Module 1

1. What is financial planning. Explain process of financial

planning.
Financial planning is the process of setting and achieving financial goals by
effectively managing one's finances. It involves analyzing an individual's current
financial situation, identifying their financial objectives, and creating a plan to reach
those goals.
The process of financial planning typically includes the following steps:
1. Determine current financial position: This involves assessing one's income,
expenses, assets, liabilities, and overall net worth. It helps in understanding the
current financial situation and identifying areas that need improvement.
2. Identify and set financial goals: This step involves determining short-term and
long-term financial objectives. These goals can include saving for retirement, buying
a house, paying off debts, or funding education. Setting specific, measurable,
achievable, relevant, and time-bound (SMART) goals is crucial.
3. Identify suitable investment avenues: Once the goals are established, the next
step is to identify investment options that align with the individual's risk tolerance,
time horizon, and financial objectives. This may include stocks, bonds, mutual
funds, real estate, or other investment vehicles.
4. Evaluate alternatives and strategize: In this step, various investment
alternatives are evaluated based on their potential returns, risks, and liquidity. A
suitable investment strategy is then developed, considering factors such as
diversification, asset allocation, and risk management.
5. Create and implement a financial action plan: This involves developing a
comprehensive plan that outlines specific actions to be taken to achieve the financial
goals. It may include budgeting, saving, investing, debt management, insurance
coverage, and tax planning. The plan should be realistic, flexible, and adaptable to
changing circumstances.
6. Review and revise the financial plan: Regular monitoring and review of the
financial plan are essential to ensure it remains aligned with the individual's
changing circumstances, goals, and market conditions. Revisions may be required
 to accommodate new goals, changes in income, or adjustments in investment
strategies.

By following these steps, individuals can create a roadmap to achieve their financial
goals, make informed decisions, and improve their overall financial well-being. It is
advisable to seek professional advice from financial planners or advisors to ensure
an effective and personalized financial plan.

2. Explain development of personal financial goals.

Developing personal financial goals involves a few key steps:
1. Assess your current financial situation: Before setting financial goals, it's
important to understand where you currently stand. This includes reviewing your
income, expenses, debts, and assets.
2. Determine your financial priorities: Based on your current financial situation,
identify the areas that are most important to you. For example, you may prioritize
paying off high-interest debt, saving for a down payment on a house, or building an
emergency fund.
3. Set specific, measurable, achievable, relevant, and time-bound (SMART)
goals: Once you have identified your financial priorities, set specific goals that are
aligned with them. Make sure your goals are SMART, which means they are specific,
measurable, achievable, relevant, and time-bound.
4. Create a plan to achieve your goals: Once you have set your financial goals,
create a plan to achieve them. This may include creating a budget, setting up
automatic transfers to your savings account, or contributing to a retirement plan.
5. Monitor your progress: Regularly monitor your progress towards your financial
goals. This will help you stay on track and make adjustments as needed.
6. Adjust your goals as needed: As your financial situation changes, you may need
to adjust your goals. For example, if you receive a promotion at work, you may want
to increase your retirement savings goal.
By following these steps, you can develop personal financial goals that are aligned
with your priorities and help you achieve financial security.
3. Discuss factors affecting personal financial planning.
There are several factors that can affect personal financial planning. These factors
can vary from individual to individual, but some common ones include:
1. Income: The amount of income a person earns is a significant factor in financial
planning. Higher income allows for more flexibility in budgeting and saving, while
lower income may require more careful planning and prioritization of expenses.
2. Expenses: The level of expenses an individual has can greatly impact their
financial planning. High expenses, such as mortgage payments, student loans, or
medical bills, can limit the amount of money available for saving or investing.
3. Debt: The presence of debt, such as credit card debt or loans, can affect
financial planning by requiring monthly payments and potentially accruing
interest. Managing and paying off debt is an important consideration in personal
financial planning.
4. Financial goals: Personal financial goals, such as saving for retirement, buying
a house, or starting a business, can influence financial planning decisions. These
goals may require specific strategies, such as investing in certain assets or setting
aside a certain amount of money each month.
5. Risk tolerance: Each individual has a different level of risk tolerance when it
comes to investing and financial decision-making. Some people may be more
conservative and prefer low-risk investments, while others may be more willing to
take on higher risks for potentially higher returns.
6. Life stage: The stage of life a person is in can impact financial planning. For
example, a young person just starting their career may have different financial
priorities than someone nearing retirement. Life events such as marriage, having
children, or caring for aging parents can also influence financial planning
decisions.
7. Economic conditions: The overall state of the economy can affect personal
financial planning. Factors such as inflation, interest rates, and job market
conditions can impact income, expenses, and investment returns.
8. Knowledge and education: The level of financial knowledge and education an
individual has can impact their ability to effectively plan and manage their
finances. Understanding concepts such as budgeting, investing, and tax planning
can help individuals make informed decisions.
 It is important to consider these factors and regularly review and adjust financial
plans as circumstances change. Personal financial planning is a dynamic process
that requires ongoing evaluation and adjustment to ensure financial goals are met.

4. Write note on Time Value of Money.

The time value of money is a fundamental concept in finance that recognizes the
idea that the value of money changes over time. It is based on the principle that a
dollar received today is worth more than the same dollar received in the future due
to factors such as inflation, opportunity cost, and risk.
Formula:
The time value of money can be calculated using various formulas, depending on
the specific scenario. The most commonly used formulas include:
1. Present Value (PV): PV = FV / (1 + r)^n
This formula calculates the current value of a future cash flow (FV) by discounting
it back to the present using an appropriate interest rate (r) and the number of periods
(n).
2. Future Value (FV): FV = PV * (1 + r)^n
This formula determines the value of an investment or cash flow at a future date
by considering the interest rate (r) and the number of periods (n).
Applications of Time Value of Money:
1. Savings: The time value of money is relevant when saving money for future goals.
By understanding the concept, individuals can determine how much they need to
save today to achieve a specific future goal, taking into account factors such as
inflation and potential investment returns.
2. Investments: The time value of money is crucial in evaluating investment
opportunities. It helps investors determine the potential return on investment and
compare different investment options by considering the present value and future
value of cash flows.
3. Purchasing Power: Inflation erodes the purchasing power of money over time.
By considering the time value of money, individuals can assess the impact of
inflation on their savings and investments, and make adjustments to maintain their
purchasing power.
4. Loan EMIs (Equated Monthly Installments): When taking out a loan, the time
value of money is used to calculate the equated monthly installments (EMIs). The
future value of the loan amount is divided into equal monthly payments, taking into
account the interest rate and the loan tenure.
5. Value of Investments: The time value of money is essential in determining the
value of investments over time. By considering the future value of investments,
individuals can assess the potential growth and profitability of their investment
portfolios.
Understanding and applying the time value of money concept is crucial for making
informed financial decisions. It helps individuals and businesses assess the worth of
future cash flows, evaluate investment opportunities, plan for retirement, and
manage debt effectively.

