Govt. has decided to abolish 'Equalization Levy' (also called Google Tax) on online advertisements from 1st April 2025. Govt has already abolished Equalization levy on e-commerce firms since 2024.
Govt. is planning to bring this income under normal taxation under the First Pillar of Global Minimum Corporate Tax
Those students who want to understand Equalization Levy can see this link: https://t.me/VivekSingh_Economy/2763
Global Minimum Corporate Tax link: https://t.me/VivekSingh_Economy/3293
Govt. is planning to bring this income under normal taxation under the First Pillar of Global Minimum Corporate Tax
Those students who want to understand Equalization Levy can see this link: https://t.me/VivekSingh_Economy/2763
Global Minimum Corporate Tax link: https://t.me/VivekSingh_Economy/3293
Just for Info:
9th Edition of the Indian Economy Book will be released around mid of May 2025 which will be targeting UPSC 2026 Exam.
9th Edition of the Indian Economy Book will be released around mid of May 2025 which will be targeting UPSC 2026 Exam.
Source: Indian Express
Just read the highlighted portion. I have already explained Fully Accessible Route (FAR): https://t.me/VivekSingh_Economy/4595
Just read the highlighted portion. I have already explained Fully Accessible Route (FAR): https://t.me/VivekSingh_Economy/4595
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Monetary Policy Meeting (7th-9th April)
RBI in its recent (last week) Monetary Policy Meeting changed its 'stance' from neutral to accomodative. Stance tells about the future trajectory of monetary policy. Accomodative stance means going forward RBI can either keep the repo rate same or can reduce it from the present 6% level. And this has been done keeping the growth concerns in mind due to Trump's tariff.
Earlier the Monetary Policy stance was neutral that means RBI could either reduce the repo rate or increase it or keep it same. But now changed to accomodative.
RBI in its recent (last week) Monetary Policy Meeting changed its 'stance' from neutral to accomodative. Stance tells about the future trajectory of monetary policy. Accomodative stance means going forward RBI can either keep the repo rate same or can reduce it from the present 6% level. And this has been done keeping the growth concerns in mind due to Trump's tariff.
Earlier the Monetary Policy stance was neutral that means RBI could either reduce the repo rate or increase it or keep it same. But now changed to accomodative.
Term of the Day:
Overseas Direct Investment (ODI)
An Indian company investing (any percentage of shares) in an unlisted foreign entity or investing 10% or more in a foreign listed entity or investing less than 10% but having management control is considered as ODI. ODI is opposite of FDI
Overseas Portfolio Investment (OPI)
Investment other than ODI in a foreign entity is called OPI. It is the opposite of FPI.
Overseas Direct Investment (ODI)
An Indian company investing (any percentage of shares) in an unlisted foreign entity or investing 10% or more in a foreign listed entity or investing less than 10% but having management control is considered as ODI. ODI is opposite of FDI
Overseas Portfolio Investment (OPI)
Investment other than ODI in a foreign entity is called OPI. It is the opposite of FPI.
Which country is India's largest trading partner in 2024-25?
Final Results
55%
(a) USA
45%
(b) China
The answer to the above question is (a)
The United States continued to be India’s largest trading partner for the fourth year in a row in the financial year 2024-25, with total bilateral trade reaching $131.84 billion (India's export is $86.5 billion and Imports $45.33) and India's trade surplus of $41billion.
Key Indian exports to the US in 2024-25
Drug formulations and biologicals – $8.1 billion
Telecom instruments – $6.5 billion
Precious and semi-precious stones – $5.3 billion
Petroleum products – $4.1 billion
Gold and other precious metal jewellery – $3.2 billion
Major US imports into India
Crude oil - $4.5 billion
Petroleum products – $3.6 billion
Coal and coke – $3.4 billion
Cut and polished diamonds – $2.6 billion
Electric machinery – $1.4 billion
Aircraft, spacecraft and their parts – $1.3 billion
Gold – $1.3 billion
China remains India’s second-largest trading partner, with total bilateral trade reaching $127.7 billion in 2024-25 (India's exports $14.2 billion and imports $ 113.45 billion) with a trade deficit of $99.2 billion. China was India’s top trading partner earlier, holding the position from 2013-14 to 2017-18 and again in 2020-21. Before that, it was the United Arab Emirates (UAE).
