1|Page

Notes By: ENG HONS HUB

Ques 1. Write short notes on
a) Internet Banking
b) Ponzi Scheme
c) Importance of Diversification in Risk Management
d) Online Frauds
e) Financial Discipline
f) U.P.l
g) Time value of money
h) Permanent Account Number(PAN)

Ans. a) Internet Banking

Introduction:
Internet banking, also known as online banking or ebanking, is
a digital service offered by banks that allows customers to
conduct financial transactions over the internet. This modern
form of banking has revolutionized the way people manage
their finances, offering convenience, speed, and accessibility.
Features of Internet Banking:
1. Account Management:
o Customers can view their account balances, check
transaction history, and monitor account activities in
real time.
o This feature helps users keep track of their
finances without needing to visit a bank branch.

2|Page
Notes By: ENG HONS HUB
 2. Fund Transfers:
o Internet banking allows users to transfer money
between their own accounts, to other accounts
within the same bank, or to accounts in different
banks.
o Transfers can be made domestically or
internationally, making it easier to send money
across borders.
3. Bill Payments:
o Customers can pay utility bills, credit card bills, and
other expenses online.
o This service often includes setting up recurring
payments for regular bills, ensuring timely payments
and avoiding late fees.
4. Online Shopping and Payments:
o Internet banking enables users to shop online and
pay for purchases directly from their bank accounts.
o Many banks offer secure payment gateways for
online transactions.
5. Loan Applications and Management:
o Customers can apply for loans, check loan statuses,
and manage repayments online.
o This includes personal loans, home loans, auto loans,
and other types of credit.
6. Investment Services:
o Internet banking platforms often provide options to
invest in stocks, mutual funds, fixed deposits, and
other financial instruments.
3|Page
Notes By: ENG HONS HUB
 o Users can monitor their investments and make
adjustments as needed.
Benefits of Internet Banking:
1. Convenience:
o Access to banking services 24/7 from anywhere with

an internet connection.
o Eliminates the need to visit physical bank branches,

saving time and effort.

2. Speed:
o Transactions are processed quickly, often in real

time.
o Instant fund transfers and bill payments streamline

financial management.
3. Cost Effective:
o Reduces the need for physical paperwork and in-

person visits, lowering operational costs for banks.

o Banks often pass these savings on to customers

through lower fees and charges.

4. Enhanced Security:
o Banks use advanced encryption and security

measures to protect online transactions.

o Features like two factor authentication and secure

login protocols help safeguard customer information.

5. Accessibility:
o Enables people in remote areas to access banking

services.

4|Page
Notes By: ENG HONS HUB
 o Facilitates financial inclusion by providing banking
access to a wider population.

Challenges and Considerations:

1. Security Risks:
o Despite advanced security measures, internet

banking is vulnerable to cyber threats like hacking,

phishing, and malware attacks.
o Customers need to be vigilant about protecting their

login credentials and personal information.

2. Technical Issues:
o Dependence on internet connectivity means that

technical issues or outages can disrupt access to

banking services.
o Banks need robust IT infrastructure to ensure

continuous service availability.

3. User Education:
o Not all customers are techsavvy, and some may find

it challenging to navigate online banking platforms.

o Banks must invest in user education and support to

help customers use internet banking effectively.

Conclusion:
Internet banking has transformed the financial landscape by
making banking services more accessible, efficient, and
secure. While there are challenges to address, the benefits
of internet banking far outweigh the drawbacks, offering a
modern solution for managing personal and business finances.
As technology continues to advance, internet banking is likely
5|Page
Notes By: ENG HONS HUB
to evolve further, offering even more innovative features and
services to users around the world

b) Ponzi Scheme: A Detailed Overview

Introduction:
A Ponzi scheme is a fraudulent investment scam promising
high returns with little risk to investors. It generates returns
for earlier investors through revenue paid by new investors,
rather than from profit earned by the operation of a
legitimate business. The scheme leads to financial ruin for
many participants and is illegal in most countries.

Origin and Name:

 The term "Ponzi scheme" is named after Charles Ponzi, an
infamous fraudster in the early 20th century who became
notorious for using this scam method in the 1920s.
 Ponzi promised investors a 50% return within 45 days or
a 100% return within 90 days by investing in international
postal reply coupons.
Mechanism of a Ponzi Scheme:
1. Attracting Investors:
 The scheme starts with a promoter who promises
extraordinary returns with minimal risk.
 The promoter often uses persuasive sales tactics and
false credentials to build trust.

2. Initial Payouts:
 Early investors receive the promised returns, which are
not generated from legitimate business activities but
from funds contributed by subsequent investors.
6|Page
Notes By: ENG HONS HUB
  These initial payouts help build credibility and attract
more investors.

3. Recruiting More Investors:

 As more investors join, their contributions are used to
pay returns to earlier investors.
 The scheme relies on a constant influx of new investors
to sustain the payouts.

4. Scheme Collapse:
 Eventually, the scheme collapses when it becomes
impossible to recruit enough new investors to pay returns
to earlier investors.
 At this point, the promoter usually disappears with the
remaining funds, leaving most investors with significant
losses.

Characteristics of Ponzi Schemes:

1. High Returns with Little Risk:
 Promises of unusually high returns with little or no risk
are a red flag.
 Legitimate investments carry some level of risk, and high
returns usually involve higher risk.
2. Consistent Returns:
 Ponzi schemes often promise and deliver consistent
returns regardless of market conditions.
 Real investments typically fluctuate with market changes.

7|Page
Notes By: ENG HONS HUB
3. Unregistered Investments:
 The investments in Ponzi schemes are often not
registered with regulatory authorities.
 Lack of registration can indicate that the investment is
not legitimate.
4. Secretive and Complex Strategies:
 The promoter might describe the investment strategy as
too complex to explain or keep it secret to avoid scrutiny.
 Transparency is a hallmark of legitimate investment
opportunities.
5. Pressure to Reinvest:
 Investors are often pressured to reinvest their earnings
rather than cash out.
 This tactic helps sustain the scheme longer by keeping
funds within the system.

Impact of Ponzi Schemes:

1. Financial Loss:
 Most investors lose their money when the scheme
collapses, leading to significant financial hardship.
 Early investors may make a profit, but later investors
bear the brunt of the losses.
2. Legal Consequences:
 Promoters of Ponzi schemes face severe legal
consequences, including fines, imprisonment, and asset
forfeiture.
 Investors may also face difficulties recovering their
money through legal channels.
8|Page
Notes By: ENG HONS HUB
3. Erosion of Trust:
 Ponzi schemes erode public trust in legitimate investment
opportunities and financial markets.
 Victims often become skeptical of future investment
opportunities, hindering their financial growth.