5. Explain Personal Financial Statements.

Personal financial statements are documents that provide a snapshot of an
individual's financial position. They are used to assess an individual's financial
health, track their income and expenses, and evaluate their net worth. Personal
financial statements typically consist of two main components: the balance sheet and
the income statement.
1. Balance Sheet: The balance sheet provides a summary of an individual's assets,
liabilities, and net worth at a specific point in time. It is divided into two sections:
a. Assets: Assets include all the valuable possessions owned by an individual, such
as cash, investments, real estate, vehicles, and personal belongings. These assets are
categorized as current assets (e.g., cash, savings accounts) or long-term assets (e.g.,
property, investments).
b. Liabilities: Liabilities represent an individual's debts and obligations. This
includes loans, credit card debt, mortgages, and any other outstanding payments.
Liabilities are categorized as current liabilities (e.g., credit card balances, utility
bills) or long-term liabilities (e.g., mortgage, student loans).
 c. Net Worth: Net worth is calculated by subtracting total liabilities from total
assets. It represents the individual's overall financial position and is an indicator of
wealth accumulation or debt burden.

2. Income Statement: The income statement provides a summary of an individual's

income and expenses over a specific period, typically monthly or annually. It
includes the following components:
a. Income: This section includes all sources of income, such as salary, wages, rental
income, dividends, and interest earned. It provides an overview of the individual's
total earnings.
b. Expenses: Expenses encompass all the costs incurred by an individual, including
housing expenses, utilities, transportation, groceries, healthcare, entertainment, and
debt payments. This section helps track and analyze spending patterns.
c. Net Income: Net income is calculated by subtracting total expenses from total
income. It represents the individual's disposable income after deducting all expenses.
Personal financial statements are essential for several reasons:
1. Financial Planning: They provide a comprehensive view of an individual's
financial situation, enabling them to set realistic goals, create budgets, and make
informed financial decisions.
2. Loan Applications: Lenders often require personal financial statements when
assessing an individual's creditworthiness and determining loan eligibility. These
statements help lenders evaluate an individual's ability to repay the loan.
3. Tax Planning: Personal financial statements assist in tax planning by providing
an overview of income, expenses, and potential deductions. They help individuals
optimize their tax strategies and ensure compliance with tax regulations.
4. Wealth Management: Personal financial statements help individuals monitor
their net worth and track progress towards financial goals. They provide insights into
investment performance, debt management, and overall financial well-being.
Regularly updating and reviewing personal financial statements is crucial for
maintaining financial stability and making informed financial decisions. They serve
as a valuable tool for assessing financial health, identifying areas for improvement,
and planning for the future.
 Module 2
1. What is investment planning. Explain factors affecting choice
of investment.
Investment planning is the process of creating a strategy for managing your financial
resources with the goal of achieving specific financial objectives over a certain
period of time. It involves analyzing your financial situation, identifying your
investment goals, determining your risk tolerance, and selecting appropriate
investment options to help you reach your objectives. Investment planning also
involves monitoring and adjusting your investment strategy as needed to ensure it
remains aligned with your goals and risk tolerance.
Several factors affect the choice of investment:
1. Risk: Risk refers to the uncertainty associated with an investment's potential
returns. Different investments carry varying levels of risk, and individuals must
consider their risk tolerance before making investment decisions. Generally, higher-
risk investments offer the potential for higher returns, but they also come with a
greater chance of loss.
2. Return on Investment (ROI): ROI is the gain or loss generated from an
investment relative to its cost. It is a crucial factor in investment planning as
individuals aim to maximize their returns. Investments with higher potential returns
often involve higher risks, so finding a balance between risk and return is essential.
3. Budget: An individual's budget plays a significant role in investment planning. It
determines the amount of money available for investment and influences the
investment options that can be considered. It is important to invest within one's
financial means and avoid overextending oneself.
4. Volatility: Volatility refers to the price fluctuations of an investment over time.
Investments with high volatility experience significant price swings, while those
with low volatility tend to be more stable. Investors must consider their risk tolerance
and investment goals when deciding whether to invest in volatile or stable assets.
5. Inflation Rate: Inflation erodes the purchasing power of money over time. When
planning investments, individuals need to consider the inflation rate to ensure that
their investments can outpace inflation and maintain their value. Investments that
offer returns higher than the inflation rate are generally preferred.
6. Taxation: Taxation can significantly impact investment returns. Different
investment vehicles have varying tax implications, such as capital gains taxes or
dividend taxes. It is crucial to consider the tax efficiency of investments and
understand how taxes will affect overall returns.
7. Liquidity: Liquidity refers to the ease with which an investment can be converted
into cash without significant loss of value. Some investments, like stocks, can be
easily bought or sold, while others, like real estate, may take longer to convert into
cash. The liquidity needs of an individual should be considered when choosing
investments.
Considering these factors and conducting thorough research and analysis can help
individuals make informed investment decisions that align with their financial goals
and risk tolerance. It is advisable to seek professional advice from financial advisors
or investment experts to ensure a well-rounded investment plan.

2. Write note on asset allocation and investment alternatives.

Asset Allocation:
Asset allocation is the process of dividing your investment portfolio among different
asset classes, such as stocks, bonds, and cash, to help manage risk and achieve your
investment goals. The goal is to balance potential returns with the level of risk you
are comfortable with.
Here are some key points to consider when developing an asset allocation strategy:
1. Determine your investment goals: Are you saving for retirement, a down
payment on a house, or a child's education? Your investment goals will help
determine your time horizon and risk tolerance.
2. Assess your risk tolerance: How comfortable are you with market volatility and
potential losses? Your risk tolerance will help determine the percentage of your
portfolio allocated to stocks versus bonds.
3. Understand asset classes: Stocks offer the potential for higher returns but also
carry more risk. Bonds offer lower returns but are less volatile. Cash provides safety
and liquidity but offers lower returns.
4. Diversify your portfolio: Spread your investments across different asset classes,
industries, and geographic regions to help manage risk.
5. Rebalance your portfolio: Periodically review and adjust your asset allocation
to ensure it continues to align with your investment goals and risk tolerance.