The United States continued to be India’s largest trading partner for the fourth year in a row in the financial year 2024-25, with total bilateral trade reaching $131.84 billion (India's export is $86.5 billion and Imports $45.33) and India's trade surplus of $41billion.
Key Indian exports to the US in 2024-25
Drug formulations and biologicals – $8.1 billion
Telecom instruments – $6.5 billion
Precious and semi-precious stones – $5.3 billion
Petroleum products – $4.1 billion
Gold and other precious metal jewellery – $3.2 billion
Major US imports into India
Crude oil - $4.5 billion
Petroleum products – $3.6 billion
Coal and coke – $3.4 billion
Cut and polished diamonds – $2.6 billion
Electric machinery – $1.4 billion
Aircraft, spacecraft and their parts – $1.3 billion
Gold – $1.3 billion
China remains India’s second-largest trading partner, with total bilateral trade reaching $127.7 billion in 2024-25 (India's exports $14.2 billion and imports $ 113.45 billion) with a trade deficit of $99.2 billion. China was India’s top trading partner earlier, holding the position from 2013-14 to 2017-18 and again in 2020-21. Before that, it was the United Arab Emirates (UAE).
Change in repo rate will lead to change in:
Final Results
23%
(a) Money supply
6%
(b) Money multiplier
4%
(c) Monetary base
66%
(d) Both (a) & (b)
The answer to the above question is (d)
Explanation
When RBI changes the repo rate ... it leads to reduction in the market interest rate leading to more lending and increase in money supply.
Money supply = Monetary base X Money multiplier
But Monetary base is not changing as RBI is not printing/creating any new currency, rather money multiplier is changing because now banks will keep less reserves and will lend more. When reserves of banks come down, money multiplier increases (because banks lend more) and hence money supply also increases.
Explanation
When RBI changes the repo rate ... it leads to reduction in the market interest rate leading to more lending and increase in money supply.
Money supply = Monetary base X Money multiplier
But Monetary base is not changing as RBI is not printing/creating any new currency, rather money multiplier is changing because now banks will keep less reserves and will lend more. When reserves of banks come down, money multiplier increases (because banks lend more) and hence money supply also increases.
Let us understand 'Liquidity Coverage Ratio (LCR)' first.
LCR is calculated by dividing an institution (Banks/NBFCs) high-quality liquid assets (for example cash, govt. securities, securities issued or guaranteed by foreign governments etc.) by its total net cash flows, over a 30-day period.
Suppose a bank's expected cash outflow/spending for the next 30 days is Rs. 150 and cash inflow is expected to be Rs. 50, that means net cash outflow for next 30-day period is Rs. 100. In such a case if bank is holding cash and govt. securities (which are called High Quality Liquid Assets) of Rs. 60 only, then LCR = (High Quality Liquid Asset)/ (Banks Net cash outflow for 30-day period) = Rs. 60/ Rs. 100 = 60%. And in this case banks may face cash/liquidity problem if depositors withdraw money. So, RBI requires that Banks (and NBFCs also) maintain 100% LCR
But retail deposits which are enabled with internet and mobile banking can withdraw funds more quickly, so there was an additional requirement of 5% 'run-off factor' for stable deposits and a run off factor of 10% for less stable deposits on top of 100% LCR. Now this has been further increased by 2.5% for banks from 1st April 2026 onwards.
So, for Banks, the LCR framework (as proposed under BASEL III) will be as follows from 1st April 2026.
*In general for all deposits = 100%
*Stable retail and small business deposits (with mobile and internet banking) = 100% + 5% + 2.5% =107.5%
*Less stable retail and small business deposits (with mobile and internet banking) = 100% + 10% + 2.5% = 112.5%
LCR is calculated by dividing an institution (Banks/NBFCs) high-quality liquid assets (for example cash, govt. securities, securities issued or guaranteed by foreign governments etc.) by its total net cash flows, over a 30-day period.