Preventing Ponzi Schemes:

1. Due Diligence:
 Investors should thoroughly research and verify the
legitimacy of any investment opportunity.
 Checking registration with regulatory authorities and
seeking independent financial advice can help.
2. Skepticism of High Returns:
 Be wary of investments promising high, consistent
returns with little or no risk.
 Understanding the risks associated with investments is
crucial.

3. Transparency and Regulation:

 Only invest in opportunities that offer clear, transparent
information about how returns are generated.
 Ensure that investments are regulated by appropriate
financial authorities.

Conclusion:
Ponzi schemes are fraudulent investment scams that can
cause significant financial harm to individuals and communities.
By understanding the characteristics and mechanisms of Ponzi
schemes, investors can better protect themselves from falling

9|Page
Notes By: ENG HONS HUB
victim to such scams. Due diligence, skepticism of high
returns, and seeking transparent, regulated investment
opportunities are key to avoiding these fraudulent schemes.

c) Importance of Diversification in Risk Management

Introduction:
Diversification is a risk management strategy that involves
spreading investments across various financial instruments,
industries, and other categories to reduce exposure to any
single asset or risk. This technique is used to manage risk by
allocating investments in a way that limits the impact of a
single asset's poor performance on the overall portfolio.
Concept of Diversification:
 Definition: Diversification means not putting all your eggs
in one basket. By investing in a variety of assets, you can
protect your portfolio from significant losses.
 Objective: The main goal is to maximize returns by
investing in different areas that would each react
differently to the same event.
Benefits of Diversification:
1. Risk Reduction:
 Diversification reduces the risk of a significant loss
because the poor performance of one asset is offset by
better performance in another.
For example, if you invest in both stocks and bonds, the
loss in stock value might be mitigated by gains in bond
value.

10 | P a g e
Notes By: ENG HONS HUB
2. Smoother Returns:
 Diversified portfolios tend to have more stable and
predictable returns.
 The performance of different investments in the
portfolio can balance out over time, reducing volatility.
3. Capital Preservation:
 By spreading investments, the chance of losing all your
capital in a market downturn is minimized.
 This helps in preserving the principal investment and
ensures longevity of the investment portfolio.
4. Exposure to Growth Opportunities:
 Diversification allows investors to take advantage of
opportunities in different sectors or markets.
 Investing in a variety of assets, like emerging markets,
technology stocks, or commodities, can enhance potential
returns.
Types of Diversification:
1. Asset Class Diversification:
 Investing in different asset classes such as stocks,
bonds, real estate, commodities, and cash.
 Each asset class reacts differently to economic events,
providing a balance.
2. Geographical Diversification:
 Spreading investments across different countries and
regions.
 This reduces the risk associated with a single country’s
economic, political, or social events.

11 | P a g e
Notes By: ENG HONS HUB
3. Sector Diversification:
 Investing in various sectors of the economy, such as
technology, healthcare, finance, and consumer goods.
 Different sectors perform differently depending on
economic conditions.

4. Investment Style Diversification:

 Combining different investment styles like growth, value,
and income strategies.
 This ensures that the portfolio can perform well under
different market conditions.

Challenges and Considerations:

1. Over Diversification:
 Spreading investments too thin can dilute potential
returns.
 It’s important to find a balance that reduces risk but
still allows for meaningful gains.

2. Management Complexity:
 Diversified portfolios require regular monitoring and
rebalancing.
 This can be complex and time consuming, potentially
requiring professional management.
3. Cost:
 Diversification can sometimes lead to higher transaction
costs.
 Investing in multiple assets may incur fees and charges
that can eat into returns.

12 | P a g e
Notes By: ENG HONS HUB
Conclusion:
Diversification is a fundamental principle of risk management
that helps investors protect their portfolios from significant
losses. By spreading investments across different asset
classes, geographical regions, sectors, and investment styles,
investors can achieve more stable and predictable returns.
While it has its challenges, the benefits of diversification far
outweigh the drawbacks, making it an essential strategy for
anyone looking to manage risk and preserve capital effectively.

d) Online Frauds
Introduction:
Online frauds refer to deceitful practices conducted over the
internet with the intent to steal personal information, money,
or both. These frauds can target individuals, businesses, and
even governments, causing significant financial and
reputational damage. The increasing reliance on digital
platforms for financial transactions, communication, and
business operations has made online frauds a growing concern.

Types of Online Frauds:

1. Phishing:
 Description: Phishing involves sending fake emails,
messages, or websites that appear legitimate to trick
individuals into revealing personal information such as
passwords, credit card numbers, and bank account
details.

13 | P a g e
Notes By: ENG HONS HUB
Example: An email that looks like it’s from a bank asking the
recipient to verify their account information by clicking on a
link and entering their credentials.

2. Identity Theft:
 Description: Identity theft occurs when a fraudster uses
someone else’s personal information without permission to
commit fraud or other crimes.
Example: Using stolen identity information to open new
credit accounts, make unauthorized purchases, or access
medical services.

3. Online Shopping Frauds:

 Description: These frauds occur on ecommerce platforms
where fake sellers create websites or listings to sell
nonexistent products.
Example: A customer pays for goods that are never
delivered, or receives counterfeit or substandard items
instead of what was advertised.

4. Credit Card Frauds:

 Description: Unauthorized use of someone’s credit card
information for online purchases.
Example: A fraudster uses stolen credit card details to buy
expensive items online.

5. Lottery and Prize Scams:

 Description: Scammers inform individuals that they have
won a lottery or prize, but to claim it, they need to pay a
fee or provide personal information.
14 | P a g e
Notes By: ENG HONS HUB
 Example: An email stating that the recipient has won a huge
amount in an international lottery, but needs to pay taxes or
fees upfront to receive the prize.

6. Online Dating and Romance Scams:

 Description: Fraudsters create fake profiles on dating
sites to establish relationships with victims and
eventually ask for money under various pretenses.
Example: A scammer, posing as a potential romantic partner,
asks for money to cover emergency expenses or travel costs.

7. Business Email Compromise (BEC):

 Description: Scammers compromise business email
accounts to initiate unauthorized fund transfers.
Example: An email appearing to be from a company executive
instructing an employee to transfer money to a fraudulent
account.

8. Fake Charities:
 Description: Fraudsters create fake charity websites or
solicit donations for nonexistent causes, especially during
disasters or emergencies.
Example: A fake charity asking for donations to help victims
of a recent natural disaster.

Prevention Measures:
1. Awareness and Education:
 Description: Educating individuals and businesses about
common online fraud tactics and how to recognize them.

15 | P a g e
Notes By: ENG HONS HUB
 Example: Regular training sessions on cyber security and
phishing awareness.

2. Strong Passwords and Authentication:

 Description: Using complex passwords and enabling two
factor authentication (2FA) to protect online accounts.
Example: A password manager can help create and store
strong passwords, and 2FA adds an extra layer of security.

