "Smishing" is an attack that uses
text messaging or short message service (SMS) to
execute the attack.
 A common smishing technique is to deliver a message

to a cell phone through SMS that contains a clickable
link or a return phone number.
 Go to our smishing webpage for more in-depth

information and details as this type of scam is on the
rise.
 Pharming involves hijacking the user’s browsers
settings to show suspicious pop ups asking the user to
click a link that then downloads malicious code
executed on the victim's device to redirect to an
attacker-controlled website.
 In order to avoid being ‘pharmed’, you should never

click links from pop ups, always manually type the
official domain of a website into your browser.
 Trap Phishing is largely based on the mistakes of a
company's IT (Information Technology) teams.
 Hackers and cyber-criminals are always on the lookout

for security faults and vulnerabilities within a company's
web ecosystem.
 Verizon takes extraordinary measures to prevent this

from happening to its customers and the customers of
our business clients.
How to protect yourself from
phishing attempts.
Insurance : Life
and Non Life
Life and non-life, including medical insurance schemes
 Insurance is a risk transfer mechanism, where you transfer your risk to

the insurance company and get cover for financial loss that you may
face due to unforeseen events.
Life and non-life, including medical
insurance schemes
 And the amount that you pay for this arrangement is called
the premium.
 The insurance industry (I) manages society's risk, (II) works

as a financial intermediary, and (III) provides long-term
funds for the nation's infrastructural development.
Insurance Companies
 Insurance companies are into the

business of insurance, and they work
as a financial intermediary.
 They collect funds from society as

premium and invest these large
amounts of premiums in large
development projects.
 They manages risk of the investor,

provide means for accumulating
savings and reduces investor’s
income tax liability also.
Insurance Companies
 Insurance companies provide funds to

the government and other sectors for
long term projects.
 Insurance companies receive steady and

periodical payments of premium as
inflows.
 Moreover, liability of these companies is

long term in nature. Hence, they are
having ample amount of funds with
them.
Principles of Insurance
Principle of insurable interest: There must be a relationship
between the insured and the beneficiary.
Principle of utmost good faith: The insured party must provide true,
accurate and complete information to the insurer.
Principle of indemnity: The insurance contract protects the insured

party against risk and unforeseen losses; it is not for making a profit by
the insured party.
Principle of contribution: Insured can claim compensation from all

insurers or anyone insured only to the extent of actual loss.
Principle of loss minimization: In case of any uncertain event or

mis-happening, insured must always try to minimize loss of his insured
property.
Insurers: a person or company that underwrites an insurance risk; the party in an insurance contract
undertaking to pay compensation.
Principle of Causa Proxima:
 As per this principle if there is more than one cause for the
loss occurred, then most near or proximate cause should be
taken into consideration while deciding the liability of the
insurer under insurance contract.
 Principle of Causa Proxima doesn’t apply to life insurance

contract.
Types of Insurance
 Life insurance
 General insurance
Life Insurance
 Under life insurance, insurer pays certain amount of

money to the insured or his beneficiary upon occurring
of a certain event such as death.
 Companies: LIC, SBI Life Insurance Company Limited,

TATA AIA Life Insurance, Company, Max Life Insurance,
HDFC life Insurance Company, ICICI Prudential Life
Insurance, Kotak Mahindra, Aditya Birla SunLife, Bajaj
Alliance, PNB Met Life, Reliance Nippon Insurance etc.
General insurance
 Any insurance policy other than life
insurance, are covered under general
insurance.
 General insurance includes health

insurance, fire insurance, marine
insurance, property insurance, rural
insurance, vehicle insurance and travel
insurance etc.
 Companies: Aditya Birla Insurance, Digit

General Insurance, Oriental General
Insurance, Reliance General Insurance,
SBI General Insurance, Shriram General
Insurance, New Indian Insurance
companies HDFC etc.
Life Insurance policy categorization
Whole Life Plan: A policy

which covers entire duration
of insured’s life is known as
whole life policy.
In this type of policy annual

premium is paid throughout
policy term period.
Endowment Plans
Under endowment plans lump

sum amount is provided when the
policy matures or when the
policyholder dies.
There are few endowment plans

which provide payment in case of
critical illness also.
Money Back Policy
Under money back plan instead of getting

lump sum amount at the end of the term,
insured person gets a fixed percentage of
sums assured at regular intervals.
There is benefit of liquidity in money back

policy.
Term Plan:
 Term plans are the most simple and

cheapest type of life insurance policy,
which provides coverage for a specified
period known as “term” or until a certain
age of the insured.
 If the insured person dies within the

coverage period, then this policy pays the
face amount of the policy, but nothing is
paid if insured outlives the term of policy.
 After the end of term period policyholder

has an option to discontinue the policy or
to extend it.
Unit Linked Insurance Plan (ULIP)
 Unit linked insurance plan is a combination of risk

cover and investment both. These policies are flexible
and protective both at the same time.
 Premium paid under these policies are used to

purchase investment asset units. These asset units
are selected by policyholder.
General Insurance Policy Categorization
Health Insurance
 Health insurance covers all the medical and surgical

expenses incurred by the insured person.
 These plans are created after assessing the insured

person’s current health position, then estimation is made
for future healthcare expenses for the insured person and
after all this approximation, premiums are decided for the
policy.
Accidental Insurance
An accidental insurance policy covers both any sort of

disability arising from an accident and death due to an
accident. An accident should not arise due to the usage
of alcohol or drugs.
Property Insurance
 Risk to property arising out of