Investment Alternatives:
1. Stocks: Stocks represent ownership in a company and offer the potential for
capital appreciation and dividends. There are two main types of stocks: common and
preferred. Common stocks offer the potential for greater returns but also carry more
risk. Preferred stocks offer a fixed dividend but may not offer the same potential for
capital appreciation.
2. Bonds: Bonds represent a loan made to a company or government and offer a
fixed interest rate. There are several types of bonds, including treasury bonds,
corporate bonds, and municipal bonds. Treasury bonds are considered the safest
investment, while corporate bonds carry more risk.
3. Mutual Funds: Mutual funds are a type of investment that pools money from
multiple investors to purchase a diversified portfolio of stocks, bonds, or both.
Mutual funds offer the potential for professional management and diversification.
4. Exchange-Traded Funds (ETFs): ETFs are similar to mutual funds but trade
like a stock on an exchange. ETFs offer the potential for low fees, transparency, and
flexibility.
5. Real Estate: Real estate investments can include buying a physical property,
investing in a real estate investment trust (REIT), or investing in a real estate mutual
fund or ETF. Real estate investments offer the potential for income through rent and
capital appreciation through property value growth.
6. Cash: Cash investments include savings accounts, money market accounts, and
certificates of deposit (CDs). Cash investments offer safety and liquidity but offer
lower returns.

Remember to always do your own research and consult with a financial advisor
before making any investment decisions.
3. Explain different investment alternatives.
1. Stocks: Stocks, also known as equities, represent ownership in a company. When
you buy a stock, you become a part-owner of the company and are entitled to a share
of its profits in the form of dividends or capital gains. Stocks can be volatile in the
short term but offer the potential for long-term growth.
2. Bonds: Bonds are debt securities issued by governments, corporations, or other
entities. When you buy a bond, you are lending money to the issuer and will receive
regular interest payments until the bond matures. Bonds generally offer lower returns
than stocks but are less volatile and provide a fixed income stream.
3. Mutual Funds: Mutual funds are investment vehicles that pool money from
multiple investors to purchase a diversified portfolio of stocks, bonds, or other
securities. Mutual funds offer professional management, diversification, and the
potential for higher returns than individual stocks or bonds.
4. Exchange-Traded Funds (ETFs): ETFs are similar to mutual funds but trade like
stocks on an exchange. ETFs offer the same benefits as mutual funds, such as
diversification and professional management, but can be bought and sold throughout
the day at market prices.
5. Real Estate: Real estate investments involve purchasing physical property, such
as residential or commercial buildings, with the expectation of generating income
through rent or capital appreciation. Real estate investments can offer higher returns
than stocks or bonds but are generally less liquid and require more management.
6. Commodities: Commodities, such as gold, oil, or agricultural products, represent
physical goods that can be bought and sold. Commodities can offer high returns but
are also highly volatile and require significant expertise to trade effectively.

7. Cryptocurrencies: Cryptocurrencies, such as Bitcoin or Ethereum, are digital or

virtual tokens that use cryptography for security and operate independently of a
central bank. Cryptocurrencies are highly volatile and speculative, but some
investors see them as a potential alternative to traditional currencies or investments.
8. Certificates of Deposit (CDs): CDs are time deposits issued by banks that offer a
fixed interest rate for a specified term, typically ranging from a few months to several
years. CDs offer a guaranteed return but generally offer lower returns than stocks or
bonds.
 9. Money Market Accounts: Money market accounts are savings accounts that offer
higher interest rates than traditional savings accounts but require a higher minimum
balance and may have restrictions on withdrawals. Money market accounts are
generally less volatile than stocks or bonds but offer lower returns than CDs.
10. Annuities: Annuities are insurance products that provide a guaranteed stream of
income in exchange for a lump sum payment. Annuities can offer a reliable income
stream but generally offer lower returns than stocks or bonds and may have fees and
restrictions.

4. Write notes on: Common stocks

Common stock is a type of equity security that represents ownership in a corporation.
Here are some key points to consider when investing in common stocks:
1. Ownership rights: When you purchase common stock, you become a shareholder
and have ownership rights in the company. This means you are entitled to vote on
important matters such as the election of directors and other corporate decisions.
2. Dividends: Common stockholders may receive dividends, which are payments
made by the company to its shareholders. However, dividends are not guaranteed
and depend on the company's profitability and discretion.
3. Limited liability: Shareholders have limited liability, meaning they are only
responsible for the amount they invested in the company and are not personally liable
for the company's debts or obligations.
4. Capital appreciation: The primary way that investors make money from
common stocks is through capital appreciation, which occurs when the stock price
increases over time.
5. Risk: Common stocks are generally considered riskier than other types of
investments, such as bonds, because their value can fluctuate significantly based on
market conditions and the performance of the company.
6. Diversification: Investing in a diversified portfolio of common stocks can help
mitigate some of the risks associated with individual stocks.
7. Research: Before investing in common stocks, it's important to do your research
and understand the company's financials, management team, competitive landscape,
and other relevant factors.
 8. Long-term investment: Common stocks are typically considered a long-term
investment, as their value can fluctuate significantly in the short term.
9. Market trends: It's important to stay up-to-date on market trends and economic
indicators that may impact the value of common stocks.
10. Dividend reinvestment plans (DRIPs): Some companies offer dividend
reinvestment plans, which allow shareholders to automatically reinvest their
dividends into additional shares of the company's stock. This can be a convenient
and cost-effective way to build a position in a company over time.

5. Write notes on : Types of bonds

1. Capital Gains Bonds:
• Capital Gains Bonds are those instruments that allow you to transfer your
gains from long term assets such as land and house property into specific
bonds.
• The most significant advantage of investing in such a bond is that it offers you
tax exemption from Capital Gains Tax under Section 54EC of the Income Tax
Act, 1961, for up to 6 months from the sale of the asset sold.
• It means that an individual need to invest in capital gains bonds within 6
months from the transfer of capital assets.
• Bonds eligible under Section 54EC of the Income Tax Act, 1961 are issued
by:
• NHAI (National Highways Authority of India)
• RECL (Rural Electrification Corporation Ltd)
2. Government Securities: Bonds issued by the Central and State Governments are
called Government security. Since these are issued by Governments they carry no
credit risk. These are one of the safest types of investment options in India to earn
periodic interests and principal on maturity. These bonds pay interest on semi-annual
basis.
3. Corporate Bonds: These are bonds issued by various corporates for their
financing needs and hence carry credit risk. The holder of the bonds earns regular
interest income. and principal amount at maturity. Corporate bonds pay higher
interest than Bank FD’s and Government bonds.
 4. Inflation-Linked Bonds: In such type of bond, both principal amount and interest
payments are indexed to inflation. Inflation indexed bonds are an efficient way to
counter the inflation risk.
5. Convertible Bonds: This kind of bond allows its holder the option to convert it
into equity based on pre-specified terms.
6. Sovereign Gold Bond: The Government of India also issues sovereign Gold
Bonds. Gold bonds are in form of a security as it in the form of the Government of
India stock. It also carries interest rate which is paid regularly and has zero risk of
handling that exists in physical gold.
7. RBI Bond: The Government of India decided to issue 7.75% Taxable Bonds,
2018, with effect from January 10, 2018 [2], for enabling resident citizens/HUF to
invest in a taxable bond, without any monetary ceiling.

