Basic Financial

Terminologies
A collective information

VENKATESH RAMACHANDRAN
[Investment Enthusiast]
 Preface
As a salaried employee with engineering background, I was not aware
of many financial terminologies when I started my carrier. Even my
salary structure itself, by keeping in mind many people are like me out
there I have just created collective basic information on various
financial terms, investments and taxation.

The information presented in the following articles are elaborated in

simple way to understand the different ways of earning money in the
most legal and appropriate manner for beginners, housewife, salaried
employees, or even employers from various online and offline
sources.

As of in 2020s with various change in technologies and internet of

things, we have numerous opportunities to explore the different
segments in art of money making. As author of this collective
information would like talk about the basic financial literacy one must
process as an investor and start making money. Investments doesn’t
require any particular age as long as you have valid proof for your
source of income and KYC documents. According to experts one
should start investments as young as possible for fruit full returns at
early stages of life, having said that one must start investing his time
as foremost investment for learning and updating himself in
knowledge in to the appropriate activity.

The word money brings the feel of motivation to do great things in life
and what is that great things differ from person to person. If you have
money you can do anything in life ……a big no for this statement
…money gives you the power of buying that is all it does. What you
buy it’s all about your satisfaction. The most important things in life is
to earn family, friends, well-wishers and supporters then money in life
and how well you spend these money on keeping up these
relationships happy and healthy will give highest sense of satisfaction.

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Table of Contents:

Sno Topic Page No

1 Salary Structure 3-13
2 Taxations in India 13-17
3 Banks in India 18-33
4 Insurance in India 34-38
5 Tax Saving Schemes in India 39-42
6 Gold –A Universal Exchange 43-47
7 Bonds in India 48-52
8 Mutual funds in India 53-70
9 Stock market in India 71-93
10 Real Estate 94-107
11 E-commerce 108-109
12 Business 110-155
13 Free lancing services 156-158
14 OTT-Platforms 159-163
15 Basic Economics of India 164-182
16 Financial Goal Settings 183-189

**All information presented in the following articles are collected from

various online and offline source all credits of articles belongs to
respective sources**

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 1. Understanding salary structure
Salaries are paid by organizations to their employees in exchange for
the services rendered by them. The salary paid to employees
comprises of a number of different components, such as basic salary,
allowance, perquisites, etc.
Terms like CTC, basic salary, gross salary, allowance, reimbursements,
tax deductions, provident fund, insurance, etc. often create confusion
for employees.
CTC or Cost to Company is the total amount that a company spends
(directly or indirectly) on an employee. It refers to the total salary
package of the employee. CTC is inclusive of monthly components
such as basic pay, various allowances, reimbursements, etc. and
annual components such as gratuity, annual variable pay, annual
bonus, etc.
CTC is never equal to the amount of take-home salary of the
employee. There are many components in the CTC that one does not
receive as part of take-home salary.

CTC = Gross Salary + PF + Gratuity

Basic salary
Basic salary is the base income of an individual. It is a fixed part of
one's compensation package. A basic salary depends on the
employee’s designation and also the industry in which the employee
works.

Gross salary

Gross salary is the amount calculated by adding up one's basic salary

and allowances, before deduction of taxes and other deductions. It
includes bonuses, over-time pay, holiday pay, and other differentials.

Gross Salary = Basic Salary + HRA + Other Allowances

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Net salary or take-home salary
Net salary or take-home salary is obtained after deducting income tax
at source (TDS) and other deductions as per the relevant company
policy.

Net Salary = Basic Salary + HRA + Allowances - Income Tax - Employer's

Provident Fund - Professional Tax

Allowances
An allowance is an amount received by the employee for meeting
service requirements. Allowances are provided in addition to the basic
salary and vary from company to company. Some common types of
allowances are discussed below:

HRA or House Rent Allowance: It is an amount paid out to

employees by companies for expenses related to rented
accommodation.
Leave Travel Allowance (LTA): LTA is the amount provided by the
company to cover domestic travel expenses of an employee. It
does not include the expenses for food, accommodation, etc.
during the travel.
Conveyance Allowance: This allowance is provided to employees
to meet travel expenses from residence to work.
Dearness Allowance: DA is a living allowance paid to employees
to tackle the effects of inflation. It is applicable to government
employees, public sector employees, and pensioners only.
Other such allowances are the special allowance, medical
allowance, incentives, etc.

Reimbursements
Occasionally, employees are entitled to several reimbursements like
medical treatments, phone bills, newspaper bills, etc. The amount is
not received in the salary, but on submission of the bills,

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reimbursement is given. Generally, there is an upper limit for every
category of reimbursement.

Employer Provident fund/EPF or Provident Fund

Provident fund is an investment both by the employer and the
employee each month, the lump sum amount of which acts as an
employee's retirement benefits scheme.

Provident fund contribution is mandatorily either of the following:

Case 1: Basic salary < 15000 (per month)
12% of the basic salary

Case2: Basic salary > 15000 (per month)

In this case the company has an option to either contribute 12% of
15,000 (i.e. 1800) or 12% of Basic salary.

It is directly deposited in the employee’s PF account.

Hence, 12% of the basic salary gets contributed by the employee and
another 12% by the employer. Usually, the contribution from the
employer can only be seen in your offer letter and not in the payslip.
Contribution from your salary is called EPF and it can be seen in the
payslip. Contribution to the provident fund is mandatory for Indian
companies.

Public provident fund or PPF

PPF is a voluntary contribution by the employee and is completely
controlled by him/her. The employer has nothing to do with a PPF
account. This amount is not mentioned in CTC or pay slips, however,
if an employee presents it as an investment for tax saving purpose, it
will be shown on Form 16.

People open PPF account for two main reasons - one is for tax saving
purpose and second for long-term investment. PPF provides 7.6% per
annum (compounded annually) and more importantly, both the
contribution and maturity amount is tax-free. Do not confuse this with
Employer's PF contribution.

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Form 16
The company issues a Form 16 which contains the details about the
salary earned by the employee and the amount of tax deducted.
The taxpayer is required to submit Form 16 to file the Income Tax
returns every financial year. It acts as the proof of his/her income and
tax paid to the government.

Gratuity
Gratuity is the part of the salary that is received by an employee from
the employer for the services offered by the employee upon him or
her leaving the job. Though an employee can receive the gratuity
amount only after 5 years, it will be deducted by the employer every
year and hence it will get deducted from your CTC.

Life insurance and Health Insurance

Many companies provide health insurance and life insurance to their
employees, the premium for which is borne by the employer and is
included in the CTC. Hence it has to be deducted while calculating your
take home salary.

Let us understand income tax and how it is related to salary

income and salary components.

Income tax
The tax levied on one’s personal income is called income tax. Usually,
an employee gets his or her salary after the tax deduction by the
employer. This process is called as Tax Deduction at Source (TDS). The
deducted tax amount is paid to the government by the company.

Professional tax
Professional tax is the tax charged by the state government in order
to let an individual practice a certain profession. The maximum
amount payable per year is INR 2,500. It depends on one’s monthly
salary and also on the state in which one works. The professional tax
levied varies from state to state in India.

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How to calculate your take-home salary?
We have provided some easy steps to help you calculate your take-
home salary, also known as in-hand salary and net salary.

In order to calculate take-home salary, subtract the Income Tax, Provident

Fund (PF) and Professional Tax from the Gross Salary.
Step 1: Calculate gross salary
Gross Salary = CTC – (EPF + Gratuity)

Step 2: Calculate taxable income

Taxable Income = Income (Gross Salary + other income) – Deductions

In order to determine the part of your income that is taxable, subtract

allowances (LTA, Conveyance Allowance, HRA), professional tax,
medical bills, medical insurance, tax saving investments, if any and
other deductions from your gross salary.

Calculating income:
To calculate income-tax, include income from all sources such as:

Salary (salary paid by your employer)

House property (rental income, or interest paid on home loan)
Capital gains (income from sale purchase of shares or house)
Income from any business/profession
Other sources (saving account interest income, fixed deposit
interest income, interest income from bonds)

Deductions:
1. HRA:
HRA received is not fully exempt from tax. HRA that you can
claim is the lowest of the following:
 The total amount received as the HRA from the employer in the
financial year.

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  Actual rent paid in the year – 10% of the basic salary in the year.
 50% of the annual basic salary if staying in a metro city or 40%
of the annual basic salary if staying in a non-metro city.

