Source: RBI
Earlier Banks and Companies were using London Interbank Offered Rate (LIBOR) as a benchmark rate (like in India banks use 'Repo Rate' or "G-Sec Yield' for benchmarking lending rates) for raising funds from abroad. But LIBOR was getting manipulated, so RBI has asked banks/companies to shift to 'Secured Overnight Financing Rate (SOFR) or Modified Mumbai Interbank Forward Outright Rate (MMIFOR).
No need to go in detail. Just have a look.
Earlier Banks and Companies were using London Interbank Offered Rate (LIBOR) as a benchmark rate (like in India banks use 'Repo Rate' or "G-Sec Yield' for benchmarking lending rates) for raising funds from abroad. But LIBOR was getting manipulated, so RBI has asked banks/companies to shift to 'Secured Overnight Financing Rate (SOFR) or Modified Mumbai Interbank Forward Outright Rate (MMIFOR).
No need to go in detail. Just have a look.
Term of the Day: 'Debt Overhang'
Debt overhang is a situation of a company where it is so overburdened with debt that it cannot borrow more money for future projects. The debt overhang problem leads to a company not receiving funding for future projects. Banks and investors are not willing to fund the company even if the company is capable of earning profit from a new project. This is because the profit made will be used to repay the company’s existing debts. As a result, the investors would suffer losses.
Debt overhang is a situation of a company where it is so overburdened with debt that it cannot borrow more money for future projects. The debt overhang problem leads to a company not receiving funding for future projects. Banks and investors are not willing to fund the company even if the company is capable of earning profit from a new project. This is because the profit made will be used to repay the company’s existing debts. As a result, the investors would suffer losses.
US Debt Ceiling Issue
US Govt. has by law put (accumulated) debt ceiling at $31.4 Trillion which US Govt. hit in January 2023. After that, US Govt was somehow managing the situation through taxes inflows and rollovers. US lawmakers have said that they will suspend the debt ceiling or increase it only if US Govt. promises spending cuts. But Mr. Biden has refused it as it will cripple the economy. If Debt ceiling is not raised then US Govt. may default on its (domestic) payments to military, social security, medicare and other services. The default may lead to:
1. Will raise interest rates in economy leading to increase in debt further by $850 billion
2. Loss of millions of jobs
3. One-tenth of the economic activity will halt
4. US dollar is a reserve currency. That means over half of the the world's foreign currency reserves are held in US dollars. Like India (RBI) also holds dollars in Forex Reserves. And this dollars RBI has invested to purchase US Govt. bonds. Now if US defaults on its payments then investors (and countries) will loose confidence in US economy and they will start selling US Govt. bonds and this would weaken the dollars (i.e. dollar would depreciate). This would make debt denominated in other currencies more expensive and could lead some countries in debt crisis. A weaker dollar would actually be beneficial for countries pushing for 'De-Dollarization'
5. If US economy suffers then it will impact global financial markets and emerging economies.
This (debt ceiling issue) has happened previously (2011, 2013) also but US has never defaulted. This ceiling (in absolute value) is American peculiarity. Debt Ceiling punishes the current Govt. for sins of overspending, debt accumulation over the years. Govt. of India has put its debt ceiling in percentage terms (40% of GDP as per FRBM Act) and Lok Sabha can easily amend it whenever needed.
When we are borrowing (Fiscal deficit) every year, so our Debt is increasing. Fiscal Deficit/Borrowing is a 'flow' concept, but (accumulated) Debt is a 'stock' concept.
US Govt. has by law put (accumulated) debt ceiling at $31.4 Trillion which US Govt. hit in January 2023. After that, US Govt was somehow managing the situation through taxes inflows and rollovers. US lawmakers have said that they will suspend the debt ceiling or increase it only if US Govt. promises spending cuts. But Mr. Biden has refused it as it will cripple the economy. If Debt ceiling is not raised then US Govt. may default on its (domestic) payments to military, social security, medicare and other services. The default may lead to:
1. Will raise interest rates in economy leading to increase in debt further by $850 billion
2. Loss of millions of jobs
3. One-tenth of the economic activity will halt
4. US dollar is a reserve currency. That means over half of the the world's foreign currency reserves are held in US dollars. Like India (RBI) also holds dollars in Forex Reserves. And this dollars RBI has invested to purchase US Govt. bonds. Now if US defaults on its payments then investors (and countries) will loose confidence in US economy and they will start selling US Govt. bonds and this would weaken the dollars (i.e. dollar would depreciate). This would make debt denominated in other currencies more expensive and could lead some countries in debt crisis. A weaker dollar would actually be beneficial for countries pushing for 'De-Dollarization'