3. Secure Websites:
 Description: Ensuring that websites used for
transactions are secure (look for “https” and a padlock
symbol in the address bar).
Example: Only entering credit card information on secure
and reputable ecommerce sites.

4. Monitoring Accounts:
 Description: Regularly checking bank and credit card
statements for unauthorized transactions.
Example: Setting up alerts for large or suspicious
transactions.

5. Software and System Updates:

 Description: Keeping operating systems, browsers, and
security software up to date to protect against
vulnerabilities.
Example: Installing the latest updates and patches for
antivirus software.

16 | P a g e
Notes By: ENG HONS HUB
6. Reporting Frauds:
 Description: Reporting any suspected online fraud to
relevant authorities.
Example: Contacting the bank immediately if there are
unauthorized transactions on your account.

Conclusion:
Online frauds are a significant threat in today’s digital world,
but by being vigilant and taking preventive measures,
individuals and businesses can protect themselves. Awareness,
education, and proactive security practices are essential in
mitigating the risks associated with online frauds.
Understanding the various types of online frauds and how to
prevent them is crucial in maintaining digital security and
safeguarding personal and financial information.

e) Financial Discipline
Introduction:
Financial discipline refers to the practice of managing
finances responsibly and effectively to achieve financial goals
and maintain stability. It involves adhering to budgeting,
saving, investing, and spending wisely to ensure financial
wellbeing in the short and long term. Here’s a detailed
explanation of financial discipline:

1. Budgeting:
 Description: Budgeting is the cornerstone of financial
discipline, involving the allocation of income towards
expenses, savings, and investments.

17 | P a g e
Notes By: ENG HONS HUB
  Importance: Helps in tracking income and expenses,
prioritizing financial goals, and avoiding overspending.
Example: Allocating a fixed percentage of monthly income
towards rent, groceries, savings, and entertainment expenses.

2. Saving and Investing:

 Description: Saving involves setting aside a portion of
income regularly, while investing involves putting savings
into assets with the expectation of generating returns.
 Importance: Builds financial reserves for emergencies,
future goals like education or retirement, and wealth
creation.
Example: Opening a savings account for short term goals and
investing in mutual funds or stocks for long term growth.

3. Avoiding Debt and Managing Credit:

 Description: Financial discipline includes prudent use of
credit, avoiding unnecessary debt, and managing existing
debt responsibly.
 Importance: Prevents debt from becoming a financial
burden, maintains a healthy credit score, and reduces
interest costs.
Example: Using credit cards responsibly, paying bills on time,
and avoiding high interest loans unless necessary.

4. Long term Financial Planning:

 Description: Involves setting clear financial goals, such
as buying a home, funding children's education, or

18 | P a g e
Notes By: ENG HONS HUB
 retiring comfortably, and creating a roadmap to achieve
them.
 Importance: Provides direction, motivates savings and
investment decisions, and ensures financial security over
the years.
Example: Investing in retirement plans like Provident Fund
(PF) or Public Provident Fund (PPF) to build a retirement
corpus.

5. Emergency Fund:
 Description: An emergency fund is savings set aside to
cover unexpected expenses or income disruptions, such
as medical emergencies or job loss.
 Importance: Provides financial security, reduces reliance
on debt during emergencies, and maintains overall
financial stability.
Example: Saving 36 months' worth of living expenses in a
liquid account like a savings account or short term deposit.

6. Reviewing and Adjusting Financial Plans:

 Description: Regularly evaluating financial decisions,
revisiting financial goals, and making necessary
adjustments based on changing circumstances or
priorities.
 Importance: Ensures alignment with current financial
needs, maximizes effectiveness of financial strategies,
and adapts to economic conditions.

19 | P a g e
Notes By: ENG HONS HUB
 Example: Revising investment allocations based on market
performance, adjusting budget categories based on income
changes.

Benefits of Financial Discipline:

 Stability: Ensures stability in personal finances,
reducing stress and uncertainty.
 Achievement of Goals: Helps in achieving short term
and long term financial goals effectively.
 Financial Independence: Builds a strong financial
foundation, leading to greater independence and
security.
 Wealth Creation: Facilitates wealth creation through
consistent savings and smart investments.

Conclusion:
Financial discipline is essential for individuals and households
to manage their finances effectively, achieve financial goals,
and secure their future. By adopting prudent financial habits
like budgeting, saving, investing wisely, and avoiding
unnecessary debt, individuals can build a strong financial
footing and navigate economic challenges with resilience.
Developing and maintaining financial discipline requires
commitment, consistency, and a proactive approach to
financial management.

f) U.P.I (Unified Payments Interface)

Introduction:
Unified Payments Interface (UPI) is a real time payment
system developed by the National Payments Corporation of
20 | P a g e
Notes By: ENG HONS HUB
India (NPCI). It facilitates instant fund transfers between
bank accounts using a mobile platform. Here's a detailed
explanation of UPI:

1. Concept and Functionality:

 Description: UPI allows users to link multiple bank
accounts into a single mobile application.
 Functionality: Enables instant money transfer, bill
payments, merchant transactions, and more.
Example: Using an UPI enabled app like Google Pay, PhonePe,
or Paytm to transfer money to a friend or pay for groceries.

2. Key Features:
 Real Time Transfers: Funds are transferred instantly
and directly from one bank account to another.
 24x7 Availability: Payments can be made and received
at any time of the day, including weekends and holidays.
 Single Interface: Provides a single interface for
accessing multiple bank accounts and services.
 QR Code Payments: Allows scanning QR codes for quick
and secure transactions.
 Payment Requests: Users can request money from
contacts and pay utility bills, taxes, and fees directly
through the app.

3. Security Measures:
 UPI PIN: Each transaction requires a secure UPI
Personal Identification Number (UPI PIN).
 Two Factor Authentication: Ensures secure
authentication of transactions.
21 | P a g e
Notes By: ENG HONS HUB
  Encryption: Uses strong encryption protocols to protect
sensitive data during transactions.
 Limits and Alerts: Banks impose transaction limits and
send alerts for every transaction for enhanced security.

4. Advantages of UPI:
 Convenience: Offers seamless and instant transactions
without the need for IFSC codes or bank account
details.
 Cost Effective: Generally, UPI transactions are free or
incur minimal charges compared to traditional banking
methods.
 Financial Inclusion: Promotes digital payments and
banking services, especially in rural and underserved
areas.
 Interoperability: Supports interoperability among
different banks and payment service providers.

5. Usage and Adoption:

 Popularity: UPI has gained widespread acceptance
among individuals, businesses, and government
organizations.
 Government Initiatives: Integrated with various
government initiatives such as Direct Benefit Transfer
(DBT) and Bharat Bill Payment System (BBPS).
 Business Transactions: Many businesses and ecommerce
platforms integrate UPI for cashless transactions.

