Introduction:
The history of banking is closely associated with the development of money. A bank is an institution which carries on the business of keeping the money of some people and lending it to other people. The rate of interest charged by the bank from its borrowers will normally be higher than what it pays to the depositors.
Saving Deposits:
The most popular deposits scheme is the saving bank account. The saving deposits are used by the public, who wish to save their money. The depositors get interest for their saving deposits. The present rate of interest for the saving bank account is 9.5% per annum (p.a.) compounded half yearly or annually according to the rules of the individual bank. This account can generally be opened in a bank with a small amount of Rs. 500 or more.
Pass Book :
A pass book is issued to every depositor, in which datawise entries regarding his deposits, withdrawals and entries of interests that is paid are made by the bank.
Fixed Deposits :
In a fixed deposit, the money deposited cannot be withdrawn before a specified period. These carry higher rates of interest.
Current Deposits :
These deposits provide a facility to the depositor to withdraw cash at any time and are used by business people who receive and make payments through cheques very often. There is no interest paid by the bank on current deposits.
Recurring Deposits :
In these deposits, the depositor deposits a fixed amount every month for a specified number of months, at the end of which he gets the sum deposited by him with compound interest.
Calculation of Interest on Savings Bank Account:
To encourage saving habit, banks offer saving deposits facility where an individual may deposit his small savings and earn interest on it.Under savings bank deposits, banks pay interest only on the minimum balance which occurs between 10th and last day of a month.
Note :
(i) The bank pays interest on the minimum balance in the saving bank account in a calendar month after the tenth day of that month.
(ii) Deposits after the tenth day of a month do not earn interest for that month.
(iii) Though the interest is compounded monthwise, but it is usually credited every six months. In some banks, the interest is credited
every year.
TAXATION
Introduction :
Modern economy rests on the economy of growth with demands resources. The State Government has to spend a lot of money for various purposes like maintenance of law and order, defence, development, education, health, etc. The Governments in turn has to collect money from the citizens, and in some cases non-citizens (like tourists and other visitors). This money that the Government collects from the people is obtained through different types of taxes like income tax, wealth tax, gift tax, sales tax, excise and customs duty, property tax, etc. All these taxes are proposed, enhanced or decreased in the central or State Governments budget every year.
In a broad sense taxes can be classified into two categories
(i) Direct taxes (ii) Indirect taxes
Direct taxes :
A tax, imposed on an individual or a group of individuals which affects them directly is called a direct tax. (e.g) income tax, wealth tax, gift tax, etc.
Indirect taxes :
A tax imposed on an individual or a group of individuals which affects them indirectly is called an indirect tax. (e.g) sales tax, excise duty and customs duty, etc.
Sales tax:
On the purchase of some items the purchaser has to pay certain amount at specified rate. This is called sales tax. Calculation of sales tax is very simple as it involves the use of the mathematical concept of percentages only.
Income tax:
The most important feature of internal revenue is income-tax. The Government charges income tax on the income of the individual and trading companies. Every individual whose annual income exceeds a specified limit is required by law to pay a part of his income to the Government. This is known as income tax and is imposed annually, by law, in the beginning of the Financial year.
Gross income :
It is the total income of an individual or a trading company. Net income:
It is the income left after paying the income tax.
Deduction or rebate:
It is allowed on accounts paid as insurance premium, provident fund, loan to Government, National savings certificate etc.
Computation of income tax :
(i) Obtain the Gross income of the financial year (i.e) the period from 1st April to March 31st.
(ii) Obtain standard deduction.
(iii) Obtain the tax free income from donations eligible for deduction under Sec. 88 G of income tax.
(iv) Compute the taxable income as Gross income - (Standard deduction + Tax free income from donations).
(v) Compute tax on the taxable income as per the rate given.
(vi) Compute deposits admissible for tax rebate.
(vii) Compute tax rebate under sec. 88 as per rate given.
(viii) Compute net tax rounded of to nearest rupee as tax rebate.
(ix) Calculate surcharge if applicable and add it to the net tax.
Rate of tax on individual taxable income
| 1. Upto rs 1,10,000 |
Nil |
| 2. Rs. 1,10,001 to Rs. 1,50,000 |
10% |
| 3. Rs. 1,50,001 to Rs 2,50,000 |
20% |
| 4. Above Rs. 2,50,000 |
30% |
Donations
| Donations |
Execptions |
| 1) Prime Minister's National Relief Fund |
100% |
| 2)National Defence Fund |
100%
|
| Medical Research |
100% |
| Other charitable trust like educational bodies, hospitals, etc |
50% |
