What is meant by the financial system in India?

The financial system in India comprises of the folllowing:
Financial markets
Financial assets
Financial intermediaries

Financial markets:
The financial market can be divided into two categories namely; money market and capital market

The following are the called as the money market instruments:
Call money, notice money, term money, Held till maturity, Yield to maturity, Coupon rate and treasury bills

Similarly, the following are called as the capital market instruments:
Government or gilt edged securities;
Corporate securities namely; shares, debentures, public deposits and loans from various institutions

Financial assets:
The following are termed as financial assets
Bills, treasury bills, promissory notes, hundies or bill of exchanges, certificate of deposits and commercial paper

Financial intermediaries:
Reserve Bank of India, Insurance Regulatory and Development Authority and Securities and Exchange Board of India are termed as the financial intermediaries

Which are called as financial intermediaries in the country?

Various ministries are functioning when it comes to Goverrnment of India; namely; Finance Ministry, Defence ministry, Home ministry etc.,

Finance ministry is headed by a minister for finance and the ministry deals with financial issues relating to the country and under finance ministry, there are several wings and economic affairs wing is one among such wings.

Under Economic affairs wing, there are three major entities called as financial intermediaries and they are as detailed below:

Reserve Bank of India:
Reserve Bank of India is called as the central bank for the country and RBI among all other functions, supervises the functioning of various banks in the country.

Insurance Regulatory and Development Authority:
Insurance Regulatory and Development Authority has been established specially for the purpose of supervising various insurance companies functioning in the country. Apart from overseeing the insurance functions, IRDA is also monitoring pension funds

Securities and Exchange Board of India:
Securities and Exchange Board of India supervises the capital markets functioning in the country. It regulates the entire capital market system and it provides various rules and regulations for the proper functioning of the various players in the capital market. 

What are the different types of capital ?

When it comes to capital, it is the contribution by the owner in his business firm. It is called as the seed capital. It can be brought by the owner by his own sources or through funds mobilised from his friends, relatives and others.

In the case of companies which are incorporated as per Indian Companies act 1956 and for presently, the Indian Companies act, 2013, the capital can be classified as mentioned below:

Authorised capital:
Authorised capital is the capital as earmarked in the memorandum of association of the company for the purpose of mobilisation from the public in due course. This will not find a place in the balance sheet of the company.

Issued capital:
When the company is in need of funds, they are issuing some portion of the authorised capital for the public for subscription. When the shares are issued, the details are informed to the public by means of a prospectus and the prospectus contains the details of shares issued, the amount of each share available for subscription and the minimum subscription to be made by the investor

Subscribed capital:
It is the capital actually subscribed by the public. The issued capital and subscribed capital need not be the same. In the case of lesser subscription, the subscribed portion is found to be less than the issued capital

Paid up capital:
The paid up capital is the capital for which cash has been fully received by the company. Normally when are shares are issued, the investors are provided with option to pay the amount in several instalments namely - application money; allotment money; first call money and final call money etc.,
Sometimes, the entire money is received at the time of issue itself.

The paid up capital alone finds a place in the balance sheet since balance sheet provides the details of financial position of the firm.

Whether expenditure has anything to do with income tax payments?

Question:
I recently got a job opportunity at a private company in Pune where they are offering me a salary of Rs 12 lakhs per annum. I have investments totaling Rs 1 lakh annually. How much income tax would get deducted and would it get deducted on a monthly basis? Someone told me that since I have investments of Rs 1 lakhs, I would have to pay an income tax of 33% on 50,000 Rs, which is Rs.16,500 per month. Is that true? As I would be relocating to Pune from Mumbai, I would have other expenditures like rent and food. So can someone please explain how the income tax calculation would work?

Ans:

Your expenditure has nothing to do with income tax payments.

Income tax is related to your annual income subject to deduction of certain investments which are eligible for tax exemption.

Taking into consideration, that the investment of Rupees one lakh made by you is eligible for income tax rebate, I shall provide the following details

• Total income - 1200000.00
• Less investment eligible for tax exemption - 100000.00
• Balance amount - 1100000.00
• You are aged less than 60 years and for the first 250000.00 you need not pay income tax
• Balance amount - 850000.00
• Out of the above you have to pay income tax at ten percent for 250000.00 = 25000.00
• The balance amount - 600000.00 and you have to pay 20 percent income tax for an amount of rupees 500000.00 = 100000.00
• For the remaining amount of 100000.00 you have to pay thirty percent income tax - 30000.00
• The total income tax payable = 25000 + 100000.00 + 30000 = 155000.00 and for this amount you have to pay educational cess at three percent of income tax = 4650
• The total tax payable by you including educational cess is Rs. 159650.00 four annual income of rupees 1200000.00

Whether income tax is calculated in respect of money withdrawn from the bank?

Question: In case I withdraw an amount of Rs. 1.00 lakhs from my bank account and after some time, I deposit some amount in the same account, whether such transactions can be taken into account for income tax purposes?

Answer:
Income tax is related to the income earned by the individual and it is connected with the debit and credit transactions in the bank account

In order to calculate the income tax, one has to add income earned by him through several sources as mentioned below:
1. Income earned by way of salaries
2. Income earned through rent by letting out house property
3. Interest income from bank deposits
4. Dividend income on account of investment in shares

The above list is illustrative and not exhaustive

Out of the above, dividend income is not taxable.
For the total income earned, tax exemptions are available for interest on savings deposit amount of Rs. 10000.00 and income tax rebate is available for some specific investments like amount remitted into public provident fund; investment in tax saving bonds etc.,

The individual can withdraw any amount from his account and he can also deposit any amount and they are mere banking transactions and not income.

What do you know by the evolution of financial system in India?

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·         When it comes to the financial system in India, there were continuous developments since 1770 as per details mentioned below:

·         The first bank in India was set up on modern lines during the year 1770

·         The earliest and short lived attempt in order to establish a central bank in the country was done during the year 1773

·         Bombay stock exchange known as BSE was made functional during the year 1870

·         Oriental Insurance Company was set up during the year 1818

·         General Non Life Insurance Company was set up during the year 1850

·         Reserve Bank of India was established on 01.04.1935

·         Unit Trust of India came into existence during the year 1964

·         Export Risk Insurance Corporation was set up during July 1967

·         Export Credit Guarantee Corporation was established during January, 1964

·         Deposit insurance Corporation was set up during the year 1962

Can any company raise public deposits?

Non banking finance companies are permitted to accept term deposits namely recurring deposit and fixed deposit from the public and they cannot accept deposits which are repayable by means of cheques - savings and current deposits.

However, companies in general collect funds in the form of commercial paper and commercial papers are issued at a discount

Companies which have the required credit rating are allowed to issue commercial papers. This cannot be termed as deposits; however, they look like fixed deposits accepted for a quarter and more