5. If US economy suffers then it will impact global financial markets and emerging economies.
This (debt ceiling issue) has happened previously (2011, 2013) also but US has never defaulted. This ceiling (in absolute value) is American peculiarity. Debt Ceiling punishes the current Govt. for sins of overspending, debt accumulation over the years. Govt. of India has put its debt ceiling in percentage terms (40% of GDP as per FRBM Act) and Lok Sabha can easily amend it whenever needed.
When we are borrowing (Fiscal deficit) every year, so our Debt is increasing. Fiscal Deficit/Borrowing is a 'flow' concept, but (accumulated) Debt is a 'stock' concept.
Consider the following statements regarding millets: 1. India is the largest producer of millets in the world 2. Among states, Rajasthan is the largest producer of millets Select the correct code:
Final Results
24%
(a) 1 only
15%
(b) 2 only
55%
(c) Both 1 and 2
6%
(d) None of the above
The answer to the above question is (c).
You can look at the below official link regarding statistics on millets.
https://apeda.gov.in/milletportal/Production.html#:~:text=India%20is%20the%20largest%20producer%20of%20millets%20in%20the%20world.
You can look at the below official link regarding statistics on millets.
https://apeda.gov.in/milletportal/Production.html#:~:text=India%20is%20the%20largest%20producer%20of%20millets%20in%20the%20world.
apeda.gov.in
Indian Millets
Agricultural and Processed Food Products Export Development Authority (APEDA)
Expansionary Fiscal Policy and its impact on 'Interest Rate' in the economy
In case of expansionary fiscal policy, Govt. increases the expenditure or reduces the tax which increases money with the people (individuals, businesses) which results in increase in demand in the economy resulting in increase in inflation and interest rate.
The other way to look at is in case of expansionary fiscal policy, generally govt.'s expenditure increases while receipts decreases which results in deficit leading to more borrowing by Govt. and hence increase in interest rate in the economy.
————————————————————————-
If money with the banks and financial institutions increases then it results in decrease in interest rate in the economy. This is because banks and financial institutions are suppliers of money and if they have more money then its price will come down i.e. interest rate comes down. BUT if more money is put into the hands of people and businessmen then it will result in increase in demand in economy leading to inflation and increase in interest rate.
(Nominal) Interest Rate = Inflation + Real interest rate
So, if inflation goes up, generally (nominal) interest rate goes up.
Now u can once again refer this question:
https://t.me/VivekSingh_Economy/4060
In case of expansionary fiscal policy, Govt. increases the expenditure or reduces the tax which increases money with the people (individuals, businesses) which results in increase in demand in the economy resulting in increase in inflation and interest rate.
The other way to look at is in case of expansionary fiscal policy, generally govt.'s expenditure increases while receipts decreases which results in deficit leading to more borrowing by Govt. and hence increase in interest rate in the economy.
————————————————————————-
If money with the banks and financial institutions increases then it results in decrease in interest rate in the economy. This is because banks and financial institutions are suppliers of money and if they have more money then its price will come down i.e. interest rate comes down. BUT if more money is put into the hands of people and businessmen then it will result in increase in demand in economy leading to inflation and increase in interest rate.
(Nominal) Interest Rate = Inflation + Real interest rate
So, if inflation goes up, generally (nominal) interest rate goes up.
Now u can once again refer this question:
https://t.me/VivekSingh_Economy/4060
Source: The Hindu
Self Explanatory.
As per present instruction, RBI is just pulling out Rs. 2000 notes from circulation as per the 'Clean Note Policy', but it will continue to be 'legal tender' even after 30th Sept. 2023. But I would suggest do not take risk and get your Rs. 2000 notes exchanged or deposited in bank accounts.