1. Standard deduction:
In Budget 2019, a standard deduction of Rs 50,000 (annually)
has been introduced. Before this, there was a transport
allowance of maximum INR 19,200 (annual) and Medical
allowance of maximum INR 15,000 (annual), which are no
longer applicable.

2. LTA
Travel cost can be claimed for tax exemption under Section
10(5), twice in a block of four years. LTA covers only domestic
travel, and the amount is provided on submission of actual bills.

Please note that some components of the salary such as medical

reimbursements, telephone bills reimbursement, etc. are exempt
from the tax deduction.

Step 3: Calculate income tax**

Once you have taxable income, you can easily calculate income-tax by
referring to the income-tax slab and rates provided below:

Tax slab
The income tax rate is levied based on a slab system under which
individuals pay taxes at different rates basis their income slab.

Income tax slabs are revised every year during the budget keeping in
mind the individual taxpayers.

According to the budget announcement for the FY 2019-20, tax slab

for male and female Indian resident individuals below 60 years of age
is as follows:

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Deductions are generally divided into the following sections:

SECTION NATURE LIMIT

80C Basic 1,50,000
deductions
from total
income
80 TTA Interest from Rs. 10,000 on interest, available to an
deposits individual and HUF, deduction allowed
on interest earned from a savings
account with a bank
80 G Donations to 50% of the donation made is allowed to
charity be deducted from the taxable income.
However, if the amount is more than
10% of the gross total income, the
excess will be ignored.
80 E Educational deduction allowed on total EMI part, no
loan limit
80 EE Home loan Allowed on interest paid on home loan
interest up to maximum Rs 50,000 per financial
year.
80 D Medical For self and family- Rs 25,000, For self
insurance and family and parents- Rs. 55,000, For
premium self and family and senior citizen
parents- Rs. 80000

Net Income Income Tax Health and

Education Cess
Up to Rs. 5 Lac Nil Nil
Rs. 5,00,000 - Rs. Rs. 12,500 + 20% on 4% of income tax
10,00,000 income above 5 lac
Above Rs. Rs. 1,12,500 + 30% on 4% of income tax
10,00,000 income above 10 lac

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 *Surcharge @10% will be applied for taxable income between Rs. 50
lac to Rs. 1 crore and @15% for taxable income above Rs. 1 crore.

But with the new budget announced on February 2, 2020, taxpayers

can now choose between the current and new tax regime.

Individual taxpayers have a choice between

 The current tax regime with existing income tax deductions and
exemptions.
 The new income tax regime with lower tax rates and fewer
exemptions.
As proposed in the Budget 2020-21, the new tax regime offers slashed
income tax rates to lower the amount of tax paid, simultaneously
eliminating certain deductions and exemptions.

As per the revised tax regime, tax slab for individuals below 60 years
of age is as follows

INCOME TAX SLAB TAX RATE

Upto Rs 2.5 lac Nil
Rs 2.5 lac to Rs 5 lac 5% (Rs 12,500 tax rebate per section 87A)
Rs 5 lac to Rs 7.5 lac 10 %
Rs 7.5 lac to Rs. 10 lac 15 %
Rs 10 lac to Rs 12.5 lac 20%
Rs 12.5 la to Rs 15 lac 25%
Rs 15 lac and above 30%

The amount of tax will be subject to 4% education and health cess

A taxpayer choosing the new tax regime will have to give up the
following deductions and exemptions:

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 HRA (House Rent Allowance)
LTA (Leave Travel Allowance)
Relocation allowance
Professional Tax
Housing loan interest (Section 24)
Education allowance
Helper allowance
Special allowances [Section 10 (14)]
Standard deductions
Chapter VI-A deduction (Except section 80CCD(2) and 80JJA)
Conveyance
Daily expenses during the employment term

Step 4: Calculating in-hand/take home salary

Take Home Salary = Basic Salary + Actual HRA + Special Allowance -
Income Tax - Employer’s PF Contribution (EPF)

Example:
Let's take an example to understand how to calculate take-home
salary:
Meera's CTC is Rs. 16,00,000. Other salary components of her salary
structure are mentioned below:

SALARY AMOUNT AMOUNT

COMPONENTS (ANNUAL) (MONTHLY)

CTC 16,00,000 -

Basic 6,40,000 53,332

HRA 3,20,000 26,666

EPF 21,600 1,800

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 SALARY AMOUNT AMOUNT
COMPONENTS (ANNUAL) (MONTHLY)

Sec 80C Investment 1,00,000 8,333

Leave Travel
Allowance 20,000 1,666

Special Allowance 5,75,324 47,943

Gratuity 23,076 1,923

Professional Tax 2400 200

Note:
*This is up to Meera to decide how much she wants to invest and claim
under section 80C. The maximum deduction possible is 1,50,000. EPF
amount also comes under section 80C.
We have assumed that Meera pays INR 30,000 per month as her rent.

DA is assumed to be zero because Meera is a private sector employee.

Step 1: Calculating gross salary

Gross Salary = CTC – (EPF + Gratuity)
Gross salary= 16,00,000 – (21,600 + 23,076)

Gross Salary = INR 15,55,324

Step 2: Calculating taxable income
First, calculate the HRA deduction that you can claim:

HRA that you can claim = Minimum of (Actual HRA, Rent paid - 10% of
basic, 50% of Basic for metro city)
= Minimum (3,20,000 , 3,60,000 - 10% of 6,40,000, 50% of 6,40,000)

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= Minimum (3,20,000, 2,96,000, 3,20,000)
= 2,96,000

Taxable Income = Gross Salary – Section 80C deduction – Standard

Deduction – HRA – Professional Tax

Taxable Income = 15,55,324 – 1,000,00 – 50,000 – 2,96,000 – 2,400

Taxable Income = 11,06,924

Step 3: Calculate income tax
Based on the slab rates announced in the FY 2019-20:

Income Tax = 112500 + 30% of (Taxable Income - 100000)

Income Tax = 112500 + 30% of 1,06,924
Income Tax = 1,87,347
Cess = 4% of Income Tax

Net Tax = 1,87,347 + 7494= 1,94,841

Step 4: Calculating in-hand/take home salary
Take Home Salary = Gross Salary – (Income Tax + Professional Tax)
Take Home Salary = 15,55,324 - (1,94,841 + 2,400)

Take Home Salary (Annual) = INR 13,58,540

Take Home Salary (Monthly) = INR 1,13,212

Source: [Link]

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 2. Taxes in India
Taxes are an essential part of any nation to promote its economic
growth. The taxes that we pay fill the coffers of the government, which
are then utilized by it to deliver various services to the country’s
population. The government has been given the authority to collect
taxes by the Indian Constitution. All the taxes that we pay are backed
by laws passed by either the Parliament or the State Legislature. Now
that we know what taxes are, let’s look at the type of taxes in India.

Different types of taxes

India has two types of taxes, namely Direct Tax and Indirect Tax. The
core difference between both the taxes lies in their implementation.
Apart from these types of taxation, there are other taxes or cess levied
by the government for specific purposes, which are – Krishi Kalyan
Cess, Swachh Bharat Cess and Infrastructure Cess Tax.
Direct Tax
Direct Taxes comprise taxes that you pay directly to the government.
These taxes are levied directly on an individual and therefore can’t be
transferred to another entity or person. The Central Board of Direct
Taxes (CBDT) under the Department of Revenue is responsible for the
governance of this tax.
There are various types of Direct Taxes, which include:

Income Tax
Income Tax came into force with the Income Tax Act of 1961. All the
rules of income tax are set by this act. This tax will apply to any income
you generate for profits, owning a property, salary, investments or
business.
Besides stipulating from where income tax is to be collected, this act
has provisions that allow tax benefits for taxpayers through fixed
deposits and life insurance premiums. This act also determines your
position on the income tax slab.

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Gift Tax

In 1958, the Gift Tax Act was originally introduced. According to the
act, if you receive presents of any kind, then you will have to pay a tax
of 30%. This was later tweaked to exclude gifts from family such as
spouse, parents and blood relatives. If anyone else gives a gift whose
value exceeds Rs. 50000, then you will have to pay tax.

Wealth Tax

Amongst the various types of taxes, Wealth Tax is applicable not only
on an individual but also on a Hindu Unified Family (HUF) and
businesses.

For example: If your net wealth is more than Rs. 1 crore, then you have
a surcharge of 12%. Companies whose turnover exceeds 10 crores will
also have to pay wealth tax.
Capital Gains Tax

This is a type of Income Tax levied on the gains you make after the
sale of an investment or property. There are two types of Gains Tax –
Long Term Capital Gains Tax and Short Term Capital Gains Tax. The
former is applied when the holding period of the investment exceeds
36 months. The latter is applicable if the duration of the investment is
less than 36 months.