Suppose a bank's expected cash outflow/spending for the next 30 days is Rs. 150 and cash inflow is expected to be Rs. 50, that means net cash outflow for next 30-day period is Rs. 100. In such a case if bank is holding cash and govt. securities (which are called High Quality Liquid Assets) of Rs. 60 only, then LCR = (High Quality Liquid Asset)/ (Banks Net cash outflow for 30-day period) = Rs. 60/ Rs. 100 = 60%. And in this case banks may face cash/liquidity problem if depositors withdraw money. So, RBI requires that Banks (and NBFCs also) maintain 100% LCR
But retail deposits which are enabled with internet and mobile banking can withdraw funds more quickly, so there was an additional requirement of 5% 'run-off factor' for stable deposits and a run off factor of 10% for less stable deposits on top of 100% LCR. Now this has been further increased by 2.5% for banks from 1st April 2026 onwards.
So, for Banks, the LCR framework (as proposed under BASEL III) will be as follows from 1st April 2026.
*In general for all deposits = 100%
*Stable retail and small business deposits (with mobile and internet banking) = 100% + 5% + 2.5% =107.5%
*Less stable retail and small business deposits (with mobile and internet banking) = 100% + 10% + 2.5% = 112.5%
Tax Collected at Source (TCS)
TCS is a tax that sellers are required to collect from their buyers on certain specific items. TCS is collected by the seller as a means to track buyers and minimize tax evasion. Till now, it used to be collected on timber wood, Tendu leaves, Motor vehicles exceeding Rs. 10 lakhs etc. NOW Govt. has expanded the list on various other luxory items like wrist watches, handbags, antiques, paintings, sculptures, home theaters, shoes and sportswear etc. priced above Rs. 10 lakh.
Example:
Suppose I am purchasing a car whose price is Rs. 15 lakh (it already includes GST) then on this 1% TCS (Rs. 15000) will be charged and the total price of the car would become Rs. 15.15 lakh. So this Rs. 15000 TCS will be deposited by the Seller in Govt. account against the buyers PAN i.e. on behalf of buyer. This TCS will be part of my income tax and while I will be paying my income tax, this amount of Rs. 15000 will get adjusted there i.e. it will be reduced from my total (income) tax liability because this amount has already been collected from me during that transaction/purchase.
TCS comes under Income Tax Act 1961 and considered as a tax on my income and hence is direct tax.
Benefit:
This notification operationalises the government’s intent to enhance monitoring of high-value discretionary expenditure and strengthen the audit trail in the luxury goods segment.
It reflects a broader policy objective of expanding the tax base and promoting greater financial transparency.
Sellers will now be required to ensure timely compliance with TCS provisions, while buyers of notified luxury goods may experience enhanced KYC requirements and documentation at the time of purchase.
Tax Deducted at Source (TDS): When my employer deducts tax from my salary and deposits in Govt. account on my behalf then it is called TDS. That is also part of income tax (under Income Tax Act 1961) and gets adjusted in my total tax liability.
TCS is a tax that sellers are required to collect from their buyers on certain specific items. TCS is collected by the seller as a means to track buyers and minimize tax evasion. Till now, it used to be collected on timber wood, Tendu leaves, Motor vehicles exceeding Rs. 10 lakhs etc. NOW Govt. has expanded the list on various other luxory items like wrist watches, handbags, antiques, paintings, sculptures, home theaters, shoes and sportswear etc. priced above Rs. 10 lakh.
Example:
Suppose I am purchasing a car whose price is Rs. 15 lakh (it already includes GST) then on this 1% TCS (Rs. 15000) will be charged and the total price of the car would become Rs. 15.15 lakh. So this Rs. 15000 TCS will be deposited by the Seller in Govt. account against the buyers PAN i.e. on behalf of buyer. This TCS will be part of my income tax and while I will be paying my income tax, this amount of Rs. 15000 will get adjusted there i.e. it will be reduced from my total (income) tax liability because this amount has already been collected from me during that transaction/purchase.
TCS comes under Income Tax Act 1961 and considered as a tax on my income and hence is direct tax.
Benefit:
This notification operationalises the government’s intent to enhance monitoring of high-value discretionary expenditure and strengthen the audit trail in the luxury goods segment.
It reflects a broader policy objective of expanding the tax base and promoting greater financial transparency.
Sellers will now be required to ensure timely compliance with TCS provisions, while buyers of notified luxury goods may experience enhanced KYC requirements and documentation at the time of purchase.
Tax Deducted at Source (TDS): When my employer deducts tax from my salary and deposits in Govt. account on my behalf then it is called TDS. That is also part of income tax (under Income Tax Act 1961) and gets adjusted in my total tax liability.