fire, theft, burglary and weather
damage are covered under
property insurance.
 Property insurance are further

sub divided into earthquake
insurance, flood insurance and
fire insurance etc.
Vehicle Insurance
 Vehicle insurance is also known as motor insurance

and auto insurance. It is a mandatory policy which
should be taken by every vehicle owner.
 In case of auto accident this policy mitigates the costs

associated with accident.
 Vehicle owner has to pay annual premiums to insurer,

and then insurer pays full or part of costs arising out of
auto accident.
Rural Insurance
 Rural insurance is a policy which covers the risk of

agriculture and rural businesses.
 These policies cover natural calamities, livestock,

crop, health and life. One can take policy according to
his needs.
Travel Insurance
 Travel insurance policies cover both, domestic and

international as well as short and long-distance travel.
 These policies cover trip cancellation, medical

expenses, flight accident, lost luggage and any other
kind of loss incurred while travelling.
Group Insurance
 An insurance policy which covers a particular group of

people is known as group insurance.
 This group can be a society, employees of an organization

or members of a professional association.
Thank You
Financial Goals
 The concept of financial goals
 The importance of Financial Goals
 Different types of financial goals
 How financial goals can be achieved
 When financial goals should be formed

What is meant by financial goals?
 When it comes to personal finance, everyone’s situation is unique. No

one has the same bills, rent, debts, or lifestyle.
 When you’re ready to take control of your financial lifestyle, you need
a plan that will answer your specific problems, not your neighbor’s.
 A financial goal is a scientifically defined financial milestone that you plan

to achieve or reach.
 Financial goals comprise earning, saving, investing and spending in

proportions that match your short-term, medium-term or long-term plans.
Examples of Personal Finance Goals
Starting a
Pay off debt,
business
Save for Buying of

retirement home
Saving for
vacation
Feeling financially Start an

secure emergency fund
Why are financial goals necessary?
 Goal setting is an important part of developing your financial plan.
 Having clear financial goals will make it easier to focus on

investing strategies to help you reach them.
 It will also help you measure how well you are tracking along the
way
Types of Financial Goals
Short-Term Goals
 Short-term goals are something you want to achieve in the

anticipatable future over the next few months.
 These are required for your more immediate expenses.
 These expenses are generally smaller in scope and easier to project

and predict.
Medium-Term Goals
 Medium Term lies between short term and long term. Short-term goals
have a typical timeline of a year.
 You may have to achieve a series of short-term goals to reach your

medium-term goals.
 Clearing outstanding dues on your credit card or personal loan can be

classified under medium-term goals.
 Medium-term goals are critical for evaluating your progress against

your long-term goals. You can check whether you are headed in the
right direction
Long-Term Goals
 Long-term goals require more deliberation, and in most cases,

money.
 Retirement, buying a house, and funding a child’s higher education

are typical long-term goals.
Develop a financial goal chart
 Write down one financial goal.
 Decide whether your financial goal is short-term, medium-term, or

long-term. And create a timeline for that goals.
 Determine how much money you need to save to reach your goal.
 Think of all the ways to reach that goal.
 Decide which is the best combination of ways to reach your goal and
write them down.
Mutual Funds: Concept, Advantages,
Organisation, History, Types, and
process of Investment
 A mutual fund is a pool of
money managed by a
professional Fund Manager.
 It is a trust that collects money

from a number of investors
who share a common
investment objective and
 invests the same in equities,

bonds, money market
instruments and/or other
securities.
Organization of Mutual Fund
 The structure of the mutual fund in India is governed by the

SEBI (Mutual Funds) regulations, 1996.
 These regulations make it mandatory for mutual funds to have

a structure of sponsor, trustee, AMC, and custodian.
 It has mandated a three-tiered structure for any fund house in

India.
1. Sponsor
2. Trustee
3. Asset Management Company (AMC)
 Each of these tiers has specific responsibilities and specific

eligibility criteria.
Sponsor (or guarantor)
A fund sponsor or guarantor is anyone who starts a mutual fund. This

could be an individual or an individual partnered with another entity
(associate company). The primary roles of a fund sponsor include –
 Setting up a mutual fund

 Approaching the SEBI for permissions
 Promoting the associate company handling the fund
 Recruit people to ensure the fund house functions efficiently
(appointing the AMC, custodian, transfer agent, auditor, and
registrar)
 The sponsor must have at least five years of hands-on

experience in the financial services and products business, with a
net positive Total Worth.
 The sponsor’s net worth in the previous year should be more than
the wealth contributed to setting up the fund house.
 The sponsor should be able to put in at least 40% of their net

worth while setting up the fund house.
 The sponsor should have had good returns in the past three to
five years before setting up the fund house.
Once the SEBI verifies the credentials of the sponsor, they issue the
Certificate of Registration.
Once the Certificate of Registration is received by the sponsor, they can

then proceed with the next steps to form their fund house.
1) Formation of Trust
2) Appointment of AMC
3) Appointment of Depository (Custodian), Registrar, Transfer Agent, and