Securities Transaction Tax

Share trading on the stock market is subject to this tax. For every share
purchase or sale, you pay the Securities Transaction Tax.
Corporate Tax

Another type of Income Tax, the Corporate Tax is levied on the earning
of businesses. An Indian firm whose turnover is less than Rs. 1 crore
is not subject to this tax. There is a corporate tax slab according to
which companies pay tax. Moreover, the tax structure for
international firms is different from domestic firms.
Indirect Taxes Unlike Direct Taxes, these taxes are not levied on
individuals but on goods and services. This tax is not levied on profit,

15
income or the revenue of an individual or an entity. Also, this tax can
be transferred from one person to another.
Here’s a list of various types of Indirect Taxes:

Sales Tax
Any product being sold is subject to Sales Tax. The product can be
either produced domestically or be imported. The government
subjects the seller of the product to the sales tax, who can then pass
it on the buyer. Sales Tax is different for different states. Also, the
central government levies the sales tax. For some states, sales tax is
one of their largest revenue sources.

Service Tax

Service Tax is applicable on services provided by companies. Unlike

Sales Tax, it is not charged on every sale. This tax is charged with on a
monthly or quarterly basis. Service providers pay this tax once their
customers clear their bills.
Goods and Service Tax
The Goods and Services Tax was introduced in 2017. This tax is applied
at the consumption stage. GST is applied at every stage of the supply
chain wherever consumption takes place.
Value Added Tax (VAT)
VAT is levied on products other than commodities such as food and
essential drugs. This tax is placed at stages in the supply chain where
value is added. This tax comes under the purview of the state
government.

Customs Duty If you buy a product from a different country and

import it to India, then you have pay tax on it. This tax is called
Customs Duty.

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Toll Tax

Toll Tax is levied either by the state or central governments on roads

and bridges. The purpose of the tax is to fund road construction and
maintenance activities

Conclusion: so whatever economic activity is done in India ..It is

taxable.

For detailed undertanding of taxation and its persentagaes we

have to visit Central and state revenue department websites.
[Link]

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 3. Banks in India
The banking industry handles finances in a country including cash and
credit. Banks are the institutional bodies that accept deposits and
grant credit to the entities and play a major role in maintaining the
economic stature of a country. Given their importance in the
economy, banks are kept under strict regulation in most of the
countries. In India, the Reserve Bank of India (RBI) is the apex banking
institution that regulates the monetary policy in the country.

Banking services include

Savings/current account
Credit/Debit cards
Loans
Trending account
Fixed deposit / Recurring deposit
Other financial aids

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Banks are classified into classified into four categories –

Commercial Banks
Small Finance Banks
Payments Banks
Co-operative Banks

Commercial Banks can be further classified into public sector banks,

private sector banks, foreign banks and Regional Rural Banks (RRB).
On the other hand, cooperative banks are classified into urban and
rural. Apart from these, a fairly new addition to the structure is
payments bank.

Commercial Banks
Commercial Banks are regulated under the Banking Regulation Act,
1949 and their business model is designed to make profit. Their
primary function is to accept deposits and grant loans to the general
public, corporate and government. Commercial banks can be divided
into-

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 Public Sector Banks Private Sector Banks

Foreign Banks Regional Rural Banks

Public Sector Banks

These are the nationalised banks and account for more than 75 per
cent of the total banking business in the country. Majority of stakes in
these banks are held by the government. In terms of volume, SBI is
the largest public sector bank in India and after its merger with its 5
associate banks (as on 1st April 2017) it has got a position among the
top 50 banks of the world.

There are a total of 20 nationalised banks in the country namely

below:

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Private Sector Banks
These include banks in which major stake or equity is held by private
shareholders. All the banking rules and regulations laid down by the
RBI will be applicable on private sector banks as well. Given below is
the list of private-sector banks in India-

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Foreign Banks
A foreign bank is one that has its headquarters in a foreign country
but operates in India as a private entity. These banks are under the
obligation to follow the regulations of its home country as well as the
country in which they are operating. Given below is the list of foreign
banks operating in India –

List of Foreign Banks in India

Australia and New

National Australia Westpac Banking
Zealand Banking
Bank Corporation
Group Ltd.

Bank of Bahrain &

AB Bank Ltd. Sonali Bank Ltd.
Kuwait BSC

Industrial &
Bank of Nova Scotia Commercial Bank of BNP Paribas
China Ltd.

Credit Agricole
Corporate & Societe Generale Deutsche Bank
Investment Bank

PT Bank Maybank
HSBC Bank Mizuho Bank Ltd.
Indonesia TBK

Sumitomo Mitsui Cooperatieve

MUFG Bank, Ltd.
Banking Corporation Rabobank U.A.

Qatar National Bank

Doha Bank Q.P.S.C JSC VTB Bank
(Q.P.S.C.)

United Overseas
Sberbank FirstRand Bank Ltd
Bank Ltd

22
 Shinhan Bank Woori Bank KEB Hana Bank

Industrial Bank of
Bank of Ceylon Credit Suisse A.G
Korea

Abu Dhabi
Krung Thai Bank
CTBC Bank Co., Ltd. Commercial Bank
Public Co. Ltd.
Ltd.

First Abu Dhabi Bank

Mashreq Bank PSC Emirates Bank NBD
PJSC

Standard Chartered The Royal Bank of

Barclays Bank Plc.
Bank Scotland plc

American Express
Bank of America Citibank
Banking Corporation

J.P. Morgan Chase SBM Bank (India)

Kookmin Bank
Bank N.A Limited

DBS Bank India Limited

Regional Rural Banks

These are also scheduled commercial banks but they are established
with the main objective of providing credit to weaker sections of the
society like agricultural labourers, marginal farmers and small
enterprises. They usually operate at regional levels in different states
of India and may have branches in selected urban areas as well. Other
important functions carried out by RRBs include-

 Providing banking and financial services to rural and semi-urban

areas
 Government operations like disbursement of wages of
MGNREGA workers, distribution of pensions, etc.

23
  Para-Banking facilities like debit cards, credit cards and locker
facilities

Small Finance Banks

This is a niche banking segment in the country and is aimed to provide

financial inclusion to sections of the society that are not served by
other banks. The main customers of small finance banks include micro
industries, small and marginal farmers, unorganized sector entities
and small business units. These are licensed under Section 22 of the
Banking Regulation Act, 1949 and are governed by the provisions of
RBI Act, 1934 and FEMA.

Payments Bank

This is a relatively new model of bank in the Indian Banking industry.

It was conceptualised by the RBI and is allowed to accept a restricted
deposit. The amount is currently limited to Rs. 1 Lakh per
customer. They also offer services like ATM cards, debit cards, net-
banking and mobile-banking.

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 Airtel Payments Bank
India Post Payments Bank
Fino Payments Bank
Jio Payments Bank
Paytm Payments Bank
NSDL Payments Bank
Co-operative Banks

Co-operative banks are registered under the Cooperative Societies

Act, 1912 and they are run by an elected managing committee. These
work on no-profit no-loss basis and mainly serve entrepreneurs, small
businesses, industries and self-employment in urban areas. In rural
areas, they mainly finance agriculture-based activities like farming,
livestock and hatcheries.

Urban Co-operative Banks State Co-operative Banks

Urban Co-operative Banks

Urban Co-operative Banks refer to the primary cooperative banks
located in urban and semi-urban areas. These banks essentially lent
to small borrowers and businesses centred around communities,
localities work place groups.

According to the RBI, on 31st March, 2003 there were 2,104 Urban Co-
operative Banks of which 56 were scheduled banks. About 79% of
these are located in five states, – Andhra Pradesh, Gujarat, Karnataka,
Maharashtra and Tamil Nadu.

State Co-operative Banks

A State Cooperative Bank is a federation of the central cooperative
bank which acts as custodian of the cooperative banking structure in
the State.

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Banks can also be classified on the basis of Scheduled and Non-
Scheduled Banks. It is essential for every individual to check if they are
holding their savings or deposit account with a Scheduled Bank or
Non-Scheduled Bank. Scheduled Banks are also covered under the
depositor insurance program of Deposit Insurance and Credit
Guarantee Corporation (DICGC), which is beneficial for all the account
holders holding a savings and fixed / recurring deposit account. Under
DICGC, bank deposits of up to Rs 1 lakh, including the fixed, savings,
current and recurring deposits, per depositor per bank in the event
of bank failure are insured.