Self Explanatory.
As per present instruction, RBI is just pulling out Rs. 2000 notes from circulation as per the 'Clean Note Policy', but it will continue to be 'legal tender' even after 30th Sept. 2023. But I would suggest do not take risk and get your Rs. 2000 notes exchanged or deposited in bank accounts.
Angel Investor and Angel Tax
An angel investor is usually a high-net-worth individual who funds start-ups at the early stages, often with their own money. Angel investing is often the primary source of funding for many start-ups who find it more appealing than other, more predatory, forms of funding.
Angel Tax:
When an unlisted company, such as a start-up, receives equity investment from a resident or non-resident investor for issue of shares that exceeds the fair value of such shares, it will be counted as income for the start-up and be subject to income tax under the head ‘Income from other Sources’ for the relevant financial year.
Explanation: If you are investing in a company whose shares are listed and traded on a stock exchange then you get the shares at a price which is considered fair. There is no way to manipulate the share price as it is taken from the market at which it is traded. But what if a company's shares are not listed on a stock exchange and not traded??
So, let us say there is a startup (unlisted) ABC which garners Rs. 30 crore from issuing 75000 shares to investors at Rs .4000 per share. But suppose the fair market value was calculated to be Rs. 1000 per share. So the excess funds received by the company i.e. (Rs. 4000 - Rs. 1000)*75000 = Rs. 22.5 crore will be treated as income and the company will have to pay Angel Tax on Rs. 22.5 crore as per Income Tax Act 1961. No need to go in further detail.
An angel investor is usually a high-net-worth individual who funds start-ups at the early stages, often with their own money. Angel investing is often the primary source of funding for many start-ups who find it more appealing than other, more predatory, forms of funding.
Angel Tax:
When an unlisted company, such as a start-up, receives equity investment from a resident or non-resident investor for issue of shares that exceeds the fair value of such shares, it will be counted as income for the start-up and be subject to income tax under the head ‘Income from other Sources’ for the relevant financial year.
Explanation: If you are investing in a company whose shares are listed and traded on a stock exchange then you get the shares at a price which is considered fair. There is no way to manipulate the share price as it is taken from the market at which it is traded. But what if a company's shares are not listed on a stock exchange and not traded??
So, let us say there is a startup (unlisted) ABC which garners Rs. 30 crore from issuing 75000 shares to investors at Rs .4000 per share. But suppose the fair market value was calculated to be Rs. 1000 per share. So the excess funds received by the company i.e. (Rs. 4000 - Rs. 1000)*75000 = Rs. 22.5 crore will be treated as income and the company will have to pay Angel Tax on Rs. 22.5 crore as per Income Tax Act 1961. No need to go in further detail.
Congrats to all the students who made it in the final list in upsc 2022. 👍
Source: The Hindu
A very good article on NPS and OPS comparison. Must read and its self explanatory.
NPS is mandatory for Central Govt. Employees and optional for State Govt and private sector.
You can refer my notes on NPS and OPS:
https://t.me/VivekSingh_Economy/3932
https://t.me/VivekSingh_Economy/3657
A very good article on NPS and OPS comparison. Must read and its self explanatory.
NPS is mandatory for Central Govt. Employees and optional for State Govt and private sector.
You can refer my notes on NPS and OPS:
https://t.me/VivekSingh_Economy/3932
https://t.me/VivekSingh_Economy/3657
Tax Deducted at Source (TDS)
Let us understand with an example:
Suppose I work in a company XYZ and it pays me monthly salary of Rs. 1 lakh. So, my total income would be Rs. 12 lakh in a year and I need to pay 'Income Tax' on Rs. 12 lakh. But Govt. asks XYZ that when you are paying salary to Vivek then you deduct some (fix) percent of tax from the monthly salary and pay in Govt.'s account on behalf of Vivek. So, lets say the company XYZ deducts 10% tax (which is called Tax Deducted at Source) and then pays me monthly amount Rs. 90,000. So in one year XYZ deducted Rs. 1,20,000 out of my total salary of Rs. 12 lakh. But if my ' total tax liability' comes out to be around Rs. 3 lakh (as per the income tax slab rates) then I will have to deposit the rest amount (Rs. 3 lakhs - Rs. 1.2 lakhs) of Rs. 1.8 lakh to the Govt. And this amount of Rs. 1.8 lakh needs to be deposited not after the completion of year but during the year (in every quarter), so this Rs. 1.8 lakh is called advance tax.