Auditor.
Trustees
 After the sponsor creates the trust through a trust deed, the AMC
appoints a board of trustees to keep track of the activities of the
fund house and preserve the investor’s faith in it.
 A trustee could be a member of the board of directors, a bank, or

a company approved by the Securities and Exchange Board of
India.
 Most fund houses appoint a minimum of four trustees to handle

operations, or they select a trustee company with no less than
four directors to run the fund
Trustees
The primary functions of the trustees include:
1) Ensuring the fund house undertakings are compliant with SEBI

guidelines
2) Ensuring proper selection of other fund members (AMC, CEO, fund
managers, CIO, registrar, etc.) based on their skills
3) Validating schemes published by the fund house
4) Ensuring company worth is as per rules
5) Reporting to the Securities and Exchange Board of India two times
a year
6) Ensuring fund house is following compliances
7) Appointing distributors and brokers
Asset Management Companies (AMCs)
The Asset Management Company (AMC) or the Fund Management Firm

is also the functioning investment manager of the trust.
But before that, it needs to get registered with the Government of India.
At present, there are three kinds of AMCs in India:
 Private Companies
 A Public Limited Co. associated Wholly owned Subsidy
 Joint Ventures.
Asset Management Companies (AMCs)
 Launch and initiate mutual fund schemes

 Generate funds with trustees and founders and monitor their
development.
 Manage funds and ask for associate services with bankers, brokers,
lawyers, registrars, etc.,
 AMCs cannot take decisions regarding fund house functions on their

own. In most cases, they can provide services like portfolio
management, asset management, etc.
 The AMC cannot nominate a trustee on any mutual fund house they
are a part of.
Roles of AMCs:
 Launch and initiate mutual fund schemes

 Generate funds with trustees and founders and monitor their
development.
 Manage funds and solicit associate services with bankers, brokers,
lawyers, registrars, etc.,
 AMCs cannot take decisions regarding fund house functions on their

own. In most cases, they can provide services like portfolio
management, asset management, etc.
 The AMC cannot nominate a trustee on any mutual fund house they
are a part of.
Employee Role
Overseer or They are responsible for the safety of the securities of the mutual
custodian fund. They also deliver and transfer fund securities to investors.
This means if an investor is looking to upgrade their SIP investment
to an equity fund, they can do it with the custodian’s help.
Auditors The main role of the auditor is checking record books and annual
reports and keeping track of the finances of the fund house. Note
that every AMC hires an independent auditor for this purpose.
Registrars and The RTAs act as middlemen between the investors and the fund
transfer agents managers. They give fund managers details about investors and tell
(RTAs) investors the advantages of investing in the fund.
Brokers, agents, Like brokers in real estate, these entities bring new investors to
dealers fund houses, keep track of market trends, and give
recommendations to fund houses.
Types of Mutual Funds Schemes
Based on the ease of  These funds do not limit when or how many
investment, mutual funds units can be purchased.
can be
 Investors can enter or exit throughout the year
at the current net asset value. Open-ended
funds are ideal for investors seeking liquidity.
Open-ended funds  There is no limit to the size of the funds.

Investors can invest as and when they like.
 The purchase price is determined on the basis

of Net Asset Value (NAV).
 NAV is the market value of the fund's assets

divided by the number of outstanding
Shares/Units of the fund.
Based on the ease of investment,  Under close-ended schemes, there is no

mutual funds can be
repurchase facility.
 However, the Units are listed in the stock

market and investors can sell and buy Units like
Close-Ended Funds any other securities in the market.
 The scheme has a `specific life (say 10 years or

5 years) and at the end of the period, the
mutual fund sells securities bought under the
scheme and disburses the proceeds to Unit
holders
A closed ended mutual fund scheme is where your investment is locked in for a
specified period of time. You can subscribe to close ended schemes only during
the new fund offer period (NFO) and redeem the units only after the lock in
period or the tenure of the scheme is over.
Interval funds
 Interval funds combine the features of open-ended and close-

ended schemes.
 They are open for sale or redemption during pre-determined

intervals at NAV related prices.
Depending on the assets
they invest in, mutual funds
are categorized under
Equity funds:
Equity Linked Savings

Schemes are Mutual fund
investment schemes that
help you save income tax
The Income Tax Act, under section 80c, allows taxpayers to invest up to INR 1.5
lakh in specific securities and claim it as a deduction from their taxable income.
Depending on the assets  Debt funds invest money into fixed-

they invest in, mutual income securities such as corporate
funds are categorized bonds, government securities, and
under treasury bills.
 Debt funds can offer stability and a

Debt funds regular income with relatively minimal risk.
 These schemes can be split further into

Corporate bonds are debt securities issued by
private and public corporations. Companies categories based on duration, like low-
issue corporate bonds to raise money for a duration funds, liquid funds, overnight
variety of purposes, such as building a new
plant, purchasing equipment, or growing the funds, credit risk funds, and gilt funds,
business. among others.
T-bills, which are money market instruments, are short term debt
instruments issued by the Government of India and are presently
issued in three tenors, namely, 91 day, 182 day and 364 day.
When you buy a government bond, you lend the government an agreed amount of money for an agreed period of time. In
return, the government will pay you back a set level of interest at regular periods, known as the coupon
Depending on the assets  Hybrid funds invest in both debt and

they invest in, mutual funds equity instruments so as to balance out
are categorized under debt and equity.
 The ratio of investment can be fixed or

Hybrid funds varied, depending on the fund house.
The broad types of hybrid funds are
balanced or aggressive funds.
 There are multi asset allocation funds

which invest in at least 3 asset classes.
Depending on the assets  These mutual fund schemes are for

they invest in, mutual specific goals like building funds for
funds are categorized children’s education or marriage, or for
under your own retirement.
Solution-oriented funds
 They come with a lock-in period of at
least five years.
Mutual Funds based on Investment Goals
 Funds that invest primarily in high-

performing stocks with the aim of capital
appreciation are considered growth
Growth funds
funds.
 These funds can be an attractive option

for investors seeking high returns over a
long period.