Scheduled Banks

Scheduled banks are covered under the 2nd Schedule of the Reserve
Bank of India Act, 1934. To qualify as a scheduled bank, the bank
should conform to the following conditions:

 A bank that has a paid-up capital of Rs. 5 Lakh and above

qualifies for the schedule bank category
 A bank requires to satisfy the central bank that its affairs are not
carried out in a way that causes harm to the interest of the
depositors
 A bank should be a corporation rather than a sole-
proprietorship or partnership firm

Non-scheduled Banks

Non-scheduled banks refer to the local area banks which are not listed
in the Second Schedule of Reserve Bank of India. Non-Scheduled
Banks are also required to maintain the cash reserve requirement, not
with the RBI, but with them.

Banks are the primary financial instrument we must possess, apart

from its major functions …we can invest in some bank scheme’s and
get reasonable returns with ur capital secured.

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 1. Savings A/c
2. Fixed Deposit
3. Recurring Deposit
1. Savings A/c
By maintaining a considerable amount in our saving account, we will
get interest of 3-6 % annually.

2. Fixed deposit

Bank FDs are considered as one of the safest investment options in

India as there are hardly any instances of a bank defaulting on FD.
Bank FDs offer a much higher rate of interest than a regular savings
bank account. Investments in 5-year tax-saving FDs are covered under
Section 80C of the Income Tax Act, 1961, and investors can deduct up
to Rs 1,50,000 a year by investing in this.
FDs offer a slightly higher rate of interest for senior citizens. The rate
of interest varies across the investment tenure, amount, residential
status (NRI or not), and bank. FDs come with a lock-in period. If you
wish to withdraw within the lock-in period, then the bank would levy
penalties in the form of deducting interest accrued on the investment.
Apart from banks, other financial institutes also offer FDs.
3. Recurring deposit:
Recurring deposit is an alternative to FDs. Under RDs, individuals
invest a fixed sum regularly. Like FDs, RDs too offer a much higher rate
of interest than a regular savings bank account. You can furnish your
RD investment as a collateral to avail secured loans.

Source: [Link]

27
 Loans
A loan is essentially money borrowed with a promise of return within
a specific time period/tenor. The lender decides a fixed rate of interest
that you must pay on the money you borrow, along with the principal
amount borrowed. Let us take a look at the different types of loans
that are available in India.

Types of loans
There are various types of loans available in India, and they are
classified based on two factors:

- Whether they require collateral

- The purpose they are used for

Based on whether they require collateral, loans are classified into

secured loans and unsecured loans. Let’s take a look at each type.

I. Secured loans: These are loans that do require collateral, i.e., you
have to provide an asset to the lender as security for the money you

28
are borrowing. That way, if you are unable to repay the loan, the
lender still has some means to get back their money. The rate of
interest of secured loans tends to be lower as compared to those for
loans without collateral.
Types of secured loans
1. Home loan

Home loans are a secured mode of finance that give you the funds to
buy or build the home of your choice. The following are the type of
home loans available in India:

Land purchase loan: Purchase land for your new home

Home construction loan: Build a new home

Home loan balance transfer: Transfer the balance of your existing

home loan at a lower interest rate
Top up loan: Can be used to renovate an existing home or have the
latest interiors for your new home
Note that while buying a new property/home, the lender requires you
make a down payment of at least 10-20% of the property’s value. The
rest is financed. The loan amount disbursed depends on your income,
its stability and current liabilities among others.
For detailed info: [Link]
[Link]
2. Loan against property (LAP)
Loan against property is one of the most common forms of a secured
loan where you can pledge any residential, commercial or industrial
property for availing the funds required. The loan amount disbursed
is equivalent to a certain percentage of the property’s value and varies
across lenders.

While some lenders may offer an amount equivalent to 50-60% of the

property’s value, others may offer an amount close to 80%. A loan
against property helps you unlock the dormant value of your asset

29
and can be used to satiate personal life goals such as higher education
of children or marriage. Businesses use a loan against property for
business expansion, R&D and product development among others.

3. Loans against insurance policies

Yes, you can also avail loans against your insurance policy. However,
note that all insurance policies don’t qualify for this. Only policies, such
as endowment and money-back policies, which have a maturity value
can be used to avail loans.
Thus, you can’t avail a loan against a term insurance plan as it doesn’t
have any maturity benefits. Also, loans can’t be availed against unit-
linked plans as the returns aren’t fixed and depends on the
performance of the market. It’s essential to note that you can opt for
a loan against endowment and money back policies only after they’ve
acquired a surrender value. These policies acquire a surrender value
only after paying regular premiums continuously for 3 years.
4. Gold loans
For the longest time, gold has been one of the most favoured asset
classes. The organized Indian gold loan industry is expected to touch
Rs.3,101 billion by 2019-20, according to a KPMG report, thanks to
flexible interest rates offered by financial institutions.

A gold loan requires you to pledge gold jewellery or coins as collateral.

The loan amount sanctioned is a certain percentage of the gold’s value
pledged. Gold loans are generally used for short-term needs and have
a short repayment tenor compared to home loans and loan against
property.
5. Loans against mutual funds and shares

An ideal vehicle for long-term wealth creation, mutual funds can also
be pledged as collateral for a loan. You can pledge equity or hybrid
funds to the financial institution for availing a loan. For doing so, you
need to write to your financier and execute a loan agreement.

Your financier then will write to the mutual fund registrar and a lien

30
on the certain number of units to be pledged is marked. Typically, you
can get 60-70% of the value of units pledged as a loan.

Similarly, with shares, financial institutions create a lien against shares

against which the loan is taken and the loan value is equivalent to a
percentage of the value of the shares.

6. Loans against fixed deposits

The humble fixed deposit not only offers assured returns but can also
come handy when you need a loan. The amount of loan can vary
between 70-90% of the FD’s value and varies across lenders. However,
it’s essential to note that the loan tenor can’t be more than the FD’s
tenor.

II. Unsecured loans

These are loans that do not require collateral. The lender lends you
the money based on past associations, and your credit score and
history. Thus, you have to have a good credit history to avail these
loans. Unsecured loans usually come at a higher rate of interest due
to the lack of collateral.

Types of unsecured loan

1. Personal loan
Offering an instant flush of liquidity, a personal loan is one of the most
popular types of unsecured loans. However, since a personal loan is
an unsecured mode of finance, the interest rates are higher compared
to secured loans. A good credit score along with high and stable
income ensures you can avail this loan at a competitive rate of
interest. Personal loans can be used for the following purposes-
- Manage all expenses of a family wedding

- Pay for a vacation or an international trip

- Finance your home renovation project

- Fund the cost of your child’s higher education
- Consolidate all your debts into a single loan

31
- Meet unexpected/ unplanned/ urgent expenses

For detailed interest rates: [Link]

[Link]

2. Short-term business loans

Another type of unsecured loans, a short-term business loan can be
used to meet their expansion and daily expenses by various entities
and organizations.
- Working capital loans
- Machinery loans and equipment finance
- Small business loans for MSMEs
- Loans for women entrepreneurs
- Loans for traders
- Loans for manufacturers
- Loans for service enterprises

Flexi Loans
A facility whereby you can avail funds from your approved limit and as
when required and pay interest only on the amount used. You can
withdraw on your loan limit, any number of times and prepay when
you have extra cash, at no extra cost. Such a unique facility gives you
the freedom to be in full control of your finances unlike rigid term
loans and offers you savings on your EMIs by up to 45%. Here, you
also have the option to pay only interest as EMIs, with the principal
payable at the end of the tenor.
Based on what they are used for, loans are classified mainly into:

1. Education loans

Aspiration for higher education from reputed institutions have

bolstered the demand for education loans in the country. This loan
covers the basic fees of the course along with allied expenses such as
the accommodation, exam fee, etc. In this loan, the student is the main
borrower while parents, siblings and spouse are co-applicants.

An education loan can be taken for a full-time, part-time or vocational

32
course along with graduation and post-graduation course in the fields
of management, engineering and medicine, among others. The loan
must repaid by the student once the course is complete.

A unique feature of an education loan is the moratorium period,

wherein the student has the option of not paying the EMIs until after
12 months of completing the course or 6 months after he/she starts
working, whichever is earlier.
2. Vehicle loans

A vehicle loan is extended in the form of a two or four-wheeler loan

which helps you to buy your dream vehicle. Vehicle loans are offered
either on purchase of a new vehicle or a used one. Your credit score,
ratio of debt to income, loan tenor, etc., play a crucial role in
determining the loan amount.