Let us understand with an example:
Suppose I work in a company XYZ and it pays me monthly salary of Rs. 1 lakh. So, my total income would be Rs. 12 lakh in a year and I need to pay 'Income Tax' on Rs. 12 lakh. But Govt. asks XYZ that when you are paying salary to Vivek then you deduct some (fix) percent of tax from the monthly salary and pay in Govt.'s account on behalf of Vivek. So, lets say the company XYZ deducts 10% tax (which is called Tax Deducted at Source) and then pays me monthly amount Rs. 90,000. So in one year XYZ deducted Rs. 1,20,000 out of my total salary of Rs. 12 lakh. But if my ' total tax liability' comes out to be around Rs. 3 lakh (as per the income tax slab rates) then I will have to deposit the rest amount (Rs. 3 lakhs - Rs. 1.2 lakhs) of Rs. 1.8 lakh to the Govt. And this amount of Rs. 1.8 lakh needs to be deposited not after the completion of year but during the year (in every quarter), so this Rs. 1.8 lakh is called advance tax.
Tax Collected at Source (TCS)
TCS is the tax that some specified sellers are required to collect from their buyers on exceptional transactions. TCS is collected by the seller as a means to track buyers and minimize tax evasion. Generally it is not applicable on the common man. It is collected on timber wood, Tendu leaves, Motor vehicles exceeding Rs. 10 lakhs etc.
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.
Now if my total income is Rs. 12 lakh and my total tax liability comes out to be Rs. 3 lakh then I need to pay only Rs. 2.85 lakh as tax because Rs. 15000 has already been deposited by the seller as TCS on my behalf. It may also be possible that the 10% TDS which my employer is deducting as adjusted against TCS i.e. my employer will reduce the TDS amount by the TCS. So, if there are TCS payments made by me then it will reflect in a lower TDS i.e. the paid TCS is adjusted with the total tax liability of the buyer.
TDS and TCS comes under Income Tax Act 1961 and hence are direct taxes.
Now read the below news.
TCS is the tax that some specified sellers are required to collect from their buyers on exceptional transactions. TCS is collected by the seller as a means to track buyers and minimize tax evasion. Generally it is not applicable on the common man. It is collected on timber wood, Tendu leaves, Motor vehicles exceeding Rs. 10 lakhs etc.
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.
Now if my total income is Rs. 12 lakh and my total tax liability comes out to be Rs. 3 lakh then I need to pay only Rs. 2.85 lakh as tax because Rs. 15000 has already been deposited by the seller as TCS on my behalf. It may also be possible that the 10% TDS which my employer is deducting as adjusted against TCS i.e. my employer will reduce the TDS amount by the TCS. So, if there are TCS payments made by me then it will reflect in a lower TDS i.e. the paid TCS is adjusted with the total tax liability of the buyer.
TDS and TCS comes under Income Tax Act 1961 and hence are direct taxes.
Now read the below news.
Source: Indian Express
Self explanatory.
A 'Closely held company' means an unlisted (which is not public) company
I have already explained 'Angel Tax' before. The previous link is:
https://t.me/VivekSingh_Economy/4103
Self explanatory.
A 'Closely held company' means an unlisted (which is not public) company
I have already explained 'Angel Tax' before. The previous link is:
https://t.me/VivekSingh_Economy/4103
My Dear Students!
Wish you all the best for tomorrow's exam.
Now its all about how you manage those 2 (+2) hours tomorrow. Don't take too much pressure and just think that you have to give your best. That's all.👍
Regards
Vivek Singh
Wish you all the best for tomorrow's exam.
Now its all about how you manage those 2 (+2) hours tomorrow. Don't take too much pressure and just think that you have to give your best. That's all.👍
Regards
Vivek Singh