 Equity-linked saving schemes
are mutual funds that invest
mostly in company securities.
 However, they qualify for tax

deductions under Section 80C
Tax-saving Funds (ELSS) of the Income Tax Act.
 They have a minimum

investment horizon of three
years.
 Some funds can be categorized based

on how liquid the investments are.
Liquidity-based funds  Ultra-short-term and liquid funds, are
ideal for short-term goals, while
schemes like retirement funds have
longer lock-in periods.
Mutual Funds based on Investment  These funds invest partially in

Goals fixed income instruments and
the rest into equities.
Capital protection funds  This could ensure capital

protection, i.e., minimal loss, if
any. However, returns are
taxable.
 Pension funds invest with the

idea of providing regular
returns after a long period of
Pension Funds: investment.
 They are usually hybrid funds

that give low but have potential
to provide steady returns in
future.
List of Mutual Funds
1. Axis Mutual Fund 11. Indiabulls Mutual Fund

2. Birla Sunlife Mutual Fund 12. Kotak AMC
3. DSP Blackrock Mutual
Fund 13. L&T Mutual Fund
4. Edelweiss Mutual Fund 14. Motilal Oswal
5. Franklin Templeton 15. Peerless Mutual Fund
16. PPFAS Mutual
Fund (Parag Parikh Financial
6. HDFC Mutual Fund Advisory Services Pvt.)
7. ICICI Prudential AMC 17. Principal Mutual Fund
8. IDBI Mutual Fund 18. Quantum AMC
9. IDFC 19. Reliance Mutual Fund
20. Religar Invesco Mutual
10. IIFL AMC Fund
21. SBI Mutual Fund 24. Taurus AMC
22. Sundaram Mutual Fund 25. UTI Mutual Fund.
23. TATA Mutual Fund
How to Invest in Mutual Funds?
 Step-1 Understand your risk capacity and risk tolerance. This process of
identifying the amount of risk you are capable of taking is referred to as risk
profiling.
 Step 2 The next step is asset allocation. Once you identify your risk profile,
you should look to divide your money between various asset classes.
 Ideally your asset allocation should have a mix of both equity and debt
instruments so as to balance out the risks.
How to Invest in Mutual Funds?
 Step-3 Then you should identify the funds that invest in each asset class.
You can compare mutual funds based on investment objectives and past
performance.
 Step-4 Decide on the mutual fund schemes you will be investing in and
make the application online or offline.
 Diversification of your investments and follow-ups are important to

ensure that you get the best out of your investment.
Ways to invest in Mutual Funds
Offline investment directly with the fund house
You can invest in schemes of a mutual fund by visiting the nearest

branch office of the fund house. Just ensure that you carry a copy of the
below documents –
The fund house will provide you with an application form which you will
need to fill out and submit, along with the necessary documents.
 Proof of Address
 Proof of Identity
 Cancelled Cheque Leaf
 Passport Size photograph
Offline investment through a broker
 A mutual fund broker or a distributor is someone who will help you

through the entire process of investment.
 He will provide you with all the information you need to make your
investment including the features of various schemes, documents
needed, etc.
 He will also offer guidance on which schemes you should invest in.
 For this, he will charge you a fee which will be deducted from the
total investment amount.
Online through the official website
 Most fund houses these days offer the online facility of investing in mutual
funds.
 All you need to do is follow the instructions provided on the official site of
the fund house, fill the relevant information, and submit it.
 The KYC process can also be completed online (e-KYC) for which you will
need to enter your Aadhar number and PAN.
 The information will be verified at the backend and once the verification is
done, you can start investing.
 The online process of investing in mutual funds is easy, quick, and hassle-
free and hence, is preferred by most investors.
Through an app
 Many fund houses allow investors to make investments through an

app which can be downloaded on your mobile device.
 The app will allow investors to invest in mutual fund schemes, buy or
sell units, view account statements, and check other details
concerning your folio.
 Some of the fund houses that allow investments through an app are
SBI Mutual Fund, Axis Mutual Fund, ICICI Prudential Mutual Fund,
Aditya Birla SunLife Mutual Funds, and HDFC Mutual Funds.
 Some apps like myCAMS and Karvy allow investors to invest as well
as access the details of all their investments from multiple fund
houses, on one platform.
Ways to invest in Mutual Funds: Summary
 Follow these steps to get started on your mutual fund investment

journey:
 Step #1: Sign up for a mutual fund account
 Step #2: Complete your KYC formalities (ignore this step if you have
already done it)
 Step #3: Enter the necessary details
 Step #4: Identify the funds you wish to invest based on your financial
goals
 Step #5: Select the appropriate fund and transfer the amount
 Step #6: Issue a standing instruction with your bank in case you invest
through a SIP every month.
Risk and Return Analysis
Return
 Return also called return on investment, is the amount of money
you receive from an investment.
 It is the expected cash inflows in terms of dividend, interest,

bonus, capital gains, etc. available to the investors from an
investment
 For every dollar you put into an investment, the investment earns
two dollars. This money that the investment earns is considered
your return.
 Return may be measured as the total gain or loss to the

holder over a given period of time.
Realized Return
Realized Return: It is known as the historical return of

an investment. It is the annual return of an asset over
several years.
The return which has been earned by an investor over

the holding period.
A holding period is the amount of time the investment

is held by an investor.
Measurement of Realized Return
Holding period return/Realized Return
= Interest/Dividend + price change in assets over the

period/purchase price of the assets
Revenue return: It refers to
periodic cash inflow or
income from investment in
the form of interest or
dividend.
Capital Return: it is the

difference between the
beginning price and the
ending price of the
investment.
= Revenue return + Capital Return (price changes)
Expected Return (Ex-ante Return)
 Expected Return is the predicted or estimated return that may

or may not occur.
 It is the return that an investor hopes to get from his

investment. There is no guarantee that what the investor has
hoped for would come true.
 Whereas, the ex-post return is the actual or realised return.

