Theories Of Interest

Ø  Interest is a payment made by a borrower for the use of a sum of money for a period of time.

Ø  It is one of the four types of income, the other being Rent, Wages & profit.
Ø  Three elements can be distinguished in interest:

1.  Payment for the risk involved in making the loan
2. Payment for the trouble involved
3. Pure interest, i.e. a payment for the use of money

M Keynes in his book “The General Theory of Employment, Interest & money” view that “The rate of interest is a purely monetary phenomenon & is determined by demand for money & supply of money.
This theory also known as Liquidity Preference theory
Keynes assumed that there are two- assets –
    1.       Money in the form of currency & current deposit
    2.       Long term bond

Rate of interest & Bond price are inversely related & vice-versa Higher the level of nominal income in two-asset economy, more people would want to hold in their portfolio balance i.e. in the form of cash / bank deposits.
Higher the nominal rate of interest, the lower the demand for money or more in the form of bonds.

Money demand Curve –

Quantity of money demand increase with the fall in rate of interest or with the increase in level of nominal income. So at the level of nominal income, money demand curve will be downward slopping.

According to J M Keynes – The rate of interest is determined by demand for money (liquidity preference) & supply of money.
Position of money demand curve, depend upon two factors –
   1.       Level of nominal income
   2.       Expectation about changes in bond price in the future  (which implies change in rate of interest)

IS and LM curves Theory promulgated by Sir Hon Richard Hicks and Alvin Hansen.
The IS curve and the LM curve relate the two variables -
   1.       Income
   2.       The rate of interest.
The intersection point of the two curves is the equilibrium rate of interest.
LM= Liquidity preference and Money supply equilibrium, derived from Keynes Liquidity preference theory of interest.
IS = Classical Theory

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How to file income tax return online

Income tax filling online is very simple, if you can try it, definitely you file your income tax return online with the help of some tip provide below. Many people don’t try to file online due to mistake and penalty but it is not good. If we try and do correctly as per our data provided by the employer i.e FORM 16B then it will be very easy.

Let’s try it today, by following some steps provide below -

First you login in Income tax

Click here for official website of Income Tax department 

Provide your USERNAME and PASSWORD

By default your USERNAME is your PANCARD

Step 1.

Then go to “ Filling of Income Tax Return”

Or

e-File → Income Tax Return

Step 2 -

 PAN – already filled

Assessment year – 2018-19

ITR Form Name – ITR-1

Submission mode – Prepare and submit Online

Check on  - AADHAR OTP

Continue

Step 3 -

 Go to – Part A General Information

Select - employee category

Other details all ready filled

Step 4 –

 Then – Computation of Income Tax

In this section, you should filled as per your form 16B received from your employer.

Here you find following details and filled in this section –

B1. (i) Salary –

       (iii) Value of Perquisite – ( If any otherwise left it)

       (v) Deduction u/s 16 – (Professional tax )

B2. Type of House Property – if you avail, otherwise left it

B3. Income from other Source – ( Here you filled interest of FDR & other income, if no then left it)

Part C Section

80C – Total Of Insurance + PPF + Sukanya etc

80CCD(1) – NPS contribution of Self (i.e Employee)

80CCD(2) - NPS contribution by your company (i.e Employer)

Note – If you provide both the above details separately then you will be eligible for saving 1,50,000+50,000 i.e max 2,00,000/- . If you don’t provide 80CCD(1) & 80CCD(2) separately then you will be eligible for only Rs 1,50,000/-

80TTA – If you mention saving bank interest as other income then here you save upto Rs. 10,000/- other wise left it blank

Now you can see your calculation of tax under Part D – COMPUTATION OF TAX PAYABLE

Step 5 –

 Go – Tax Details.

In this section you can see the total tax deducted as on 31th March.

Step 6 –

 Go – Tax Paid And Verification

Here you can see Amount payable/Refunded,

In Part E, You have to mention your account number & IFS Code and write SELF in filled my capacity as

Step 7 –

 Go – 80G

 if you have made any donation then provide details about your donation during the financial year otherwise left it  

At Last click on

Preview & Submit.

Again Submit and verify with AADHAAR OTP

BEST OF LUCK

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Initiation of Family Pension of Defense & Railway Pensioner

When a pensioner expire and left behind his family such a wife/husband, his/her children and no other than his/her a earning member than a big crisis of money has been face by his/her family member.