22 | P a g e
Notes By: ENG HONS HUB
6. Future Trends:
 Innovation: Continual advancements in UPI technology to
enhance security, scalability, and user experience.
 Integration: Further integration with IoT (Internet of
Things) and other digital platforms for seamless
payments.
 Global Recognition: Potential for UPI to serve as a
model for real time payment systems in other countries.

Conclusion:
UPI revolutionizes the way payments are made in India by
offering a secure, efficient, and convenient platform for
digital transactions. Its user friendly interface and extensive
features have made it a preferred choice for millions, driving
the nation towards a cashless economy. As UPI continues to
evolve with technological advancements and broader adoption,
it plays a pivotal role in promoting financial inclusion and
accelerating digital transformation across the country.

g) Time value of money

Introduction:
The time value of money (TVM) is a fundamental financial
concept that reflects the idea that money available today is
worth more than the same amount in the future due to its
potential earning capacity. This concept is essential in various
financial decisions, such as investments, loans, and savings.

23 | P a g e
Notes By: ENG HONS HUB
Here's a detailed explanation of the time value of money:
1. Basic Principle:
 Description: The principle states that a sum of money
today is worth more than the same sum in the future
because of its potential earning capacity, or conversely,
the cost of receiving money at a later date.
Example: If given a choice between receiving Rs. 10,000
today or Rs. 10,000 a year from now, most people would prefer
to have the money today because it can be invested or used
immediately.

2. Factors Influencing TVM:

 Interest Rates: Higher interest rates increase the
future value of money and decrease its present value.
 Time Period: The longer the time period, the greater
the impact of compounding on the future value of money.
 Risk: Uncertainty or risk associated with future cash
flows affects the present value of money.

3. Components of TVM:
Present Value (PV):
 Definition: The current value of a future sum of money
or a series of cash flows, discounted back to the
present.
 Calculation: PV = FV / (1 + r)^n, where FV is the future
value, r is the discount rate (interest rate), and n is the
number of periods.

24 | P a g e
Notes By: ENG HONS HUB
 Future Value (FV):
 Definition: The value of an investment at a specific
date in the future, based on the assumption that it
earns a certain rate of return.
 Calculation: FV = PV (1 + r)^n, where PV is the present
value, r is the interest rate, and n is the number of
periods.

Compounding and Discounting:

 Compounding: The process of earning interest on both
the initial principal and the accumulated interest from
previous periods.
 Discounting: The process of determining the present
value of a future amount by applying a discount rate.

4. Applications of TVM:
 Investment Decisions: Helps in evaluating the potential
returns on investments and comparing investment
options.
 Loan Amortization: Calculates loan repayments and
determines the total interest paid over the loan term.
 Retirement Planning: Estimates the future value of
savings and investments needed to achieve retirement
goals.
 Capital Budgeting: Assesses the profitability of long
term projects and determines their net present value
(NPV).

25 | P a g e
Notes By: ENG HONS HUB
5. Importance of TVM:
 Financial Planning: Guides individuals and businesses in
making informed financial decisions by considering the
time value of money.
 Risk Management: Helps in assessing the risk and
return tradeoffs associated with various investment
opportunities.
 Economic Decision Making: Forms the basis for
economic theories and policies related to interest rates,
inflation, and monetary policy.

6. Practical Example:
 Scenario: An individual considers investing Rs. 50,000 in
a fixed deposit offering an annual interest rate of 8%.
 Calculation: After 5 years, the future value (FV) of the
investment would be FV = 50,000 (1 + 0.08)^5 = Rs.
73,466.40.
 Interpretation: The Rs. 50,000 invested today will grow
to Rs. 73,466.40 in 5 years at an 8% annual interest
rate, demonstrating the time value of money concept.

Conclusion:
Understanding the time value of money is crucial for making
sound financial decisions that maximize wealth accumulation
and minimize financial risks. Whether planning investments,
managing loans, or preparing for retirement, incorporating
TVM principles enables individuals and businesses to optimize
their financial strategies and achieve long term financial goals
effectively.

26 | P a g e
Notes By: ENG HONS HUB
h) Permanent Account Number(PAN)
Introduction:
A Permanent Account Number (PAN) is a unique alphanumeric
identifier issued to Indian taxpayers. It is essential for
various financial transactions and serves as a key document
for tax related purposes. PAN is issued by the Income Tax
Department under the supervision of the Central Board of
Direct Taxes (CBDT).

Structure of PAN:
 A PAN is a 10character long alphanumeric code. It
follows a specific structure:
 The first five characters are letters.
 The next four characters are numbers.
 The last character is a letter.
For example, in the PAN "ABCDE1234F":
 The first three characters are a sequence of alphabets
(ABC).
 The fourth character represents the PAN holder's
status (D for an individual).
 The fifth character is the first letter of the PAN
holder's surname.
 The next four characters are numerical digits (1234).
 The last character is an alphabetic check digit (F).

Importance of PAN:
1. Taxation:
 PAN is mandatory for filing income tax returns.

27 | P a g e
Notes By: ENG HONS HUB
  It helps in tracking tax payments and preventing tax
evasion.

2. Financial Transactions:
 PAN is required for transactions above a certain
threshold, such as bank deposits, buying or selling
property, and investments in mutual funds.
 It ensures that large financial transactions are
reported to the tax authorities.
3. Opening Bank Accounts:
 PAN is necessary for opening a new bank account.
 It helps banks in KYC (Know Your Customer) processes
to verify the identity of the account holder.

4. Loans and Credit Cards:

 Financial institutions require PAN details when applying
for loans or credit cards.
 It helps in assessing the creditworthiness of the
applicant.

5. Property Transactions:
 PAN is compulsory for buying or selling immovable
property above a certain value.
 It helps in preventing money laundering and ensuring
transparency in real estate transactions.
6. Business Transactions:
 PAN is needed for registering a business, obtaining a
GST number, and making business related financial
transactions.
 It aids in tracking business income and expenses.
28 | P a g e
Notes By: ENG HONS HUB
How to Apply for PAN:
Online Application:
o Applicants can apply for PAN online through the NSDL
or UTIITSL websites.
o They need to fill in the required details, upload
supporting documents, and pay a nominal fee.

Offline Application:
o Applicants can visit designated PAN centers, fill out
the PAN application form (Form 49A for Indian
citizens), attach supporting documents, and submit it
along with the fee.

Documents Required:
o Proof of Identity (Aadhaar card, Voter ID, Passport,
etc.)
o Proof of Address (Utility bills, Aadhaar card, Passport,
etc.)
o Proof of Date of Birth (Birth certificate, Aadhaar
card, Passport, etc.)