Real Rate of Return
 The real Rate of Return is the inflation-adjusted return.
 The rate of inflation may also reduce the income earned by the
investor.
 So the prevailing rate of inflation should be considered while
making investment decisions.
Risk
 The risk can be defined as the variability in the expected return. It
is the likelihood that actual returns will be less than historical or
expected returns.
 Risk arises because returns are neither certain nor fixed and
cannot be predicted in advance.
 It arises due to the fact that the actual return will be different from
the expected return.
 Risk factors include market volatility, inflation, and deteriorating

business fundamentals.
Risk
 Strategic risk - eg a competitor coming onto the market.

 Compliance and regulatory risk - eg introduction of new
rules or legislation.
 Financial risk - eg interest rate rise on your business loan
or a non-paying customer.
 Operational risk - eg the breakdown or theft of key
equipment.
UNCERTAINTY AND RISK
 Uncertainty is the core concept of risk.
 Uncertainty refers to a state of mind which is characterized by doubt

due to a lack of knowledge about what will or will not happen in the
future.
 In case of risk, we can assign the probability of happening or not

happening an event on the basis of facts and figures available
regarding the decision,
 Whereas as in the case of uncertainty, we cannot assign a probability

for the happenings of events either the facts or figures are not
available.
 While risk is a state of nature, uncertainty is a state of the human

mind.
TYPE OF RISK
 Systematic risk is the type of risk that is impossible to avoid

completely. It refers to that portion of the variability in return
which is caused by the factors affecting all the firms.
 Examples of systematic risk include inflation, recession,

interest rate policy of the government, political factors, credit
policy, tax reforms and war.
 These are factors which affect almost all firms.

TYPE OF RISK
 Unsystematic risk is the risk that affects an isolated group of

companies or industries.
 This risk represents the fluctuations in return from investment
due to factors which are specific to the particular firm and not
the market as a whole.
 So these are the factors which are controllable by the firm.
 This involves company-specific issues like labour, management

assets etc., that affect a specific firm and not the industry as a
whole.
Source of Risk
 Business risk is the exposure a company or organization has

to factor(s) that will lower its profits or lead it to fail.
 Anything that threatens a company's ability to achieve its

financial goals is considered a business risk.
 Damage by fire, flood or other natural disasters. unexpected

financial loss due to an economic downturn, or bankruptcy of
other businesses that owe you money. loss of important
suppliers or customers. decrease in market share because new
competitors or products enter the market.
Source of Risk
Financial risk is the possibility of losing money on an investment or
business venture. Financial risk is a type of danger that can result in the
loss of capital to interested parties.
Some more common and distinct financial risks include
 Credit risk (An example is when borrowers default on a principal or

interest payment of a loan),
 Liquidity risk (A liquidity risk example in banks is a decline in deposits

or rise in withdrawals (which are liabilities for the bank). As a result, the
bank is unable to generate enough cash to meet these obligations. This
was dramatically illustrated by the global financial crisis of 2008-2009.)
 Operational risk (Operational risk is the risk that a firm's internal

practices, policies and systems are not adequate to prevent a loss
being incurred, either because of market conditions or operational
difficulties)
Source of Risk
 Market risk is the risk that arises from movements in stock

prices, interest rates, exchange rates, and commodity prices.
 Inflation risk, also referred to as purchasing power risk, is the

risk that inflation will undermine the real value of cash
flows made from an investment. Inflation risk can be seen
clearly with fixed-income investments.
 Exchange rate risk refers to the risk that a company's

operations and profitability may be affected by changes in
the exchange rates between currencies.
MEASURES OF RISK
 Range: It is the difference between the highest and lowest possible

return from an investment. More the range higher will be the variability,
hence greater will be the risk.
 Standard Deviation (SD): A standard deviation (or σ) is a measure of

how dispersed the data is in relation to the mean.
 A low standard deviation means data are clustered around the mean,
and a high standard deviation indicates data are more spread out.
MEASURES OF RISK
 Variance (σ 2 ): The square of SD is called variance. This measures

the dispersion around the mean.
 Co-efficient of Variation (CV): This is yet another frequently used

measure of variation.
 The interpretation of this measure is that the lesser the variation in

data, the more consistent it is.
Tax Structure in India: An Introduction
 Taxes are the largest source of

earnings for the government and
collected from the general public.
 The general public includes salaried

persons, business people,
industrialists, and other service
providers.
 All these stakeholders pay taxes

with the expectation that the
government will work efficiently.
 Collected money used for various

developmental projects such as
roads, railways, defence, schools,
colleges, hospitals etc.
We pay taxes:
 When buying things from the

market.
 When spending money.
 When earning money.
India has a well-developed taxation structure. The taxation system in
India is mainly a three-tier system:
1.Central Government (The central government levies customs duty,

income tax, service tax, and central excise duty).
2.State governments (Levy taxes on agricultural income, professional

tax, value added tax, state excise duty, land revenue and stamp duty).
3.Local governments (includes panchayat and municipalities and are

allowed to collect tax on octroi, property tax, and other taxes on various
services like drainage and water supply).
The Government cannot impose taxes until it is passed as a law.