6. Write note on: Categories of Mutual funds

1. Equity Scheme: Equity schemes primarily invest in stocks and shares of
companies. These funds aim to generate long-term capital appreciation by investing
in a diversified portfolio of equity securities. They are suitable for investors with a
higher risk appetite and a longer investment horizon.

Category of
Scheme Features
Schemes

Large-cap Fund Invest 80% of total assets in equity and its related securities of large-cap firms

Mid-cap Fund Invest 65% of total assets in equity and its related securities of mid-cap firms

Small-cap Fund Invest 65% of total assets in equity and its related securities of small-cap firms

Multi-cap Fund Invest 65% of total assets in equity and its related securities
2. Debt Scheme: Debt schemes invest in fixed-income securities such as
government bonds, corporate bonds, debentures, and money market instruments.
These funds aim to provide regular income and capital preservation. Debt schemes
are suitable for conservative investors who prioritize stability and regular income
over capital appreciation.
Overnight Fund Invest in overnight securities with a maturity of 1 day

Short-duration Fund Invest in debt and money market securities so that the Macaulay
duration of the portfolio is between 1 year and 3 years

Medium Duration Fund Invest in debt and money market securities so that the Macaulay
duration of the portfolio is between 3 years and 4 years

Money Market Fund Invest in money market securities with maturity of up to 1 year

Medium- to Long-duration Invest in debt and money market securities so that the Macaulay
Fund duration of the portfolio is between 4 years and 7 years

Long-duration Fund Invest in debt and money market securities so that the Macaulay
duration of the portfolio is more than 7 years

3. Hybrid Scheme: Hybrid schemes, also known as balanced funds, invest in a mix
of equity and debt instruments. The allocation between equity and debt varies based
on the fund's objective. These funds aim to provide a balance between capital
appreciation and income generation. Hybrid schemes are suitable for investors
seeking a moderate level of risk and a balanced approach to investment.

Invest between 40% and 60% of total assets in equity and its related
Balanced Hybrid
securities; should invest between 40% and 60% of total assets in debt
Fund
securities. No arbitrage will be allowed

Invest between 65% and 80% of total assets in equity and its related
Aggressive Hybrid
securities; should invest between 20% and 35% of total assets in debt
Fund
securities

Invest between 10% and 25% of total assets in equity and its related
Conservative Hybrid
securities; should invest between 75% and 90% of total assets in debt
Fund
securities
4. Solution Oriented Scheme: Solution-oriented schemes are designed to meet
specific financial goals or objectives. These funds have a lock-in period of at least
five years and are categorized into two types: retirement funds and children's
education funds. Retirement funds aim to provide long-term capital appreciation and
regular income for retirement planning, while children's education funds aim to
accumulate wealth for a child's education expenses.

Category of Schemes Scheme Features

Children’s Fund Lock-in period for at least 5 years or till the child attains majority
age, whichever is earlier

Retirement Fund Lock-in period of at least 5 years or till retirement age, whichever is
earlier

5. Other Scheme: This category includes all other types of mutual funds that do not
fall under the above categories. It may include sector-specific funds, index funds,
exchange-traded funds (ETFs), and international funds. Sector-specific funds focus
on specific sectors or industries, while index funds aim to replicate the performance
of a specific market index. ETFs are traded on stock exchanges like shares, and
international funds invest in securities of foreign markets.

Index Funds/ETFs Tracks returns of underlying market index

Fund of Funds Invest at least 95% of total assets in the underlying

(Overseas or Domestic) fund

It is important for investors to understand the different categories of mutual funds

and their investment objectives before making investment decisions. Each category
has its own risk-return profile, and investors should choose funds that align with
their financial goals, risk tolerance, and investment horizon.
7. Write note on: Types of insurance
8. Write note on: Derivative market
The derivative market is a financial market where various types of
financial instruments, known as derivatives, are traded. These derivatives derive
their value from an underlying asset or group of assets, such as stocks, bonds,
commodities, currencies, or interest rates.
Derivatives are contracts between two parties that specify the conditions
under which payments are to be made between them based on the value of the
underlying asset. The value of a derivative is derived from the fluctuations in the
price of the underlying asset. These instruments are used for hedging, speculation,
and arbitrage purposes.
There are several types of derivatives traded in the derivative market,
including futures contracts, options contracts, swaps, and forward contracts. Each
type of derivative has its own unique characteristics and purpose.
 Futures contracts are agreements to buy or sell an asset at a
predetermined price on a specified future date. They are commonly used by investors
to hedge against price fluctuations in the underlying asset.
Options contracts give the holder the right, but not the obligation, to buy
or sell an asset at a predetermined price within a specified period. Options can be
used for hedging or speculative purposes.
Swaps are agreements between two parties to exchange cash flows based
on different variables, such as interest rates or currencies. Swaps are commonly used
to manage interest rate or currency risks.
Forward contracts are similar to futures contracts, but they are
customized agreements between two parties to buy or sell an asset at a specific price
on a future date. Forward contracts are often used for hedging purposes.
The derivative market plays a crucial role in the global financial system.
It provides investors with opportunities to manage risk, speculate on price
movements, and enhance returns. However, derivatives can also be complex and
carry significant risks, including the potential for substantial losses.
Regulation of the derivative market varies by country, with many
jurisdictions implementing measures to ensure transparency, stability, and investor
protection. Market participants, such as banks, financial institutions, and individual
investors, actively trade derivatives to capitalize on market opportunities and
manage their exposure to various risks.
In conclusion, the derivative market is a vital component of the global
financial system, providing investors with a wide range of instruments to manage
risk and enhance returns. However, it is important for market participants to
understand the complexities and risks associated with derivatives before engaging
in trading activities.
9. Write note on: Investment in real estate
Introduction:
Real estate investment is a popular and potentially lucrative way to diversify one's
portfolio, generate passive income, and build long-term wealth. This note will
provide an overview of the key aspects of investing in real estate, including its
benefits, challenges, and various strategies.
Benefits of Real Estate Investment:
1. Regular Income: Rental properties can generate consistent monthly cash flow,
providing investors with a steady source of passive income.
2. Appreciation: Over time, real estate values tend to increase, leading to potential
capital gains when the property is sold.
3. Diversification: Real estate investments offer a low correlation with stocks and
bonds, reducing overall portfolio risk through diversification.
4. Leverage: Real estate allows investors to control large assets with relatively small
amounts of capital, amplifying potential returns through financial leverage.
5. Tax Benefits: Real estate investors can take advantage of various tax deductions
and incentives, such as depreciation and mortgage interest deductions.
Challenges of Real Estate Investment:
1. Illiquidity: Real estate is an illiquid asset class, meaning it may take time to sell
a property and convert it into cash.
2. High Initial Costs: Purchasing real estate often requires substantial upfront
capital, which can be a barrier for some investors.
3. Management Intensive: Managing rental properties can be time-consuming,
requiring attention to maintenance, tenant relations, and regulatory compliance.
4. Market Volatility: Real estate markets can experience cyclical fluctuations,
impacting property values and rental demand.
5. Financing Risks: Obtaining financing for real estate investments can be
challenging, particularly in a rising interest rate environment.
 Investment Strategies:
1. Residential Rentals: Investors can purchase single-family homes, townhouses,
or apartment buildings and rent them out to tenants.
2. Commercial Properties: Office buildings, retail spaces, and industrial facilities
can provide higher rental yields but may also involve more complex management
and leasing arrangements.
3. Real Estate Investment Trusts (REITs): REITs allow investors to pool their
resources and invest in a diversified portfolio of real estate assets, offering liquidity
and professional management.
4. Real Estate Crowdfunding Platforms: These platforms enable investors to
participate in real estate projects with lower minimum investments, often in
exchange for equity or debt instruments.
5. Fix-and-Flip: Investors can purchase distressed properties, renovate them, and
sell them at a profit, typically within a short time frame.
Conclusion:
Investing in real estate offers numerous benefits, including regular income,
appreciation, diversification, leverage, and tax advantages. However, it also presents
unique challenges, such as illiquidity, high initial costs, management intensity,
market volatility, and financing risks. By understanding these factors and employing
appropriate investment strategies, individuals can successfully build wealth and
achieve their financial goals through real estate investments.