3. Agricultural Loan:
There are multiple loan schemes by banks to assist farmers and their
needs. Such loans have very low interest rates and help farmers to buy
seeds, equipment for farming, tractors, insecticides etc. to generate a
better yield. The repayment of the loan can be made after the yielding
and selling of crops.
4. Consumer Durable Loan:
Consumer durable loans are loans that are availed to finance the
purchase of consumer durables such as a electronic gadgets and
household appliances. Depending on the lender, they can be used to
buy anything from mobile phones to television sets. Loan amounts
range from Rs.5,000 to Rs.5 lakh. There is no security deposit required
usually. Some lenders offer 0% interest on consumer durable loans
with instant approvals and minimal documentation required as well.

Detailed info on loans: [Link]

loan/[Link]
Take loans only when it is essential.

33
 4. Insurance
1. What is Insurance?
Insurance is a legal agreement between two parties i.e. the insurance
company (insurer) and the individual (insured). In this, the insurance
company promises to make good the losses of the insured on
happening of the insured contingency.
The contingency is the event which causes a loss. It can be the death
of the policyholder or damage/destruction of the property. It’s called
a contingency because there’s an uncertainty regarding happening of
the event. The insured pays a premium in return for the promise made
by the insurer.

2. How does insurance work?

The insurer and the insured get a legal contract for the insurance,
which is called the insurance policy. The insurance policy has details
about the conditions and circumstances under which the insurance
company will pay out the insurance amount to either the insured
person or the nominees.
Insurance is a way of protecting yourself and your family from a
financial loss. Generally, the premium for a big insurance cover is
much lesser in terms of money paid. The insurance company takes
this risk of providing a high cover for a small premium because very
few insured people actually end up claiming the insurance. This is why
you get insurance for a big amount at a low price.
Any individual or company can seek insurance from an insurance
company, but the decision to provide insurance is at the discretion of
the insurance company. The insurance company will evaluate the
claim application to make a decision. Generally, insurance companies
refuse to provide insurance to high-risk applicants.

3. What are the types of insurance available in India?

Insurance in India can be broadly divided into three categories:

34
Life insurance
As the name suggests, life insurance is insurance on your life. You buy
life insurance to make sure your dependents are financially secured
in the event of your untimely demise. Life insurance is particularly
important if you are the sole breadwinner for your family or if your
family is heavily reliant on your income. Under life insurance, the
policyholder’s family is financially compensated in case the
policyholder expires during the term of the policy.

Health insurance
Health insurance is bought to cover medical costs for expensive
treatments. Different types of health insurance policies cover an array
of diseases and ailments. You can buy a generic health insurance
policy as well as policies for specific diseases. The premium paid
towards a health insurance policy usually covers treatment,
hospitalization and medication costs.

Vehicle insurance
In today’s world, a car insurance is an important policy for every car
owner. This insurance protects you against any untoward incident like
accidents. Some policies also compensate for damages to your car
during natural calamities like floods or earthquakes. It also covers
third-party liability where you have to pay damages to other vehicle
owners.

Education Insurance
The child education insurance is akin to a life insurance policy which
has been specially designed as a saving tool. An education insurance
can be a great way to provide a lump sum amount of money when
your child reaches the age for higher education and gains entry into
college (18 years and above). This fund can then be used to pay for
your child’s higher education expenses. Under this insurance, the child
is the life assured or the recipient of the funds, while the parent/legal
guardian is the owner of the policy.

35
You can estimate the amount of money that will go into funding your
children’s higher education using Education Planning Calculator.

Home insurance

We all dreaming of owning our own homes. Home insurance can

help with covering loss or damage caused to your home due to
accidents like fire and other natural calamities or perils. Home
insurance covers other instances like lightning, earthquakes etc.

4. What are the tax benefits on insurance?

Apart from the safety and security benefits of buying insurance, there
are also the income tax benefits that you can avail.

 Life insurance premium of up to ₹1.5 lakh can be claimed as a

tax-saving deduction under Section 80C
 Medical insurance premium of up to ₹25,000 for yourself and
your family and ₹25,000 for your parents can be claimed as a
tax-saving deduction under Section 80D

These claims have to be made at the time of e-filing income tax

returns.

Types of insurance policies

36
37
[Link]
insurance/

Conclusion
Be it life insurance, health insurance or general insurance, you can buy
an insurance policy offline as well as online. Just like there are
insurance agents who will help you buy a policy, there are websites as
well that you can buy a policy from. Ensure that you have done your
research before choosing and investing in an insurance policy.
One must have a good term insurance and medical insurance with
maximum financial coverage in our absence to our families.

38
5. Tax Saving Instruments

39
PPF-Public provident fund
The PPF was launched in 1968 and is backed by the Government of
India. The PPF is a long term savings cum investment product. To start
saving in PPF, you need to open a PPF account at the post office or
designated branches of public and private sector banks. The PPF is
structured in a way that the contributions to the account earn a
guaranteed rate of interest, and these deposits can be claimed as
deductions under Section 80C up to Rs 1.5 lakh in a financial year.

NPS-National pension scheme

The NPS is a voluntary retirement scheme through which you can
create a retirement corpus or your old-age pension. It’s regulated by
PFRDA (Pension Fund Regulatory and Development Authority) and
available to all Indian citizens (resident or non-resident) between 18
and 65 years old. There are two different accounts to consider under
the NPS – Tier I and Tier II. You can exit the Tier I account only after
you reach the age of 60.
Read: NPS- Everything you need to know

ELSS: Equity linked Saving Scheme

The ELSS (Equity Linked Savings Scheme) is an equity mutual fund in
which investments qualify for tax deductions under Section 80C of the
income tax up to the Rs 1.5 lakh limit in a financial year. Investments
in ELSS have a minimum equity exposure of 80% to qualify as an
equity fund, which technically can go up as high as 100%. ELSS returns
are market-linked and, in the long run, have proven to fare better than
PPF returns.
Read: ELSS-The Best Tax Saver

ULIPs-Unit linked Insurance Policies

ULIPs (Unit Linked Insurance Policies) are insurance policies that offer
you an investment option while providing the security of a life
insurance cover. In ULIPs, a part of your premium is dedicated to your
life insurance, and the rest is invested into funds of varying asset

40
allocation to suit the policyholder. The returns on the investments
depend upon the performance of the fund one opts for.

What to consider when choosing between PPF, NPS, ELSS, and

ULIPs?
All four products offer tax savings under Section 80C of the Income
Tax and come with different features. Here are aspects that are worth
looking into before making the right selection (See: Features of PPF,
NPS, ELSS, and Ulips).

Lock-in: How long your money has to compulsorily stay in a product is

an important feature to consider. On this factor, the ELSS scores over
the rest with its short three-year lock-in. If you are investing through
SIP (systematic investment plan) in ELSS, you should know that each
SIP installment will need to complete the three-year lock-in before you
can redeem the investment. Effectively, each SIP installment will have
a different maturity date.

Choice: You can open a PPF account at the bank or post office, and
that is all the choice you have. Structurally there is no differentiation
among PPF accounts. There are 38 ELSS schemes to choose from.
There are 24 life insurers, with each of them offering multiple of ULIPs
and funds to choose from. There are seven fund managers of the NPS,
each offering a choice of 4 funds to select from, though the asset
allocation for each fund is predefined by the NPS Trust.

Returns: It is well documented that equity as an asset class over the

long term not only beats inflation; it also tends to build wealth. If one
analyses ELSS funds with an over 10-year history, the average returns
for the category are in the 10-12% CAGR range. This period includes
market downs and ups. But, such returns alone should not be the
reason for you to invest in ELSS, NPS, or ULIPs, which are mostly
market-linked. The potential to earn more than what the PPF offers in
the long run, over 5-10 years, is a preferred time frame to stay
invested in them.

41
Risk: Investments of any kind has risk associated with it. The PPF
returns are guaranteed, the returns vary every year and sometimes
even every quarter. In the case of the NPS, ULIPs, and ELSS, as each
one of them is market-linked, returns vary. However, when investing
in market-linked instruments, one must consider the long-term
potential returns and choose accordingly.