Conclusion:
The Permanent Account Number (PAN) is a vital document for
individuals and businesses in India. It ensures smooth
functioning of tax processes, promotes transparency in
financial transactions, and helps in preventing tax evasion and
money laundering. Given its significance, it is essential for
every taxpayer and business entity to obtain and use their
PAN responsibly.

29 | P a g e
Notes By: ENG HONS HUB
Ques 2. Discuss the various financial products available
for investment in India.
Ans. Financial Products Available for Investment in India.
Investing is a crucial aspect of financial planning. In India,
there are various financial products available for investment,
each with its own characteristics, benefits, and risks. Here is
an overview of the key investment options:

1. Fixed Deposits (FDs):

 Description: A fixed deposit is a financial instrument
provided by banks and nonbanking financial companies
(NBFCs), where investors can deposit money for a fixed
tenure at a predetermined interest rate.
 Benefits: Safety, guaranteed returns, and fixed
interest rates.
 Risks: Lower returns compared to market linked
investments, inflation risk.
Example: Bank fixed deposits, post office time deposits.
2. Public Provident Fund (PPF):
 Description: A government backed long term savings
scheme that offers tax benefits and guaranteed
returns.
 Benefits: Tax benefits under Section 80C, safe and
secure, attractive interest rates.
 Risks: Long lockin period of 15 years.
Example: PPF accounts can be opened at designated banks
and post offices.

30 | P a g e
Notes By: ENG HONS HUB
3. National Savings Certificate (NSC):
 Description: A government savings bond primarily used
for small savings and income tax savings.
 Benefits: Tax benefits under Section 80C, fixed return,
low risk.
 Risks: Lower liquidity as it has a fixed maturity period.
Example: NSC certificates available at post offices.

4. Equity Shares:
 Description: Investing in shares means buying a part of a
company’s ownership. The returns are based on the
company’s performance and market conditions.
 Benefits: Potential for high returns, ownership in
companies, dividends.
 Risks: Market volatility, higher risk, requires knowledge
and monitoring.
Example: Investing in stocks listed on BSE and NSE.
5. Mutual Funds:
 Description: A mutual fund pools money from many
investors to invest in diversified securities like stocks,
bonds, and other assets.
 Benefits: Diversification, professional management,
liquidity, and various schemes to choose from.
 Risks: Market risk, fund management risk.
Example: Equity mutual funds, debt mutual funds, hybrid
mutual funds.

31 | P a g e
Notes By: ENG HONS HUB
6. Real Estate:
 Description: Investing in real estate involves buying
property for rental income or capital appreciation.
 Benefits: Potential for high returns, physical asset,
rental income.
 Risks: High entry cost, illiquid, market risk.
Example: Residential properties, commercial properties,
REITs (Real Estate Investment Trusts).

7. Bonds and Debentures:

 Description: Bonds are fixed income instruments where
investors lend money to an entity (government or
corporation) for a defined period at a fixed interest
rate.
 Benefits: Regular interest income, lower risk compared
to equities.
 Risks: Interest rate risk, credit risk.
Example: Government bonds, corporate bonds, municipal
bonds.

8. Unit Linked Insurance Plans (ULIPs):

 Description: ULIPs are insurance products that provide
risk cover for the policyholder along with investment
options to invest in various qualified investments such as
stocks, bonds, or mutual funds.
 Benefits: Life cover, tax benefits, investment
flexibility.

32 | P a g e
Notes By: ENG HONS HUB
  Risks: Market risk, high charges and fees.
Example: ULIPs offered by insurance companies.

9. Gold:
 Description: Investing in gold can be done through
physical gold (jewelry, coins, bars), gold ETFs (Exchange
Traded Funds), or sovereign gold bonds.
 Benefits: Hedge against inflation, liquidity, high demand.
 Risks: Price volatility, storage and insurance costs for
physical gold.
Example: Gold ETFs, sovereign gold bonds, physical gold
purchases.

10. Systematic Investment Plans (SIPs):

 Description: SIP is a method of investing in mutual funds
regularly (monthly or quarterly), allowing investors to
buy units over time.
 Benefits: Disciplined investment, rupee cost averaging,
compounding benefits.
 Risks: Market risk associated with mutual funds.
Example: SIPs in equity, debt, or hybrid mutual funds.

11. Recurring Deposits (RDs):

 Description: A recurring deposit is a type of term
deposit offered by banks, allowing investors to save a
fixed amount every month and earn interest.
 Benefits: Regular savings habit, fixed returns, safe
investment.
33 | P a g e
Notes By: ENG HONS HUB
  Risks: Lower returns compared to other investment
options.
Example: Bank recurring deposits, post office recurring
deposits.

Conclusion:
India offers a wide range of financial products for
investment, catering to different risk appetites and financial
goals. From safe and secure options like fixed deposits and
PPF to market linked instruments like equities and mutual
funds, investors can choose based on their preferences and
objectives. Diversification and informed decision making are
key to building a balanced investment portfolio.

Ques 3. What is New Tax Regime? How is it different from

Old Tax Regime?
Ans. New Tax Regime vs. Old Tax Regime: A Comparative
Analysis
Introduction:
In India, the income tax system underwent a significant
overhaul with the introduction of the New Tax Regime (NTR)
in the Finance Act, 2020, which became effective from the
assessment year 202122. This regime introduced changes
aimed at simplifying tax structures and providing more options
for taxpayers to choose from based on their financial
situations. Here, we discuss the differences between the New
Tax Regime and the Old Tax Regime (OTR).

34 | P a g e
Notes By: ENG HONS HUB
Old Tax Regime (OTR):
1. Section 80C:
o Description: Under Section 80C of the Income Tax Act,
taxpayers could claim deductions of up to Rs. 1.5 lakh per
annum.
o Eligible Investments: Contributions to Public Provident
Fund (PPF), Employee Provident Fund (EPF), National
Savings Certificate (NSC), Life Insurance Premiums,
Equity Linked Savings Scheme (ELSS), and Fixed
Deposits with a tenure of five years or more.

o Impact: This section provided a significant incentive for

individuals to invest in a variety of savings instruments,
fostering a habit of regular savings and investments.

2. Section 80D:
o Description: Section 80D allowed deductions for health
insurance premiums.
o Eligible Expenses: Health insurance premiums for self,
spouse, children, and parents, including preventive health
checkups.
o Impact: Encouraged individuals to invest in health
insurance, ensuring financial security in case of medical
emergencies and promoting the importance of health
related savings.

3. Section 80E:

35 | P a g e
Notes By: ENG HONS HUB
 o Description: Section 80E provided deductions on
interest paid on education loans.
o Eligible Expenses: Interest paid on loans taken for
higher education for self, spouse, children, or a student
for whom the taxpayer is a legal guardian.
o Impact: Motivated individuals to save for education and
invest in educational pursuits without worrying about the
tax burden on interest payments.