10. Write note on: Investment in commodities

Investing in commodities can be a valuable way to diversify your portfolio and
potentially earn returns. Commodities are physical goods that are widely used in the
production of other goods and services, such as oil, gold, and wheat.
There are several ways to invest in commodities, including:
1. Buying physical commodities: You can purchase physical commodities directly,
such as gold coins or oil barrels, and store them in a secure location.
2. Investing in commodity futures: Commodity futures contracts are agreements
to buy or sell a specific quantity of a commodity at a future date. They allow you to
speculate on the price of a commodity without actually holding the physical goods.
3. Investing in commodity ETFs: Commodity exchange-traded funds (ETFs) are
funds that track the price of a specific commodity or a basket of commodities. They
allow you to invest in commodities without actually holding the physical goods.
4. Investing in commodity mutual funds: Commodity mutual funds are funds that
invest in a variety of commodities, allowing you to diversify your portfolio and
potentially earn returns.
It's important to note that investing in commodities can be risky, as the prices of
commodities can be volatile and subject to significant fluctuations. It's important to
do your research and consult with a financial advisor before making any investment
decisions.

Additionally, it's important to consider the following factors when investing in

commodities:
1. Supply and demand: The price of a commodity is influenced by supply and
demand factors, such as global demand, geopolitical events, and weather conditions.
2. Storage and transportation costs: Physical commodities require storage and
transportation, which can be expensive and affect the price of the commodity.
3. Regulatory risks: Commodity prices can be affected by government regulations,
trade policies, and environmental regulations.
4. Counterparty risks: Commodity futures contracts and other financial
instruments can expose you to counterparty risks, such as the risk that the other party
may default on their obligations.
5. Liquidity risks: Commodity markets can be illiquid, making it difficult to sell
your investments quickly and at a favorable price.

In summary, investing in commodities can be a valuable way to diversify your

portfolio and potentially earn returns, but it's important to do your research, consult
with a financial advisor, and carefully consider the risks involved.
 Module 3

1) Explain EPF and PPF and how it works.

EPF stands for Employees' Provident Fund, and PPF stands for Public
Provident Fund. Both are savings schemes that provide a way for individuals
to save money for their future, with some benefits and incentives thrown in.
Employees' Provident Fund (EPF):
EPF is a mandatory savings scheme for employees in India, managed by the
Employees' Provident Fund Organization (EPFO). It is a retirement benefits
scheme that provides a lump sum payment to employees at the time of their
retirement or when they leave their job.
Here's how it works:
➢ Employers and employees contribute a certain percentage of the
employee's salary to the EPF every month. The current contribution rate is
12% of the basic salary, with the employer contributing 8% and the
employee contributing 4%.
➢ The contributions are collected and invested in various instruments such
as stocks, bonds, and government securities.
➢ The accumulated amount in the EPF account earns interest, which is
declared by the EPFO every year.
➢ Employees can withdraw a portion of their EPF balance in certain
situations, such as buying a house, getting married, or for medical
purposes.
➢ When an employee retires or leaves their job, they can withdraw the entire
EPF balance, which includes the employer's contribution, employee's
contribution, and the interest earned.

Public Provident Fund (PPF):

PPF is a voluntary savings scheme that provides a safe and secure way for
individuals to invest their money and earn interest on it. It is managed by the
Ministry of Finance and is open to all Indian citizens.
Here's how it works:
 ➢ Anyone can open a PPF account and start depositing money into it. The
minimum deposit amount is Rs. 500, and the maximum deposit amount is
Rs. 1.5 lakh per year.
➢ The deposits made into a PPF account are eligible for tax deductions under
Section 80C of the Income Tax Act.
➢ The interest rate on PPF deposits is fixed by the government and is
currently set at 7.9% per annum.
➢ The interest earned on PPF deposits is tax-free.
➢ Withdrawals from a PPF account are allowed after a certain period, subject
to certain conditions. For example, a withdrawal can be made after five
years from the date of opening the account, or after the completion of 15
years from the date of opening the account.
➢ If an individual dies before the maturity of their PPF account, their
nominee can withdraw the entire amount in the account.

In summary, both EPF and PPF are savings schemes that provide a way for
individuals to save money and earn interest on it. However, EPF is a
mandatory scheme for employees, while PPF is a voluntary scheme open to
all Indian citizens. EPF provides a lump sum payment at retirement or when
an employee leaves their job, while PPF allows for partial withdrawals after a
certain period.