Wealth creation: Investing works best when it is directed towards

financial goals. You could set financial goals other than tax savings
when putting monies into the PPF, ELSS, NPS, or ULIPs. From these
four, a suitable retirement plan is the NPS, given its long-term lock till
retirement. Between ELSS and ULIPs, depending on the choice on
makes there is a possibility to set future financial goals such as a child’s
education. The PPF, with its almost predictable returns, is suited for
the risk-averse.

Conclusion:

Whatever the salary package may be and tax to be paid …..one

must invest in tax saving instruments for long term with respect
to financial goal.

42
 6. Gold – A universal exchange
Like no other commodity, gold has held the fascination of human
societies since the beginning of recorded time. Empires and kingdoms
were built and destroyed over gold and mercantilism. As societies
developed, gold was universally accepted as a satisfactory form of
payment. In short, history has given gold a power surpassing that of
any other commodity on the planet, and that power has never really
disappeared.
Indian's love for gold is no secret. But do you know how much we love
it? According to some estimates, India has a stock of about 23,000-
24,000 tonnes of gold which is mostly held by households. In value
terms, based on the 2015 average price, it was worth $800 billion.

India's gold market is driven primarily by the consumption and

fabrication of the yellow metal. Both have a significant impact in terms
of economic value add, employment, contribution to foreign exchange
earnings, and the trade balance. A report commissioned by the World
Gold Council from PricewaterhouseCoopers estimated that gold made
a direct contribution of more than $30 billion to the Indian economy.

The role and the impact of gold are reflected by the gems and
jewellery industry which contributes around 7 percent of the country's
gross domestic product (GDP) and 15.71 percent to India's total
merchandise exports. The gems and jewellery sector in India is one of
the largest in the world and contributes to about 29 percent of the
global consumption. In FY 2014-15, the sector constituted 13.30
percent of the country's total merchandise exports.

Gold as a means of saving

Gold is looked upon as one of the best options when it comes to
security and savings for a good percentage of the 1.24 billion people
that reside in India. There may be various reasons as to why gold is
treated in high regard in comparison with other investment
instruments, but the fact that India is home to around 6,50,000 villages
43
and only around 36,000 of those have a bank branch tells a whole
story altogether. With a large portion of peoples’ savings going into
gold which they are likely to keel idle until they need the money, the
economy is left wanting. This gold doesn’t flow in the overall economy
and as such does not contribute toward it.
Gold jewelleries and the Indian economy
In addition, the cultural importance of gold makes it instrumental in
ceremonies such as weddings. And it’s not just the villagers who offer
gold the amount of significance they do. Even lawyers, bankers,
politicians and others purchase gold jewellery during festivals or
special occasions. They consider it a fool-proof financial strategy, and
since the real estate and capital markets are losing promise off late,
the wealthy section of Indian society is now a new class of gold
investors on its own. Though the demand for gold has always been
high, the past four years have seen the demand turn into an
investment and everyone who has the money goes in for gold, thereby
adversely affecting the Indian economy.
There are ways of owning gold - paper and physical. You can buy it
physically in the form of jewellery, coins, and gold bars and for paper
gold you can use gold exchange traded funds (ETFs) and sovereign
gold bonds (SGBs). Then there are gold mutual funds (fund of funds)
which further invest in gold ETFs. There are gold MFs (fund of funds)
which invest in the shares of international gold mining companies.

Physical GOLD Jewellery

Indians certainly cherish possessing gold. But owning it in the form of

jewellery has its own concerns about safety, high costs, and outdated
designs. Then there are the 'making charges', which could prove to be
a costly affair. The making charges on gold jewellery, which typically
ranges between 6 percent and 14 percent of the cost of gold (may go
as high as 25 percent in case of special designs) are irrecoverable.

44
Gold Coin Scheme
Gold coins can be bought from jewellers, banks, non-banking finance
companies, and now even e-commerce websites. The government has
launched ingeniously minted coins which will have the National
Emblem of Ashok Chakra engraved on one side and Mahatma Gandhi
on the other. The coins are available in denominations of 5 and 10
grams while the bars will be for 20 grams.

The Indian Gold Coin and Bar will be of 24 karat purity and 999
fineness carrying advanced anti-counterfeit features and tamper
proof packaging. All coins and bars will be hallmarked as per the BIS
standards. These coins are distributed through designated and
recognised MMTC outlets and through specified bank branches and
post offices. MMTC also offers a transparent 'buy back' option for
Indian Gold Coin through its own showrooms across India. MMTC will
repurchase the Indian Gold Coin, in intact tamper proof packaging and
with original invoice, at the prevailing gold base rate.

Gold savings schemes

Gold or jewellery savings schemes come in two forms. A typical one
allows you to deposit a fixed amount every month for the chosen
tenure. When the term ends, you can buy gold (from the same
jeweller) at a value that is equivalent to the total money deposited,
including a bonus amount. This conversion is done at the gold price
prevailing on maturity. In most cases, the jeweller adds a month's
instalment at the end of the tenure as a cash incentive or may even
offer a gift item.
PAPER GOLD-Gold exchange traded funds (ETF)
An alternate way of owning paper gold in a more cost-effective
manner is through gold exchange traded funds (Gold ETF). Such
investments (buying and selling) happens on a stock exchange (NSE or
BSE) with gold as the underlying asset. What's more, the high initial
buying and even selling charges that go into owning jewellery, bars or
coins gives an extra edge to the low-cost gold ETF. The transparency

45
in pricing is another advantage. The price at which it is bought is
probably the closest to the actual price of gold and therefore the
benchmark is the physical gold price

What you need is a trading account with a stock broker and a demat
account. One may either buy in lump sum or even at regular intervals
through systematic investment plans (SIP). You may even buy 1 gram
of gold.

Even though there are no entry or exit charges there are three costs
that come with gold ETFs. One is the expense ratio (for managing the
fund) which is generally low compared to other mutual funds and is
around 1 percent. Second, is the broker cost that needs to be
accounted for every time you buy or sell gold ETF units. Third, which
technically is not a charge but impact returns is the tracking error. It
arises because of the fund's expenses and cash holdings thus not
mirroring actual gold price.

Sovereign Gold Bonds (SGB)

Sovereign Gold Bond is another way of owning paper gold with 2.5 %
interest given annually. They are issued by the government but
availability is not 'on-tap basis'. Instead, the government will
intermittently open a window for the fresh sale of SGBs to investors.
This could typically happen every 2-3 months and the window will
remain open for about a week. For investors looking to purchase SGBs
anytime in between the only way out is to buy earlier issues (at market
value) which are listed in the secondary market.

Digital gold
You can now purchase gold coins, bars and jewellery online. 'Digital
Gold', is offered on the mobile wallet platform of Paytm and
'GoldRush' is offered by the Stock Holding Corporation of India on
their website, while Motilal Oswal has launched Me-Gold, a digital gold
online investment. All of these are offered in association with MMTC -

46
PAMP, (a joint venture between public sector MMTC and Switzerland's
PAMPSA).
The initial cost of owning physical gold in the form of bars or coins is
anywhere around 10 percent and it is even higher for jewellery. SGB
and Gold ETF, both paper-gold, are cost effective as there is no entry
cost in SGB while costing for gold ETF could be around 1 percent.

SGB should benefit those who want to invest in gold for a longer
period as its maturity is after 8 years, although the lock-in ends from
the fifth year. However, gold ETF provides much better liquidity than
SGB. Owing units is much easier than SGB as it's entirely online in case
of ETFs. The risk of owning, holding also doesn't exist in both.

The big difference is on the taxation front. Gains in SGB on redemption

are tax-exempt but gains in Gold ETFs after 3 years are subject to 20
percent tax post indexation.
The only disadvantage with gold ETFs is that its units won't be earn the
additional interest of 2.5 per cent per annum like you would get for
SGBs.

[Link]
to-buy-and-invest-in-
gold/articleshow/[Link]?utm_source=contentofinterest&utm
_medium=text&utm_campaign=cppst

Conclusion:
Get clarity as to why you need to invest in gold - is it for marriage
purpose or for pure investment. For investments, one should not
have more than 10 percent of the total portfolio in gold. Choose
between Gold ETFs or SGBs depending on how comfortable you
are managing investments online and keep the worries of purity,
security aside.