DIRECT TAX
 A direct tax is a tax that a person or

organisation pays directly to the
entity that imposed it.
 It cannot be transferred to other

individuals.
 Examples include income tax,

wealth tax, and gift tax.
 All of which are paid by an

individual taxpayer directly to the
government.
A type of tax where the impact and the incidence fall under the same category
can be defined as a Direct Tax.
DIRECT TAX
 As per the Income Tax Act, 1961, every assesses

whose total income exceeds the maximum
exempt limit is liable to pay this tax.
 The tax structure and rates are annually

prescribed by the Union Budget.
 Tax is imposed during each assessment year,

which commences on 1st April and ends on 31st
March.
 Total income is calculated from various heads

such ass business and profession, house
property, salaries, capital gains, and other
sources.
DIRECT TAX
The assesses are classified as
 Individuals,
 Hindu Undivided Family (HUF)

 Association of Persons (AOP)
 Body of Individuals (BOI)
 Company,
 Firm.
 Local authority
 Artificial Judiciary not falling in any of the category
Indirect tax
 Indirect tax is a type of tax that is passed
on to another individual or entity.
 An indirect tax is collected by one entity in

the supply chain, such as a manufacturer
or retailer, and paid to the government.
 However, the manufacturer or retailer

passes the tax to the consumer as part of
the purchase price of a good or service.
This type of tax is not directly paid by the individual to the government. These
are levied on the goods and services and collected by the intermediaries
(those who sell goods and offer services)
Central Excise duty
 An excise or excise tax

(sometimes called an excise
duty) is a tax charged on goods
produced within the country.
 It is a tax on the production or

sale of a good. This tax is now
known as the Central Value
Added Tax (CENVAT).
 This particular tax is governed

by two sets of acts – Central
Excise Act, 1944 and Central
Excise Tariff Act, 1985.
Value-Added Tax
(VAT)
 VAT or value-added tax, is a

common form of indirect tax
levied on services and goods.
 It is paid to the government by

the producers at every stage in
the supply chain.
 VAT tax is applicable only on

goods sold within a particular
state, which means that the
buyer and the seller need to be
in the same state.
Value-Added Tax
(VAT)
 VAT is the tax which is charged
on the gross margin at every
stage in the sale of goods. Tax
is assessed and collected at
each point, starting from the
manufacturer until the product
reaches the retailer.
 It is a multistage tax system

with provision for collection of
tax paid on the purchases at
every point of sale. Thus, it
removes the tax-on-tax effect.
Customs duties
 Customs duties are charges levied

on goods when they cross
international borders.
 Customs duties are charged by

special authorities and bodies
created by local governments and
are meant to protect local
industries, economies, and
businesses.
 Different products, as well as

different countries of origin, may
have different customs duties
associated with them.
Octroi Tax
 Octroi duty is the tax levied by Following are some of the goods on
local or state governments on which Octroi Tax is levied:
certain categories of goods as
 Leather goods
they enter the area.
 Food grain
 China Made Products
 It is a charge for allowing transit  Cars and other motor vehicles
of good through the jurisdiction.  Imported glass
 Products made from wood
 Goods manufactured from silk
 Domesticated animals
 Items made from gold
Goods and Service Tax
(GST)
 GST is known as the Goods and Services Tax.
 It is an indirect tax which has replaced many indirect taxes in

India such as the excise duty, VAT, services tax, etc.
 The Goods and Service Tax Act was passed in the Parliament
on 29th March 2017 and came into effect on 1st July 2017.
Goods and Service Tax
(GST)
 In other words, Goods and Service Tax (GST) is

levied on the supply of goods and services.
 Goods and Services Tax Law in India is

a comprehensive, multi-stage, destination-based
tax that is levied on every value addition.
 GST is a single domestic indirect tax law for the

entire country.
Objectives Of GST
 To achieve the ideology of ‘One Nation, One Tax’
 To subsume a majority of the indirect taxes in India
 To eliminate the cascading effect of taxes
 Online procedures for ease of doing business
 To increase the taxpayer base
 To promote competitive pricing and increase consumption

CGST: Central Goods and Service Tax -
 The Central Goods and Services Tax or CGST is an indirect tax under the
GST regime that is applicable to intrastate transactions.
 Governed by the CGST Act, 2017, CGST is collected by the Central

Government.
 For instance, if a supplier from Mumbai has sold goods worth Rs. 10,000 to
a customer in Mumbai and the GST applicable is 18%, then CGST and
SGST will be divided equally. Hence, out of the total revenue earned, Rs.
900 will go to the Central Government towards CGST.
SGST: State Goods and Service Tax -
 SGST is an indirect tax levied on the intrastate supply of goods and services
and is collected by the State Government of the respective state under the
State Goods and Services Act, 2017.
 Just like CGST, under section 15 of the SGST Act, SGST is levied on the
transaction value of the goods or services supplied which is the price actually
paid for the supply of goods or services.
 Additionally, as per sections 12 and 13 of the SGST Act, the obligation to

pay SGST is at the time of supply of goods or services and the CGST portion
will also be levied accordingly.
GST: Integrated Goods and Service Tax -
 The Integrated Goods and Services Tax or IGST is another