2) Explain various investment schemes for retirement

planning.
1. National Pension Scheme (NPS): NPS is a government-backed pension
scheme that allows individuals to save for their retirement. It is a defined
contribution scheme, which means that the subscriber contributes a certain
amount of money to the scheme, and the returns generated are based on the
investments made by the fund manager. NPS offers a range of investment
options, including equity, corporate bonds, and government securities. The
scheme also provides tax benefits, and the returns are tax-free until
withdrawal.
2. Senior Citizen Saving Scheme (SCSS): SCSS is a savings scheme
designed for senior citizens, offering a high-interest rate and a low-risk
investment option. The scheme has a maturity period of five years and offers
an interest rate of 8.6% per annum. The maximum deposit amount is 15 lakh
rupees, and the interest earned is taxable.
3. Bank Fixed Deposit (FD): Bank FD is a traditional investment option that
offers a fixed rate of interest for a specific period. The interest rate varies
depending on the tenure of the deposit, with longer tenures offering higher
interest rates. FDs are considered a low-risk investment option, but the returns
are generally lower than other investment options.
4. Public Provident Fund (PPF): PPF is a long-term savings scheme that
offers a fixed rate of interest and tax benefits. The scheme has a maturity
period of 15 years, and the interest rate is currently 7.9% per annum. The
maximum deposit amount is 1.5 lakh rupees per year, and the returns are tax-
free.
5. Unit Linked Insurance Plans (ULIPs): ULIPs are investment plans that
offer a combination of insurance and investment. The investor pays a
premium, and the insurance company invests the premium in various assets
such as stocks, bonds, and money market instruments. The returns generated
are based on the performance of the investments, and the policyholder can
choose to invest in different fund options. ULIPs offer tax benefits, and the
returns are tax-free.
6. Mutual Funds: Mutual funds are investment vehicles that pool money
from various investors to invest in different assets such as stocks, bonds, and
money market instruments. The returns generated are based on the
performance of the investments, and investors can choose to invest in different
fund options such as equity funds, debt funds, and balanced funds. Mutual
funds offer diversification and professional management, but the returns are
not guaranteed and are subject to market risks.
3) Discuss life cycle approach of financial planning.
The life cycle approach to financial planning is a method that takes into
account an individual's current stage of life and financial goals to create a
personalized financial plan. This approach recognizes that an individual's
financial needs and priorities change over time, and it divides the financial
planning process into three distinct stages: wealth protection, wealth
accumulation, and wealth distribution.
1. Wealth Protection (Early Life):
The first stage of the life cycle approach is wealth protection. This stage
typically covers the early years of an individual's life, from college to the early
30s. During this stage, the focus is on protecting one's assets, minimizing debt,
and building an emergency fund. The goal is to create a solid financial
foundation that can withstand unexpected events, such as job loss, illness, or
accidents.
➢ Recommended financial goals for this stage:
­ Build an emergency fund
­ Pay off high-interest debt
­ Invest in insurance (health, disability, and life)
­ Start saving for retirement
2. Wealth Accumulation (Middle Life):
The second stage of the life cycle approach is wealth accumulation. This stage
typically covers the middle years of an individual's life, from the 30s to the
50s. During this stage, the focus is on building wealth through investments,
retirement savings, and increasing income. The goal is to create a significant
amount of wealth that can sustain a comfortable lifestyle in the long term.
➢ Recommended financial goals for this stage:
­ Increase income through career advancement or side hustles
­ Invest in tax-advantaged retirement accounts (401(k), IRA, Roth
IRA)
­ Build a diversified investment portfolio
­ Save for specific goals (college funds, down payment on a house)

3. Wealth Distribution (Later Life):

The third stage of the life cycle approach is wealth distribution. This stage
typically covers the later years of an individual's life, from the 60s and beyond.
During this stage, the focus is on managing and distributing wealth to maintain
a comfortable lifestyle, minimize taxes, and leave a legacy. The goal is to
ensure that the wealth accumulated over the years is used effectively and
efficiently.
➢ Recommended financial goals for this stage:
­ Create a sustainable withdrawal strategy from retirement accounts
­ Consider charitable giving or philanthropy
­ Review and update estate planning documents (will, trust,
beneficiaries)
­ Consider long-term care insurance
4) Write note on: Senior Citizen’s Saving Scheme
The Senior Citizen's Saving Scheme (SCSS) is a government-backed savings
scheme designed specifically for senior citizens in India. It is a popular
investment option for retirees looking for a regular income and capital
protection. Here are some key features and benefits of the SCSS:
1. Eligibility: The SCSS is open to Indian citizens who are 60 years or above.
However, individuals who have taken voluntary retirement (VRS) or
superannuation can also invest in this scheme if they are 55 years or above but
less than 60 years, subject to certain conditions.
2. Investment amount: The minimum investment amount is Rs. 1,000, and
the maximum is Rs. 15 lakhs. Investors can open multiple SCSS accounts, but
the total investment amount should not exceed the maximum limit.
3. Tenure: The SCSS has a tenure of five years, which can be extended by
another three years.
4. Interest rate: The interest rate on SCSS is reviewed quarterly and is
currently at 7.4% per annum for the first quarter of the financial year 2023-
24. The interest is paid quarterly, and the investor can choose to receive the
interest payment either through a cheque or directly in their bank account.
5. Tax benefits: Investments in SCSS are eligible for tax deductions under
Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakhs
per financial year. However, the interest earned on SCSS is taxable as per the
investor's income tax slab.
6. Premature withdrawal: SCSS allows premature withdrawal after one
year, but with a penalty. If the investor withdraws the amount before two
years, 1.5% of the deposit amount is deducted as a penalty. If the investor
withdraws the amount after two years but before five years, 1% of the deposit
amount is deducted as a penalty.
7. Nomination facility: SCSS allows investors to nominate a person who can
receive the amount in case of the investor's demise.
In summary, SCSS is a safe and secure investment option for senior citizens
looking for regular income and capital protection. It offers a decent interest
rate, tax benefits, and the flexibility to withdraw the amount prematurely,
albeit with a penalty.
5) Write note on: National Pension Schemes (NPS)
National Pension Schemes (NPS) are long-term retirement savings plans
introduced by the Indian government to provide financial security to its
citizens in their old age. NPS is a voluntary and defined contribution pension
system that aims to inculcate a culture of saving for retirement among the
Indian population.
1. Objective: The primary objective of NPS is to promote a habit of saving
for retirement among individuals and provide them with a self-managed
pension system. It aims to ensure that individuals have adequate financial
resources to sustain themselves during their post-retirement years.
2. Eligibility: NPS is open to all Indian citizens, including government
employees, private sector employees, and self-employed individuals. There is
no minimum age limit to join NPS, but the maximum age limit is 65 years.
3. Contribution: Individuals can contribute to NPS through various modes,
including online and offline. The minimum annual contribution for Tier I
account is Rs. 6,000, and there is no maximum limit. For Tier II account, there
is no minimum contribution, and the maximum annual contribution is Rs.
1,25,000.
4. Investment Options: NPS offers two types of accounts, Tier I and Tier II.
Tier I account is mandatory, and it is a retirement savings account. Tier II
account is optional, and it is a voluntary savings account. Both accounts offer
multiple investment options, including equity, corporate bonds, government
securities, and alternative investment funds.
5. Tax Benefits: Contributions made to NPS are eligible for tax deductions
under Section 80CCD(1) and Section 80CCD(2) of the Income Tax Act, 1961.
The amount withdrawn from NPS after retirement is also tax-exempt under
certain conditions.
6. Exit Options: After retirement, individuals can withdraw up to 60% of the
corpus as a lump sum, and the remaining 40% has to be invested in an annuity
plan. In case of untimely death, the nominee can receive the entire corpus.
7. Regulatory Framework: NPS is regulated by the Pension Fund
Regulatory and Development Authority (PFRDA), which ensures the
transparency, efficiency, and security of the pension system.
 In conclusion, NPS is a well-designed retirement savings plan that offers
several benefits to individuals. It promotes a culture of saving for retirement,
provides tax benefits, and offers multiple investment options. It is a must-have
retirement savings plan for all Indian citizens.