47
 7. Bonds
Bond is a debt security, in which the authorized issuer owes the
holders a debt and, depending on the terms of the bond, is obliged to
pay interest (the coupon) to use and/or to repay the principal at a later
date, termed maturity. A bond is a formal contract to repay borrowed
money with interest at fixed intervals (ex semi annual, annual,
sometimes monthly).
Bonds provide the borrower with external funds to finance long-term
investments, or, in the case of government bonds, to finance current
expenditure. Bonds and stocks are both securities, but the major
difference between the two is that (capital) stockholders have an
equity stake in the company (i.e., they are owners), whereas
bondholders have a creditor stake in the company (i.e., they are
lenders). Another difference is that bonds usually have a defined term,
or maturity, after which the bond is redeemed, whereas stocks may
be outstanding indefinitely.

Bond market in India

Investments are classified in two types to put it simply:
• Fixed return investments
• Variable return investments
Investments with a fixed return provide a guaranteed return in
exchange for the capital invested. These investments generally have a
lock in period with low liquidity. Variable return investments are
subject to market forces where the exact return on the investment is
not guaranteed till the time the investor exits from the investment.
Equities, mutual funds, gold, real estate are variable return
investments.
One of the most popular types of fixed return investments are
investment bonds.

48
What are bonds?
Bonds are instruments issued by a borrower to raise capital from
investors or the public at large. Bonds are like loans which mature on
a fixed date. In return, the borrower pays interest. Depending on the
terms and conditions of the bond, the interest can be paid either at
specified intervals or on maturity (deep discount bond)

What are the different types of bonds?

Bonds in India are generally issued by Government bodies. Having a
government backing to the bonds provides security to the investor
that these bonds will be repaid on maturity. However, other private
institutions also issue bonds depending on their need.
These are the different types of bonds available for investment in
India:
1. Central Government bonds:
These bonds are issued by the Central Government to raise funds.
These bonds are issued by the RBI on behalf of the Government.
The primary purpose of these bonds is to finance fiscal deficit and
meet the shortfall of revenue in the Government budget. These
bonds are the safest bonds to invest in, since they are backed by the
Government and will be repaid on maturity.

2. State Government bonds:

These bonds are issued by the State Government to meet their fiscal
deficits. These bonds are listed on the stock exchange. These bonds
are also backed by the Government, making them low risk
investments.

3. Municipal and Local authority bonds:

A municipal corporation or a local authority may raise finance to
meet funding for specific goals such as constructing infrastructure,
public water works etc. These bonds are also rated by credit rating
agencies and it is best to go by the rating and past records before
investing.

49
4. Corporate bonds:
These are highly risky bonds since the maturity depends on the
track record of the company. Before investing in such bonds, you
must do a complete study into the company and its performance.

5. Public Sector bonds:

These bonds are issued by highly rated public sector companies for
meeting their growth and expansion needs. These bonds are
relatively less risky since PSUs are under the Government.
Generally, these bonds are issued by companies where the Central
Government is the majority shareholder.

6. Tax free bonds:

Companies such as the National Highways Association of India
(NHAI), Indian Railways Finance Corporation, HUDCO, Rural
Electrification Corporation (REC) issue these bonds. The interest
earned on these bonds is completely tax free in the hands of the
investor.

Types of bond markets:

Primary market:
This is the market where the borrower approaches investors to raise
capital. The issue price of the bonds and the coupon rate is fixed at
the time of raising capital.
Secondary market:
Most of the bonds are traded in the stock market. They can be sold
depending on when the investor wishes to exit from the bond.
However, it is to be noted that the price for the bonds depends on how
close the bond is to interest payment. As the bond nears the interest
payment date, the price goes up. The price and coupon rate of the
bond move inversely i.e if the price goes up, the interest rate goes
down. This is because the net return to the investor stays the same as
when the bond was issued in the primary market.

50
For example, if the bond is issued at Rs. 1,000 with a coupon rate of
8%, the interest will be Rs. 80. However, if the price goes up to Rs.
1,250, the interest rate goes down to 6.4%. However, the interest
payment to the investor remains the same.

How to invest in bonds:

It is possible to invest in bonds in India using your demat account.
Since these bonds open for subscription in the primary market, it is
possible to apply for them online. If you do your trades through an
offline broker, it is possible to fill up a form and submit it offline to
your broker as well. The application will then be submitted into the
issue.
Once the allotments are made, you will come to know how many
bonds you are allotted. The process is similar to equity shares. Bonds
have a minimum issue price and you can invest in bonds in India in
multiples of the specified number. For example, a corporate bond may
have an issue price of Rs. 1,000 and can be purchased in multiples of
5. This means the minimum issue is for 5 x Rs. 1,000 or Rs. 5,000.
Further investments can be made in multiples of 5 i.e 10,20,35 etc.
Investing in the primary market is extremely simple and can also be
done wholly online through the demat account. It is also possible to
exit your bond investment online as well since these bonds are traded
in the market. Bonds in India are listed on the stock exchange. Even
though the price discovery for bonds is restricted, it offers low
liquidity, which means the investor can exit these bonds ahead of their
maturity should he wish. Generally, the price of bonds goes up as it
nears the coupon payment date. The ideal exit strategy would be to
sell bonds as it comes close to the interest payment date to get more
than the payment price.
However, in case of deep discount bonds, the funds may be locked in
till maturity depending on terms and conditions of the bond. A deep
discount bond is a bond where no interest is paid but a higher amount
is paid on maturity. For example, a deep discount bond may be issued
for Rs. 20,000 and maturity price may be Rs. 95,000 after 10 years. No

51
interest will be paid in these 10 years and the maturity amount will
directly be credited to the investor’s account on maturity. Deep
discount bonds are available for investment through the demat
account or through a broker.
Another way to invest in bonds indirectly is to purchase debt mutual
funds that primarily invest in bonds. These can be found out by
analysing the portfolio of the respective mutual funds.
The bond market in India does not have many players. It is dominated
by Government bonds and entities. This provides safety and security
of capital. The bond market however is very nascent and still growing.
With increasing investor interest, bonds in India can turn out to be a
fast growing market.

[Link]

Conclusion:

Bonds are good source of investments for long term growth with
good returns where we help various sector to grow their business
and services.

52
 8. Mutual Funds
A mutual fund collects money from investors and invests the money
on their behalf. It charges a small fee for managing the money. Mutual
funds are an ideal investment vehicle for regular investors who do not
know much about investing. Investors can choose a mutual fund
scheme based on their financial goal and start investing to achieve the
goal.

How to invest in mutual funds?

You can either invest directly with a mutual fund or hire the services
of a mutual fund advisor. If you are investing directly, you will invest
in the direct plan of a mutual fund scheme. If you are investing
through an advisor or intermediary, you will invest in the regular plan
of the scheme.
If you want to invest directly, you will have to visit the website of the
mutual fund or its authorized branches with relevant documents. The
advantage of investing in a direct plan is that you save on the
commission and the money invested would add sizeable returns over
a long period. The biggest drawback of this method is that you will
have to complete the formalities, do the research, monitor your
investment...all…by…yourself.

1. Based on Asset Class

a. Equity Funds
Equity funds primarily invest in stocks, and hence go by the name of
stock funds as well. They invest the money pooled in from various
investors from diverse backgrounds into shares/stocks of different
companies. The gains and losses associated with these funds depend
solely on how the invested shares perform (price-hikes or price-drops)
in the stock market. Also, equity funds have the potential to generate
significant returns over a period. Hence, the risk associated with these
funds also tends to be comparatively higher.
SEBI has decided total 11 categories under Equity Schemes but a
mutual fund company can only have 10 categories and it has to
53
choose between Value or Contra. Still 10 categories looks bit high but
I think its fair considering the possible variations in the strategy. To
make this easier SEBI has also defined meaning of Large Cap, Mid
Cap and Small Cap.