4. Section 80TTA:
o Description: Section 80TTA offered deductions on
interest earned from savings accounts.
o Eligible Accounts: Savings accounts in banks, post
offices, or cooperative societies.
o Impact: Promoted the habit of maintaining savings
accounts and earning interest on savings, leading to
financial prudence among individuals.

5. Housing Loan Deductions:

o Section 24(b): Allowed deductions on interest paid on
housing loans up to Rs. 2 lakh per annum.
o Principal Repayment: The principal repayment of home
loans was also eligible for deduction under Section 80C.
o Impact: Encouraged individuals to invest in real estate
and buy homes, leading to long term financial security
and asset creation.

New Tax Regime (NTR):

36 | P a g e
Notes By: ENG HONS HUB
1. Flat Tax Rates:
 Description: The New Tax Regime introduced lower and
simplified tax rates with fewer tax slabs compared to
the Old Tax Regime.
Example: The new tax rates range from 5% to 30%,
depending on income levels, without deductions.

2. Removal of Deductions and Exemptions:

 Description: Under the NTR, most deductions and
exemptions available under the Old Tax Regime were
removed to streamline tax calculations.
Example: Deductions under Section 80C (PPF, EPF
contributions), 80D (health insurance premiums), and 24(b)
(interest on home loans) are not allowed.

3. Simplicity and Ease of Compliance:

 Description: The NTR aims to simplify tax filing by
offering lower and uniform tax rates, reducing the need
for extensive tax planning.
Example: Taxpayers can opt for the new regime and
calculate taxes based on income slabs without considering
deductions.

4. Opting Option:
 Description: Taxpayers have the flexibility to choose
between the Old Tax Regime and the New Tax Regime
based on which benefits them more.

37 | P a g e
Notes By: ENG HONS HUB
 Example: Individuals must carefully evaluate their income
sources and potential tax savings before opting for either
regime.

5. Impact on Tax Liability:

 Description: The choice between regimes depends on
individual financial profiles; for some, the NTR might
result in lower taxes, while others may benefit more
from deductions in the OTR.
Example: Taxpayers with substantial investments and
expenses eligible for deductions may find the Old Tax
Regime more beneficial in reducing taxable income.

Comparison and Considerations:

 Flexibility vs. Simplicity: The OTR offers flexibility
through deductions and exemptions, allowing taxpayers to
lower their tax liability based on various investments and
expenses. In contrast, the NTR provides simplicity with
lower tax rates but removes these deductions, requiring
less tax planning.
 Tax Planning vs. Convenience: Taxpayers accustomed to
maximizing deductions for tax planning purposes may
prefer the OTR. Meanwhile, those seeking ease of
compliance and lower tax rates upfront might opt for the
NTR.
 Long term Impact: The choice between regimes depends
on individual financial goals, investment strategies, and
long term tax planning objectives. Taxpayers should
38 | P a g e
Notes By: ENG HONS HUB
 evaluate their options annually based on changes in
income and financial circumstances.

Conclusion:
The introduction of the New Tax Regime in India represents a
shift towards simplifying tax structures and providing more
straightforward options for taxpayers. While the Old Tax
Regime offered deductions and rebates to lower tax
liabilities, the New Tax Regime focuses on lower and uniform
tax rates without these benefits. Taxpayers should carefully
assess their income sources, deductions, and financial goals to
determine which regime suits them best and ensures optimal
tax efficiency.

Ques 4. Explain in detail the different types of life

insurance.
Ans. Types of Life Insurance
Life insurance is a crucial financial tool that provides financial
security and protection against the uncertainties of life. It
ensures that dependents and beneficiaries are financially
supported in case of the policyholder's death. There are
various types of life insurance policies tailored to meet
different needs and circumstances. Here’s a detailed
explanation of the common types of life insurance:

1. Term Life Insurance:

 Description: Term life insurance provides coverage for a
specific period, known as the term of the policy.

39 | P a g e
Notes By: ENG HONS HUB
  Features:
 It offers pure protection without any savings
component.
 Premiums are generally lower compared to other types
of life insurance.
 Coverage is for a fixed duration (e.g., 10, 20, or 30
years).
 If the policyholder dies during the term, the death
benefit is paid to the nominee.
Example: A 30year term life policy with a sum assured of Rs.
50 lakh means the nominee receives Rs. 50 lakh if the insured
dies within 30 years.

2. Whole Life Insurance:

 Description: Whole life insurance provides coverage for
the entire life of the insured, as long as premiums are
paid.
 Features:
 It offers lifetime coverage and accumulates cash value
over time.
 Premiums remain constant throughout the
policyholder's life.
 Part of the premium goes towards building a cash value
component that can be borrowed against or withdrawn.
 Beneficiaries receive the death benefit upon the
insured's death.

40 | P a g e
Notes By: ENG HONS HUB
 Example: A whole life policy with a sum assured of Rs. 1 crore
ensures the nominee receives Rs. 1 crore whenever the
insured passes away, regardless of age.

3. Endowment Life Insurance:

 Description: Endowment life insurance combines life
coverage with a savings component that accrues cash
value over time.
 Features:
 Provides death benefits to beneficiaries if the insured
dies during the policy term.
 Pays a lump sum amount (sum assured) to the
policyholder if they survive the policy term.
 Offers maturity benefits upon survival till the end of
the policy term, combining insurance protection with
savings.
Example: A 20year endowment policy with a sum assured of
Rs. 20 lakh pays Rs. 20 lakh to the nominee if the insured dies
within 20 years or to the insured upon surviving 20 years.

4. Unit Linked Insurance Plans (ULIPs):

 Description: ULIPs are insurance products that combine
life insurance coverage with investment options in equity
and debt funds.
 Features:
 Premiums are divided into insurance and investment
components.

41 | P a g e
Notes By: ENG HONS HUB
  Policyholders can choose from different fund options
based on risk appetite (equity, debt, or balanced
funds).
 Returns are linked to the market performance of
chosen funds.
 Offers flexibility to switch funds and partial
withdrawals after a locking period.
Example: A ULIP with a sum assured of Rs. 15 lakh allows
policyholders to invest in equity funds for higher returns
potential or debt funds for stability.

5. Money Back Policies:

 Description: Money back policies are traditional life
insurance plans that provide periodic payouts during the
policy term.
 Features:
 Offers regular survival benefits (partial withdrawals of
sum assured) at specified intervals during the policy
term.
 Provides death benefits to nominees if the insured dies
during the policy term.
 Combines insurance protection with periodic liquidity
through guaranteed survival benefits.
Example: A 25year money back policy with a sum assured of
Rs. 10 lakh may provide 20% of sum assured at the end of
every 5 years, with the balance paid upon maturity or death.