6) Write note on: Superannuation Fund and Gratuity

Superannuation Fund:
A superannuation fund is a type of retirement savings account
that is designed to provide financial security to individuals after they retire. It
is a long-term investment vehicle that allows individuals to accumulate funds
over their working years, which can then be used to support their lifestyle
during retirement.
Superannuation funds are typically established by employers for
their employees, although individuals can also set up their own funds.
Contributions to the fund are made by both the employee and the employer,
with the aim of building a substantial nest egg over time. These contributions
are usually made on a regular basis, such as monthly or quarterly, and are
based on a percentage of the employee's salary.
The funds accumulated in a superannuation account are invested
in various assets, such as stocks, bonds, and property, with the goal of
generating returns and growing the fund's value. The investment strategy is
usually determined by the fund manager, who is responsible for managing the
fund's assets and ensuring that it remains financially viable.
One of the key advantages of a superannuation fund is the tax
benefits it offers. Contributions made to the fund are generally tax-deductible,
which means that individuals can reduce their taxable income by contributing
to their superannuation. Additionally, the investment earnings within the fund
are taxed at a concessional rate, which can help to maximize the growth of the
fund over time.
Upon reaching the eligible age for retirement, individuals can
access their superannuation funds and use the accumulated funds to support
their living expenses. This can be done through various options, such as taking
a lump sum payment, setting up a regular income stream, or a combination of
both.

Gratuity:
Gratuity is a form of monetary benefit that is provided to
employees by their employers as a token of appreciation for their service and
loyalty. It is a lump sum payment that is made to employees upon their
retirement, resignation, or termination, depending on the terms and conditions
specified in their employment contract or the applicable labor laws.
The amount of gratuity is usually calculated based on the
employee's length of service and their last drawn salary. In many countries,
there are specific rules and regulations that govern the calculation and
payment of gratuity, which may include factors such as the number of years
of service, the average salary, and a statutory cap on the maximum amount
payable.
Gratuity serves as a financial cushion for employees during their
transition from active employment to retirement or a new job. It can be used
to meet various financial needs, such as paying off debts, covering living
expenses, or investing in other ventures.
It is important for both employers and employees to understand
the gratuity provisions applicable to their specific jurisdiction and ensure
compliance with the legal requirements. Employers are responsible for setting
aside funds for gratuity payments and ensuring that they are made in a timely
manner, while employees should be aware of their entitlements and rights
regarding gratuity.
Overall, gratuity serves as a valuable form of financial support
for employees, recognizing their contributions and providing them with a
financial safety net as they transition into the next phase of their lives.
7) Write note on: Reverse Mortgage.
A reverse mortgage is a type of loan that allows homeowners who are at least
62 years old to convert a portion of their home equity into cash. Unlike a
traditional mortgage where the borrower makes monthly payments to the
lender, in a reverse mortgage, the lender makes payments to the borrower.
Here are some key points to note about reverse mortgages:
1. Eligibility: To qualify for a reverse mortgage, the homeowner must be at
least 62 years old, own their home outright or have a significant amount of
equity, and live in the home as their primary residence.
2. Loan Repayment: Unlike a traditional mortgage, a reverse mortgage does
not require monthly repayments. The loan is typically repaid when the
homeowner sells the home, moves out permanently, or passes away. The loan
balance is usually paid off through the sale of the home, with any remaining
equity going to the homeowner or their heirs.
3. Loan Amount: The amount of money a homeowner can borrow through a
reverse mortgage depends on several factors, including the age of the
borrower, the appraised value of the home, and current interest rates.
Generally, the older the borrower and the more valuable the home, the higher
the loan amount.
4. Payment Options: Reverse mortgages offer various payment options to
the borrower. They can choose to receive a lump sum, a line of credit, fixed
monthly payments, or a combination of these options. The chosen payment
plan can have implications on the total loan amount and interest accrued.
5. Financial Implications: While a reverse mortgage provides homeowners
with additional income, it is essential to understand the financial implications.
The interest on the loan accumulates over time, potentially reducing the equity
in the home. Additionally, reverse mortgages may affect eligibility for certain
government assistance programs like Medicaid.
6. Non-Recourse Loan: A reverse mortgage is a non-recourse loan, which
means that the borrower or their heirs are not personally liable for any loan
amount exceeding the value of the home. If the loan balance exceeds the
home's value, the lender absorbs the loss, and the borrower or their heirs are
not responsible for the difference.
Reverse mortgages can provide financial flexibility for older homeowners,
allowing them to access their home equity without having to sell their
property. However, it is crucial to carefully consider the terms, costs, and
long-term implications before deciding if a reverse mortgage is the right
option. Seeking advice from financial professionals can help homeowners
make an informed decision based on their specific circumstances.
 Module 4
1) What is form-16? Explain its structure.
2) Explain individual status of a person.
In the context of financial planning and taxation, the individual status of a
person refers to their specific circumstances and characteristics that impact
their financial situation and tax obligations. Here are some key aspects related
to individual status in this context:
1. Filing Status: This refers to the category in which an individual is classified
for tax purposes. Common filing statuses include single, married filing jointly,
married filing separately, head of household, or qualifying widow(er). The
filing status determines the tax rates, deductions, and credits available to the
individual.
2. Income Status: This involves assessing a person's income from various
sources, such as employment, self-employment, investments, rental
properties, or other forms of income. The income status determines the tax
bracket in which the individual falls and the applicable tax rates.
3. Deduction and Credit Eligibility: Individual status affects the eligibility
for certain deductions and credits. For example, married couples filing jointly
may have different deductions and credits available compared to those filing
separately. The status of being a parent or caregiver may also provide
eligibility for specific deductions or credits.
4. Employment Status: This includes factors such as being an employee,
self-employed, or unemployed. Different employment statuses have varying
implications for tax obligations, such as the availability of certain deductions
or credits related to business expenses or unemployment benefits.
5. Retirement Status: This aspect considers whether an individual is actively
working, retired, or receiving retirement benefits. Retirement status impacts
the taxation of retirement account withdrawals, Social Security benefits, and
eligibility for certain retirement-related deductions or credits.
6. Investment Status: This involves assessing an individual's investment
activities, such as owning stocks, bonds, mutual funds, or real estate
properties. Different investment statuses have implications for capital gains
taxes, dividend income, or rental income taxation.
7. Estate Planning Status: This aspect focuses on an individual's plans for
the distribution of their assets after death. Estate planning status may involve
considerations such as wills, trusts, and the potential for estate taxes.
Understanding and considering these individual statuses is crucial for
effective financial planning and tax management. It helps individuals and their
financial advisors make informed decisions regarding income management,
tax optimization, retirement planning, investment strategies, and estate
planning.
3) Give examples of incomes which are exempted from tax.
1. Gifts and Inheritance: In many countries, gifts and inheritance are not
considered taxable income. However, there may be some exceptions, such as
when the gift or inheritance is very large or comes from a foreign source.
2. Child Support: Child support payments are not typically considered
taxable income for the recipient.
3. Life Insurance Proceeds: The proceeds from a life insurance policy are
usually not taxed as income to the beneficiary, unless the policy has
accumulated cash value.
4. Disability Benefits: In some cases, disability benefits may be exempt from
taxation, depending on the source of the benefits and the nature of the
disability.
5. Scholarships and Grants: Scholarships and grants used for educational
expenses are often not considered taxable income, as long as they are used for
qualified education expenses.
6. Certain retirement plan distributions: Distributions from qualified
retirement plans, such as 401(k)s and IRAs, may be exempt from income tax
under certain circumstances.
7. Social Security Benefits: In many cases, Social Security benefits are not
taxable, or only partially taxable, depending on the recipient's income level.
8. Gains from the Sale of a Personal Residence: In some cases, gains from
the sale of a personal residence may be exempt from taxation, up to a certain
amount, as long as the proceeds are used to purchase another residence.