As a banker, it is our duty to provide full co-operation to start the family pension if he/she opted his/her family member as family pensioner in PPO . At that time we should obtained the required document from his family and initiate the family pension and send it to pension department

Document required for initiation of Family Pension of decease Defense & Railway Pensioner-  

1) Death Certificate of the Service Pensioner.

2) Life Certificate of the Family Pensioner.

3) Unemployment Certificate of the Family Pensioner.

4) Re marriage Certificate of the Family Pensioner.

5) Letter of Undertaking of the Family Pensioner.

6) Revised copy of PPO.

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Money Supply and Inflation

MONEY SUPPLY

Stock of money in circulation in the economy at a given point of time. It is partially exogenous (decided by the government and the central bank) and partially endogenous.

Measure of Money Supply

A. Narrow Money (M1) – Currency with the public + Demand deposits with the banking system + Other deposits with the RBI

B. M2 – M1 + Saving deposits of post office saving banks

C. M3 – M1 + Time deposits with the banking systems

D. M4 – M3 + All deposits with the post office saving banks (excluding NSC )

Note –

Currency with the public – Currency in circulation less cash held by bank

Demand Deposit – Payable on demand

Time Deposit – Payable other than on demand

INFLATION

Ø  Sustained rise in the general level of prices of goods and services in an economy over a period of time.

Ø  Negative effects of inflation include loss in stability in the real value of money and other monetary item over time.

Ø  Positive effects include a mitigation of economic recessions and debt relief by reducing the real level of debt.

CAUSE OF INFLATION

1. Demand-pull Inflation

Rise in general prices caused by increasing aggregate demand for goods and services

Demand exceed s supply → Shortage → an increase in prices

2. Cost-Pull Inflation

Substantial increase in the cost of production of important goods or services where no suitable alternative is available.

Inflation = (Price Index in current year – Prices index in Base year) * 100

PRICE INDEX

A price index is a weighted average of the prices of a selected basket of goods and services relative to their prices in some designated base-year.

Most important price indexes are –

1. Wholesale Price Index (WPI)

Reflect the change in the level of prices of a basket of goods at the wholesale level and will be announced by government monthly.

2. Food inflation index (FII)

Announced weekly

3. Consumer Price Index (CPI)

Ø  Change in the level of prices purchased / consumed by the households.

Ø  It is the cost of living index popularly known as Core Inflation

Ø  CPI in India released by Labour Bureau, Ministry of Labour and Employment, Govt. of India

4. GDP Deflator

Measure of the level of prices of all new, domestically produced, final goods and services in an economy.

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Supply and Demand

Theory of Supply and Demand shows how consumer preferences determine consumer demand for commodities, while business costs determine the supply of commodities.

THE DEMAND SCHEDULE

Relationship that exists between price and quantity bought is called the Demand Schedule or the Demand Curve

e.g – The higher the price of an article, other thing remain constant, the less units consumers are willing to buy and vice versa.

THE DEMAND CURVE

Ø  The graphical representation of the demand schedule is the demand curve.

Ø  Quantity and price are inversely related.

Ø  Law of downward-sloping demand.

Quantity demanded tends to fall as prices rises for two reasons –

 1. Substitution effect (substitute other similar goods)

2. Income effect (curb consumption)

FORCE BEHIND THE DEMAND CURVE

·         Average income

·         Size of market

·         Price and availability of related goods

·         Taste and preferences

·         Special influences e.g Umbrella in rainy and air condition in hot weather

THE SUPPLY SCHEDULE

The supply schedule (or supply curve) for a commodity shows the relationship between its markets prices and the amount of that commodity that producers are willing to produce and sell, other things being constant.

THE SUPPLY CURVE

Ø  Show Upward slop

Ø  The law of diminishing returns

FORCE BEHIND THE SUPPLY CURVE

·         Cost of production

·         Prices of input and technological advances

·         Technological advances

·         Prices of related goods

·         Government policy

·         Special factors

IMPORTANT POINT

Ø  When changes in factors other than a good’s own price affect the quantity supplied, we call these changes as shifts in supply .

Ø  Supply and demand interacts to produce an equilibrium price and quantity or market equilibrium.

Ø  When the forces of supply and demand are in balance, there is no reason for price to rise or fall, as long as other things remain unchanged.

Ø  A market equilibrium comes at the price at which quantity demanded equals quantity supplied.

Ø  The equilibrium price is also called the market-clearing price.

EFFECT OF A SHIFT IN SUPPLY OR DEMAND

Ø  In case of Supply, there might have been a change in technology or input price.

Ø  In demand shift, one of the influences affecting consumer demand – incomes, population, and the prices of related goods or taste

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