6. Pension Plans (Annuities):

42 | P a g e
Notes By: ENG HONS HUB
  Description: Pension plans, also known as annuities,
provide regular income postretirement or at a specified
age.
 Features:
 Accumulates a corpus through regular premiums during
the accumulation phase.
 Converts the accumulated corpus into a steady income
stream (annuity) during the distribution phase.
 Offers options like immediate annuities (payouts start
immediately after purchase) or deferred annuities
(payouts start at a future date).
Example: A pension plan with a corpus of Rs. 50 lakh provides
monthly annuities to the policyholder after retirement to
cover living expenses.

Conclusion:
Life insurance policies are designed to cater to diverse
financial needs, including income protection, savings,
investment, and retirement planning. Choosing the right type
of life insurance depends on individual goals, financial
circumstances, and risk tolerance. Understanding the features
and benefits of each type helps individuals and families make
informed decisions to secure their financial future and
provide protection to loved ones in unforeseen circumstances.

Ques 5. What is a mutual fund? Explain the role of mutual

funds in personal investment planning.
Ans. Introduction to Mutual Funds:
43 | P a g e
Notes By: ENG HONS HUB
A mutual fund is a professionally managed investment vehicle
that pools money from multiple investors to invest in a
diversified portfolio of securities such as stocks, bonds, or
other assets. Each investor owns shares in the fund,
representing a portion of the holdings. Here’s a detailed
explanation of mutual funds and their role in personal
investment planning:

1. Structure and Operation:

 Structure: Managed by professional fund managers or
asset management companies (AMCs), who make
investment decisions based on the fund's objectives.
 Types: Include equity funds (stocks), bond funds
(bonds), hybrid funds (mix of stocks and bonds), and
money market funds (short term debt securities).

2. How Mutual Funds Work:

 Pooling of Funds: Investors pool their money, allowing
even small investors to access diversified portfolios
managed by experts.
 Investment Strategy: Fund managers allocate assets
based on the fund's investment objective, aiming for
capital appreciation, income generation, or a mix of both.
 Units: Investors purchase units of the mutual fund, and
the value of these units fluctuates based on the fund's
performance and market conditions.

3. Role of Mutual Funds in Personal Investment Planning:

Diversification:
44 | P a g e
Notes By: ENG HONS HUB
  Explanation: Mutual funds invest in a variety of
securities across different sectors and asset classes,
reducing risk through diversification.
 Benefits: Provides exposure to a wide range of
investments, spreading risk and potentially enhancing
returns.

Professional Management:
 Explanation: Fund managers conduct indepth research
and analysis to select investments aligned with the
fund's objectives.
 Benefits: Investors benefit from expertise, time, and
resources of professional managers, enhancing
investment decisions.

Accessibility and Affordability:

 Explanation: Allows small investors to participate in
markets they may not access individually due to capital
constraints or expertise.
 Benefits: Offers a cost effective way to invest in
diversified portfolios with relatively low minimum
investment amounts.

Liquidity:
 Explanation: Mutual funds provide liquidity as units can
be bought or sold on any business day at the fund's
current net asset value (NAV).

45 | P a g e
Notes By: ENG HONS HUB
  Benefits: Offers flexibility to redeem investments
based on financial needs or market conditions without
significant penalties.

Risk Management:
 Explanation: Different types of mutual funds cater to
varying risk appetites, from low risk money market
funds to higher risk equity funds.
 Benefits: Investors can choose funds aligning with
their risk tolerance and investment goals, balancing
potential returns with risk exposure.

Goal Based Investing:

 Explanation: Mutual funds support goal based investing
by offering funds tailored to specific financial
objectives, such as retirement planning, education
funding, or wealth accumulation.
 Benefits: Helps investors achieve long term goals
through systematic investment plans (SIPs) or lump
sum investments, aligning investments with financial
milestones.

4. Types of Mutual Fund Schemes:

 Equity Funds: Invest primarily in stocks, offering
potential for higher returns over the long term.
 Debt Funds: Invest in fixed income securities like
government bonds or corporate bonds, providing stable
income with lower risk.

46 | P a g e
Notes By: ENG HONS HUB
  Hybrid Funds: Combine equity and debt investments,
balancing risk and return.
 Index Funds: Track specific market indices like Nifty
or Sensex, aiming to replicate their performance.
 Sectoral Funds: Focus on specific sectors like
technology, healthcare, or infrastructure, offering
targeted exposure to industry trends.

Conclusion:
Mutual funds play a pivotal role in personal investment
planning by offering diversified, professionally managed
portfolios accessible to a wide range of investors. They
provide opportunities for wealth creation, risk management,
and achieving financial goals through systematic and
disciplined investment strategies. Understanding mutual funds
empowers individuals to make informed decisions aligned with
their financial objectives, leveraging the expertise of fund
managers and the benefits of diversification in the dynamic
world of investments.

Ques 6. From the following information available about

the share of ABC Limited, calculate its expected return
and risk: photo paste answer
State Probability Return
Boom 0.30 40%
Stagnant 0.40 20%
Bust 0.30 20%
47 | P a g e
Notes By: ENG HONS HUB
Ans. To calculate the expected return and risk (standard
deviation) of the share of ABC Limited based on the given
information, we will use the following steps:

 Expected Return:
The expected return of a stock is the weighted average of
the possible returns, where the weights are the probabilities
of each state occurring. The formula for expected return E(R)
is:

48 | P a g e
Notes By: ENG HONS HUB
49 | P a g e
Notes By: ENG HONS HUB
Ques 7. Explain the need and importance of buying a
health insurance.
Ans The Need and Importance of Buying Health Insurance
Introduction:
Health insurance is a crucial component of personal financial
planning. It provides a safety net against the high costs of
medical care, ensuring that individuals and families can access
necessary healthcare services without facing financial
hardship. Here, we will discuss the need and importance of
buying health insurance in simple and easy to understand
language.

1. Financial Protection:
Health insurance helps cover the cost of medical treatments,
surgeries, hospitalization, and other healthcare services.
Without insurance, paying for these expenses out of pocket
can be financially overwhelming. Health insurance reduces the
financial burden by sharing the costs with the insurer.

50 | P a g e
Notes By: ENG HONS HUB
2. Access to Quality Healthcare:
Having health insurance ensures that individuals can access
timely and quality healthcare services. Insured individuals are
more likely to seek medical attention when needed, leading to
early diagnosis and treatment of illnesses, which can prevent
complications and improve health outcomes.