It's important to note that tax laws vary by jurisdiction, so it's always a good
idea to consult with a tax professional to determine whether a particular type
of income is taxable in your specific situation.
4) Explain Deductions Under Chapter – VI (A) for
Individuals.
Chapter VI A of Income Tax Act contains various sub-sections of section 80
that allows an assesses to claim deductions from the gross total income on
account of various tax-saving investments, permitted expenditures, donations
etc. Such deductions allow an assesses to considerably reduce the tax payable.
The Chapter VI A of Income Tax Act contains the following
sections:
80C: Deduction in respect of life insurance premium, deferred annuity, contributions to
provident fund (PF), subscription to certain equity shares or debentures, etc. The
deduction limit is Rs 1.5 lakh together with section 80CCC and section 80CCD(1).

80CCC: Deduction in respect of contribution to certain pension funds. The deduction

limit is Rs 1.5 lakh together with section 80C and section 80CCD(1).

80CCD(1): Deduction in respect of contribution to pension scheme of Central

Government – in the case of an employee, 10 per cent of salary (Basic+DA) and in any
other case, 20 per cent of his/her gross total income in a FY will be tax free. Overall limit
is Rs 1.5 lakh together with 80C and 80CCC.

80CCD(1B): Deduction up to Rs 50,000 in respect of contribution to pension scheme of

Central Government (NPS).

80CCD(2): Deduction in respect of contribution to pension scheme of Central Government

by employer. Tax benefit is given on 14 per cent contribution by the employer, where such
contribution is made by the Central Government and where contribution is made by any
other employer, tax benefit is given on 10 per cent.

80D: Deduction in respect of Health Insurance premium. Premium paid up to Rs 25,000

is eligible for deduction for individuals, other than senior citizens. For senior citizens, the
limit is Rs 50,000 and overall limit u/s 80D is Rs 1 lakh.

80DD: Deduction in respect of maintenance including medical treatment of a dependent

who is a person with disability. The maximum deduction limit under this section is Rs
75,000.

80DDB: Deduction in respect of expenditure up to Rs 40,000 on medical treatment of

specified disease from a neurologist, an oncologist, a urologist, a haematologist, an
immunologist or such other specialist, as may be prescribed.

80E: Deduction in respect of interest on loan taken for higher education without any upper
limit.
 80EE: Deduction in respect of interest up to Rs 50,000 on loan taken for residential house
property.

80G: Donations to certain funds, charitable institutions, etc. Depending on the nature of
the done, the limit varies from 100 per cent of total donation, 50 per cent of total donation
or 50 per cent of donation with a cap of 10 per cent of gross income.

5) What is form - 26AS. Explain its components.

WHAT IS FORM 26AS ?
Form 26AS means a Tax Credit Statement and is an important document for
taxpayers. 26AS full form is Annual Information Statement (AIS). Form
26AS provides a detailed overview of your financial activities for a specific
year, going beyond just TDS (Tax Deducted at Source) and TCS (Tax
Collected at Source) transactions. It serves as proof of income and tax
payments, linked to your PAN number. Based on the details mentioned in
Form 26AS, the taxpayers file annual returns. When filing your tax return,
verify that the taxes you claim match the tax values stated in Form 26AS.
WHAT’S NEW IN FORM 26AS?
To make tax return filing easier and more transparent, the Central Board of
Direct Taxes (CBDT) has made changes to Form 26AS. The updates to Form
26AS include:
­ Inclusion of foreign remittances mentioned in Form 15CC
­ Quarterly information on TDS deductions from salaries
­ Details of ongoing or completed income tax proceedings
­ Information on income tax demands and refunds, if applicable
­ Details of advance tax payments made by the taxpayer

In addition to the previously required personal details such as name, address,

and PAN, the new Form 26AS includes additional information to enhance
communication options:
­ Date of birth
­ Registered email address
­ Mobile/phone number
STRUCTURE OF FORM 26AS:
The new Form 26AS is designed to make filing taxes easier and give you a
complete picture of your tax-related details. Understanding each part will help
you manage your tax-related activities more efficiently:

Part A: Details of TDS

Amount of TDS deducted from your income, such as salary, interest, pension.
It is updated quarterly and provides information about your tax deductor as
well.
• Part A1: Details of TDS for Form 15G/15H: Gives details of cases
where the taxpayer has submitted Form 15G or 15H to declare that no
TDS should be deducted from their income.
• Part A2: Details of TDS on Property: Gives details about your TDS
deducted on transactions of property sales, rent, and making payments
to resident contractors or professionals

Part B: Details of TCS

If you, as a seller, collect tax at the time of sale, this section displays
information about the tax collected from the buyer.
Part C: Details of Tax Paid (Other than TDS or TCS)
If you're involved in transactions related to selling property, receiving rent, or
making payments to contractors or professionals, this section displays the
TDS deducted on those transactions.
Part D: Details of Paid Refund
If you've received a tax refund, this section displays the details, such as the
payment method, refund amount, any interest paid, and the date of payment.
It's good to verify these details for your records.
Part E: Details of Statement of Financial Transactions (SFT)
This section provides additional information about your financial transactions,
such as cash deposits/withdrawals, property sales/purchases, credit card
payments, and more.
Part F: TDS on Property Sale, Rent, and Professional Fees (From
Buyer/Tenant Perspective)
If you're the buyer or tenant involved in property transactions or making
payments to contractors and professionals, this part shows the TDS deducted
by you.
Part G: TDS Defaults (Processing of Defaults)
This section highlights any defaults related to the processing of statements.
It's essential to review this part to address any issues or discrepancies
promptly.