component of GST that is applicable to the interstate supply of
goods and services as well as to imports and exports between 2
states.
 The IGST is governed and collected by the Central Government

under the IGST Act. The accumulated tax is then divided between
the respective states by the Central Government.
UTGST: Union Territory Goods and Service Tax -
 UTGST is another indirect tax imposed and collected by the respective Union
Territory under the Union Territory Goods and Services Act (UTGST), 2017
on the intra-state supply of goods or services.
 Alcoholic products meant for human consumption are excluded from the list
of products under UTGST. UTGST is applicable to the supplies of goods and
services that take place in the Union Territories of Andaman and Nicobar
Islands, Chandigarh, Dadra and Nagar Haveli, Daman and Diu, and
Lakshadweep.
 However, it is to be noted here that SGST law will be applicable to the union
territories of Delhi and Puducherry since these territories have their private
legislature and Government.
Revenue Authority
The Central Board of Direct Taxes
 It is a statutory authority functioning under the Central Board of

Revenue Act, 1963.
 The officials of the Board in their ex-officio capacity also function

as a Division of the Ministry dealing with matters relating to levy
and collection of direct taxes.
The Central Board of Excise and Customs
 The Central Board of Excise and Customs is part of the

Department of Revenue under the Ministry of Finance.
 It is the nodal agency responsible for the administering customs,

central excise duty and service tax in India.
The Central Board of Excise and Customs
 Under the GST regime, the CBEC has been renamed as the
Central Board of Indirect taxes and Customs post legislative
approval.
 CBIC supervise the work of all its field formations and

directorates and assist government in policy making in relation to
GST, continuing central excise levy and custom functions.
Taxation Terminologies
 Assessee means a person liable for payment of

taxes or any other sum of money under the Income-
tax Act.
 The person includes individuals, Hindu Undivided

Families (HUF), Associations of Persons (AOP),
Companies, Firms, Limited liability Partnership, and
Artificial judicial persons not included in the former
categories.
 Previous year also known as financial year,

concerning income tax calculation is the year in which
income is earned for which tax is to be calculated.
 The tax on such income is paid in the succeeding

year.
 It starts from 1st April to ends on 31st March of the

succeeding year.
 The Assessment Year is the year in which the tax liabilities are
computed and paid off to the government.
 The assessment year is the period (from April 1 to March 31) during
which you are taxed on the money you receive in a given financial
year.
 In Assessment Year 2023-24, income gained in the current Financial

Year 2022-23 (i.e. from April 1, 2022, to March 31, 2023) will be
taxable (i.e. from 1st April 2023 to 31st March 2024).
 In Assessment Year 2023-24, income received in Financial Year

2022-23 (i.e. from April 1, 2022, to March 31, 2023) will be taxable
(i.e. from 1st April 2023 to 31st March 2024).
 The financial year is the calendar year in which you received your
money. It begins on April 1st of each calendar year and ends on March
31st of the next calendar year.
 The word "financial year" is sometimes abbreviated as "F.Y." An

assessee must measure and plan taxes for the fiscal year, but
the income tax return must be filed the next year or Assessment Year.
 Any money earned by you from April 1, 2022, to March 31, 2023, is
simply referred to as income earned in Financial Year (FY) 2022-23.
How to determine residential
status?
For the purpose of income tax in India, the income tax
laws in India classifies taxable persons as:
•A resident
•A resident not ordinarily resident (RNOR)
•A non-resident (NR)
The taxability differs for each of the above categories of

taxpayers. Before we get into taxability, first we need to
understand how a taxpayer becomes a resident, an
RNOR or an NR.
status?
A taxpayer would qualify as a resident of India if he

satisfies one of the following two conditions :
1. Stay in India for a year is 182 days or more or
2. physically present in India for a period of 60 days

during a relevant tax year or a total of 365 days or more
in the four preceding years.
status?
Resident Not Ordinarily Resident
If an individual qualifies as a resident, the next step is to determine if he/she

is a Resident ordinarily resident (ROR) or an RNOR. He will be a ROR if he
meets both of the following conditions:
1. Has been a resident of India in at least 2 out of 10 years immediately

previous years and
2. Has stayed in India for at least 730 days in 7 immediately preceding years
Therefore, if any individual fails to satisfy even one of the above conditions,
he would be an RNOR.
status?
Non-resident
Any individual is said to be a non resident if he/she fails to

satisfy the following condition:
1. Stay in India for a year is 182 days or more or
2. physically present in India for a period of 60 days during a

relevant tax year or a total of 365 days or more in the four
preceding years.
Head of Income
Tax
 According to the Income Tax Act, a taxpayer’s earnings
are divided into 5 heads of income.
 At the end of each financial year, you must correctly

classify your earnings under these heads of
income for accurate tax calculation.