3. Coverage for Hospitalization and Treatment:

Health insurance policies typically cover various medical
expenses, including:
 Inpatient hospitalization (admission to the hospital)
 Pre hospitalization expenses (medical tests and
consultations before hospital admission)
 Post hospitalization expenses (follow up treatments and
consultations after discharge)
 Daycare procedures (treatments that do not require
overnight hospitalization)
 Emergency ambulance services

4. Protection against Rising Medical Costs:

Medical costs are continuously increasing due to advancements
in healthcare technology, inflation, and the growing demand
for healthcare services. Health insurance helps mitigate the
impact of rising medical costs by covering a significant portion
of the expenses, ensuring that individuals do not have to
compromise on their healthcare due to financial constraints.

51 | P a g e
Notes By: ENG HONS HUB
5. Tax Benefits:
In many countries, including India, health insurance premiums
are eligible for tax deductions. Under Section 80D of the
Income Tax Act, individuals can claim deductions for
premiums paid for health insurance policies for themselves,
their spouses, children, and parents. This provides an
additional financial incentive to purchase health insurance.

6. Peace of Mind:
Knowing that one is covered by health insurance provides
peace of mind. It alleviates the stress and anxiety associated
with unexpected medical emergencies, allowing individuals to
focus on their recovery and wellbeing without worrying about
the financial implications.

7. Coverage for Critical Illnesses:

Many health insurance policies offer riders or addons for
critical illnesses such as cancer, heart disease, and kidney
failure. These addons provide additional financial support to
cover the high costs associated with the treatment of such
severe illnesses.

8. Cashless Treatment Facility:

Most health insurance providers have tie ups with a network
of hospitals where insured individuals can avail of cashless
treatment. This means that the insurer directly settles the
medical bills with the hospital, eliminating the need for the
insured to pay out of pocket and then seek reimbursement.

52 | P a g e
Notes By: ENG HONS HUB
9. Comprehensive Coverage for Families:
Family floater health insurance policies cover all family
members under a single policy. This ensures that the entire
family is protected against medical expenses, and the sum
insured can be utilized by any family member as needed.

10. Long term Savings:

Health insurance policies often come with benefits like no
claim bonuses, where the sum insured increases if no claims
are made during a policy year. This provides an incentive for
maintaining good health and results in long term savings on
premiums.

Conclusion:
Health insurance is an essential investment for individuals and
families. It provides financial protection, access to quality
healthcare, and peace of mind. Given the unpredictability of
health issues and the rising costs of medical care, having
health insurance ensures that one is prepared for any medical
emergency without facing financial distress. It is a crucial
tool for maintaining overall wellbeing and financial stability.

Ques 8. From the following information related to Mr.

Aditya aged 51years who is resident in India, compute his
Total tax liability under both old tax regime and new

53 | P a g e
Notes By: ENG HONS HUB
tax regime for financial year2023-24:

Ans Calculation of Total Tax Liability for Mr. Aditya

To compute the total tax liability of Mr. Aditya under both

the old tax regime and the new tax regime for the financial
year 2023-24, we need to:

1. Calculate the gross total income.

2. Calculate the deductions available under the old tax regime.
3. Compute the taxable income under both regimes.
4. Calculate the tax liability for both regimes.

### Given Information

1. Gross Total Income: Rs. 24,85,000

2. Investments:

54 | P a g e
Notes By: ENG HONS HUB
 - Investment in Term Deposit of ICICI Bank for 6 years:
Rs. 1,70,000
- Medical Insurance Premium paid on the policy of
dependent children: Rs. 30,000
- Interest on Saving Account in ICICI Bank: Rs. 14,000

Old Tax Regime

Deductions

**Section 80C:**
- Investment in Term Deposit: Rs. 1,70,000 (maximum
allowable: Rs. 1,50,000)
- Total under 80C: Rs. 1,50,000

**Section 80D:**
- Medical Insurance Premium: Rs. 30,000

**Section 80TTA:**
- Interest on Saving Account: Rs. 10,000 (maximum allowable:
Rs. 10,000)

#### Calculation under Old Tax Regime

1. **Gross Total Income:** Rs. 24,85,000

2. **Deductions:**

55 | P a g e
Notes By: ENG HONS HUB
 - Section 80C: Rs. 1,50,000
- Section 80D: Rs. 30,000
- Section 80TTA: Rs. 10,000
- Total Deductions: Rs. 1,90,000
3. **Taxable Income:** Rs. 24,85,000 - Rs. 1,90,000 = Rs.
22,95,000

4. **Tax Calculation:**
- Up to Rs. 2,50,000: Nil
- Rs. 2,50,001 to Rs. 5,00,000: 5% of Rs. 2,50,000 = Rs.
12,500
- Rs. 5,00,001 to Rs. 10,00,000: 20% of Rs. 5,00,000 = Rs.
1,00,000
- Above Rs. 10,00,000: 30% of Rs. 12,95,000 = Rs. 3,88,500
- Total Tax: Rs. 12,500 + Rs. 1,00,000 + Rs. 3,88,500 = Rs.
5,01,000

5. **Cess (4%):** 4% of Rs. 5,01,000 = Rs. 20,040

6. **Total Tax Liability under Old Regime:** Rs. 5,01,000 + Rs.
20,040 = Rs. 5,21,040

New Tax Regime

Under the new tax regime, no deductions are allowed, and the
tax slabs are different.

56 | P a g e
Notes By: ENG HONS HUB
 Calculation under New Tax Regime

1. **Taxable Income:** Rs. 24,85,000 (no deductions)

2. **Tax Calculation:**
- Up to Rs. 2,50,000: Nil
- Rs. 2,50,001 to Rs. 5,00,000: 5% of Rs. 2,50,000 = Rs.
12,500
- Rs. 5,00,001 to Rs. 7,50,000: 10% of Rs. 2,50,000 = Rs.
25,000
- Rs. 7,50,001 to Rs. 10,00,000: 15% of Rs. 2,50,000 = Rs.
37,500
- Rs. 10,00,001 to Rs. 12,50,000: 20% of Rs. 2,50,000 = Rs.
50,000
- Rs. 12,50,001 to Rs. 15,00,000: 25% of Rs. 2,50,000 = Rs.
62,500
- Above Rs. 15,00,000: 30% of Rs. 9,85,000 = Rs. 2,95,500
- Total Tax: Rs. 12,500 + Rs. 25,000 + Rs. 37,500 + Rs.
50,000 + Rs. 62,500 + Rs. 2,95,500 = Rs. 4,83,000

3. **Cess (4%):** 4% of Rs. 4,83,000 = Rs. 19,320

4. **Total Tax Liability under New Regime:** Rs. 4,83,000 +
Rs. 19,320 = Rs. 5,02,320

### Summary

- **Total Tax Liability under Old Regime:** Rs. 5,21,040

57 | P a g e
Notes By: ENG HONS HUB
- **Total Tax Liability under New Regime:** Rs. 5,02,320

Mr. Aditya would pay less tax under the new tax regime.

58 | P a g e
Notes By: ENG HONS HUB