Head of Income
Tax
1. Income from salary
2. Income from house property
3. Income from profits and gains from business or
profession
4. Income from capital gains
5. Income from other sources
Income from
salary
 Any income that you receive in terms of the service you provide
on a contract of employment is applicable for taxation under this
head.
 This includes salary, advance salary, perquisites, gratuity,

commission, annual bonus and pension.
This tax head also includes some exemptions:
•House Rent Allowance (HRA): As a salaried individual, if you live

in a rented house, you can claim House Rent Allowance for partial or
complete tax exemptions.
•Conveyance Allowance: You can get a monthly tax exemption of
up to Rs.800.
Income from house property
 An individual’s income from his or her property or land is taxable under

the head of income from house property.
 This head includes the policy for calculating tax on rental income that
you receive from your properties.
 In case you own more than one self-occupied house, then only one
house is considered to be occupied and the rest are considered to be
rented out.
 The taxation occurs on income received from both commercial and

residential property.
Income from profits and gains
from business and professions
 Under this head, the income earned through profits and gains
from the business and professional activities is taxed.
 The term business here includes any type of trade commerce,

manufacturing, or any other commercial ventures.
 Expenses are deducted from the total revenue generated in

business to arrive at the taxable part of the income.
 It also includes any salary or bonus received through a

partnership with a business.
Income from Capital gains
 Under this head, all the gains earned from capital assets be it
moveable or immovable are taxed from the taxpayers.
 Short-term capital gains: gain earned after holding capital

assets for a period of less than 36 months is termed as short-
term capital gain.
 In the case of holding stock, the holding period for short-term

capital gains is less than 12 months.
 Long-term capital gains: holding periods more than 36 month

Income from other sources
Under this head, any income which fails to

belong to any category is taxed.
What Is Income Tax
Slab?
 In India, the Income Tax applies to individuals based on a slab system,
where different tax rates are assigned to different income ranges. As
the person's income increases, the tax rates also increase.
 This type of taxation allows for a fair and progressive tax system in the
country.
 The income tax slabs are revised periodically, typically during each
budget.
 These slab rates vary for different groups of taxpayers.

https://www.incometax.gov.in/iec/foportal/ m
https://www.incometax.gov.in/iec/foportal/help/how-to-file-itr1-form-sahaj
Returns and Forms Applicable for Salaried
Individuals for AY 2024-25
Tax Slabs for AY 2024-25
 The Finance Act 2023 has amended the provisions of Section

115BAC w.e.f AY 2024-25 to make the new tax regime the
default tax regime for the assessee being an Individual, HUF, AOP
not being co-operative societies), BOI and Artificial Juridical Person.
 However, eligible taxpayers have the option to opt out of the new
tax regime and choose to be taxed under the old tax regime.
Old tax regime
 The old tax regime refers to the system of income tax

calculation and slabs that existed before the introduction of the
new tax regime.
 In the old tax regime, taxpayers have the option to claim

various tax deductions and exemptions.
The option to choose the regime
 In the case of "non-business cases", the option to choose the regime can
be exercised every year directly in the ITR to be filed on or before the due
date specified under section 139(1).
 In case eligible taxpayers have income from business and profession

and want to opt out of the new tax regime, the assessee would be required
to furnish Form-10-IEA on or before the due date u/s 139(1) for furnishing
the return of income.
 Also, for withdrawal of such option i.e. opting out of the old tax regime shall
be done by way of furnishing Form No.10-IEA.
 However, in the case of eligible taxpayers having income from business

and profession option to switch to the old tax regime and withdraw the
option in any subsequent AY is available only once in a lifetime.
Tax Slabs
Tax Slabs
Tax Slabs

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Financial Literacy: An

Dr. Sanjeev Kumar

 Familiarity with different aspects of “Financial Literacy” such as

 Apply the concept of investment planning.

 Able to analyze the different products of banking and insurance.

 Personal tax planning.

UNIT- I Financial Planning and Financial Products

UNIT- II Banking and Digital Payment

 Banking products and services

UNIT- Ill Investment Planning and Management

 Investment opportunity and financial products

UNIT- IV Personal Tax

 Introduction to basic Tax Structure in India for personal taxation

 Financial planning is the process of managing your money

 It involves evaluating your current financial situation, setting

 Financial planning covers budgeting, saving, investing, and

Financial planning is a broader term and cover all the

 From wealth creation to wealth protection,

Imagine Sarah, a 30-year-old, who wants to save for three

1. Emergency Fund: Save $10,000 for unexpected expenses.

2. Buy a House: Save $50,000 for a down payment in 5 years.

3. Retirement: Save $500,000 by age 60.

1. Assess Current Situation: Sarah calculates her income, expenses,

3. Create a Budget: Sarah adjusts her monthly spending to save

4. Invest Wisely: Sarah invests part of her income in a retirement

These may be:

 Savings to buy a car costing around 10 lakh after 3 years.

Using a monthly spending plan or budget to keep

 Planning finances is essential for everyone,

 Let’s suppose you choose not to plan and keep

 This happens when you don’t plan and end up

 Another essential reason why financial

 Equity and debt markets have become dynamic

 Indian markets have become more integrated

 Investment options are growing, and bank

 The universe of investment options is likely to

 Reforms have put more money in the hands of

 Hence, there is a need to get help from a

 Financial planners offer expertise and guidance for

 Financial planners may be of the following types

 Commission-based financial planners: who act as

 Fee-based financial planners: who charge a fee for

 Anybody with goals or dreams to achieve something

 Any person who earns money either in the form of

 Financial planners can provide a model portfolio,

 Short-term goals. These can be reached within a year and

 Long-term goals. Indicate wants and desires for a time period

 Write down one personal financial goal. It should be specific, measurable,

 Decide whether your goal is short-term, Midterm, or long-term.

Be clear about the objectives.

This includes achieving your future goals, such as:

 Enjoy a better standard of living.

 Be prepared for emergencies.

 Attain peace of mind.

 Manage your money in a best possible manner

 A sum of money in the hand

 This principle is based on the

 For example, let's say you can either receive a

 Ignoring taxes, the $100,000 payout today is