 Large Cap: Top 100 companies in terms of market capitalization

 Mid Cap: 101st- 250th companies in term of market
capitalization
 Small Cap: 251st company onwards in terms of market
capitalization

Multi Cap Fund – An

Minimum investment in
equity mutual fund
Multi Cap equity & equity related
1 investing across Large
Funds instruments–65% of total
Cap, Mid Cap, Small Cap
assets
stocks

Minimum investment in Large Cap Fund – An

equity & equity related equity
Large Cap
2 instruments of large cap mutual fund
Funds
companies – 80% of total predominantly investing
assets in Large Cap stocks

Minimum investment in
equity & equity related
Large & Mid Cap Fund –
instruments of large cap
An open ended equity
Large & companies – 35% of total
mutual
3 Mid Cap assets
fund investing in both
Funds Minimum investment in
large cap and mid cap
equity & equity related
stocks
instruments of mid cap
stocks – 35% of total assets

Mid Cap Minimum investment in Mid Cap Fund

4
Funds equity & equity related – An equity

54
 instruments of mid cap mutual fund
companies – 65% of total predominantly investing
assets in Mid Cap stocks

Minimum investment in Small Cap Fund –

equity & equity related An equity
Small Cap
5 instruments of small cap mutual fund
Funds
companies – 65% of total predominantly investing
assets in Small Cap stocks

Scheme should An equity

Dividend predominantly invest in mutual fund
6 Yield dividend yielding stocks. predominantly investing
Funds Minimum investment in in dividend yielding
equity – 65% of total assets stocks

Scheme should follow a

value investment strategy. An equity
Value Minimum investment in mutual fund following a
7a
Funds* equity & equity related value investment
instruments – 65% of total strategy
assets

Scheme should follow a

contrarian investment An equity
Contra strategy. Minimum mutual fund following
7b
Funds* investment in equity & contrarian investment
equity related instruments – strategy
65% of total assets

A scheme focused on the

An equity scheme
number of stocks (maximum
investing in maximum
Focused 30) Minimum investment in
8 30 stocks (mention
Funds equity & equity related
where the scheme
instruments – 65% of total
intends to focus,
assets

55
 viz., multi cap, large cap,
mid cap, small cap)

Minimum investment in
Sectoral equity & equity related An open ended equity
9 Funds or instruments of a particular scheme following the
Thematic sector/particular theme – theme as mentioned
80% of total assets

Minimum investment in
equity & equity related An open ended equity
instruments – 80% of total linked saving scheme
ELSS
10 assets (in accordance with with a statutory lock in
Funds
Equity Linked Saving of 3 years and tax
Scheme, 2005 notified by benefit
Ministry of Finance)

b. Debt Funds
Debt funds invest primarily in fixed-income securities such as bonds,
securities and treasury bills. They invest in various fixed income
instruments such as Fixed Maturity Plans (FMPs), Gilt Funds, Liquid
Funds, Short-Term Plans, Long-Term Bonds and Monthly Income
Plans, among others. Since the investments come with a fixed interest
rate and maturity date, it can be a great option for passive investors
looking for regular income (interest and capital appreciation) with
minimal risks.
SEBI has decided total 16 categories under Debt Schemes. 16
categories are very high for debt funds considering their similarity in
risk and returns from a retail investor perspective. Some categories
like Overnight Fund and Liquid Fund are similar. Same is the case
with money market fund and ultra-short term debt fund categories.

56
 Investment in overnight
Overnight A debt scheme investing
1 securities having
Funds in overnight securities
maturity of 1 day

Investment in Debt and

money market securities
2 Liquid Funds A liquid scheme
with maturity of upto 91
days only

Investment in Debt & An ultra – short term

Money Market debt scheme investing in
Ultra Short
instruments such that instruments with
3 Duration
the Macaulay duration of Macaulay duration
Funds
the portfolio is between between 3 months and 6
3 months – 6 months months

Investment in Debt & A low duration debt

Money Market scheme investing in
Low
instruments such that instruments with
4 Duration
the Macaulay duration of Macaulay duration
Funds
the portfolio is between between 6 months and
6 months – 12 months 12 months

Investment in Money
Money A debt scheme investing
Market instruments
5 Market in money market
having maturity up to 1
Funds instruments
year

Investment in Debt & A short term debt

Money Market scheme investing in
Short
instruments such that instruments with
6 Duration
the Macaulay duration of Macaulay duration
Fund
the portfolio is between between 1 year and 3
1 year – 3 years years

57
 Investment in Debt & A medium term debt
Money Market scheme investing in
Medium
instruments such that instruments with
7 Duration
the Macaulay duration of Macaulay duration
Funds
the portfolio is between between 3 years and 4
3 years – 4 years years

Investment in Debt & A medium term debt

Medium to Money Market scheme investing in
Long instruments such that instruments with
8
Duration the Macaulay duration of Macaulay duration
Fund the portfolio is between between 4 years and 7
4 – 7 years years

Investment in Debt &

Money Market A debt scheme investing
Long
Instruments such that in instruments with
9 Duration
the Macaulay duration of Macaulay duration
Fund
the portfolio is greater greater than 7 years
than 7 years

Dynamic Investment across A dynamic debt scheme

10
Bond Funds duration investing across duration

Minimum investment in
A debt scheme
corporate bonds – 80%
Corporate predominantly investing
11 of total assets (only in
Bond Funds in highest rated
highest rated
corporate bonds
instruments)

Minimum investment in
corporate bonds – 65%
A debt scheme investing
Credit Risk of total assets (
12 in below highest rated
Funds investment in below
corporate bonds
highest rated
instruments)

58
 Minimum investment in A debt scheme
Debt instruments of predominantly investing
Banking and banks, Public Sector in Debt instruments of
13
PSU Fund Undertakings, Public banks, Public Sector
Financial Institutions – Undertakings, Public
80% of total assets Financial Institutions

Minimum investment in A debt scheme investing

14 Gilt Fund Gsecs – 80% of total in government securities
assets (across maturity) across maturity

Minimum investment in
Gilt Fund Gsecs – 80% of total A debt scheme investing
with 10 year assets such that the in government securities
15
constant Macaulay duration of the having a constant
duration portfolio is equal to 10 maturity of 10 years
years

A debt scheme
Minimum investment in
predominantly investing
16 Floater Fund floating rate instruments
in floating rate
– 65% of total assets
instruments

c. Money Market Funds

Investors trade stocks in the stock market. In the same way, investors
also invest in the money market, also known as capital market or cash
market. The government runs it in association with banks, financial
institutions and other corporations by issuing money market
securities like bonds, T-bills, dated securities and certificates of
deposits, among others. The fund manager invests your money and
disburses regular dividends in return. Opting for a short-term plan
(not more than 13 months) can lower the risk of investment
considerably on such funds.
Money Market is an exchange where the trade of cash and cash-
equivalent instruments takes place. The instruments that are traded

59
in the money markets have maturities which can vary from overnight
to one year. Here are some key money market instruments in India:

Treasury Bills or T-Bills

The Government of India issues treasury bills to raise funds for a
period of up to 365 days. Since these are issued by the government,
they are considered to be very safe. However, lower risks also
translate into lower returns which is the case with treasury bills too.
The returns on T-bills is lower than other money market instruments.

Certificate of Deposit or CD
A CD is a term deposit which is offered by scheduled commercial
banks which does not have the option of premature redemption. The
primary difference between a CD and FD is that CDs are freely
negotiable.

A repurchase agreement is made between a bank and RBI to

facilitate short-term loans. It can also be made between two banks.
Commercial Paper or CP
Companies and financial institutions with a high credit rating can
issue a commercial paper which is a short-term, unsecured
promissory note. It allows such entities to diversify their short-term
borrowing sources. CPs are usually issued at a discounted rate while
the redemption is done on face value. The investor earns the
difference.

d. Hybrid Funds
As the name suggests, hybrid funds (Balanced Funds) is an optimum
mix of bonds and stocks, thereby bridging the gap between equity
funds and debt funds. The ratio can either be variable or fixed. In
short, it takes the best of two mutual funds by distributing, say, 60%
of assets in stocks and the rest in bonds or vice versa. Hybrid funds
are suitable for investors looking to take more risks for ‘debt plus
returns’ benefit rather than sticking to lower but steady income
schemes

60
SEBI has decided total 7 categories under Hybrid Schemes but a
mutual fund company can only have 6 categories and they have to
choose between Balanced Hybrid Fund or Aggressive Hybrid Fund.
Also, Finally SEBI has made Arbitrage Fund under Hybrid Fund
category.

Investment in equity &

equity related instruments – A hybrid mutual
Conservative between 10% and 25% of fund investing
1
Hybrid Funds total assets; Investment in predominantly in
Debt instruments – between debt instruments
75% and 90% of total assets

Equity & Equity related

instruments – between 40%
50-50 balanced
and 60% of total assets; Debt
Balanced scheme investing
2A instruments – between 40%
Hybrid Funds@ in equity and debt
and 60% of total assets. No
instruments
Arbitrage would be
permitted in this scheme

Equity & Equity related

A hybrid scheme
instruments – between 65%
investing
and 80% of total assets; Debt
Aggressive predominantly in
2B instruments – between 20%
Hybrid Funds equity and equity
– 35% of total assets. Most
related
of the balanced funds will
instruments
fall into this category.

Dynamic Asset Investment in equity/ debt A hybrid mutual

Allocation that is managed dynamically. fund which will
3 Funds or All famous balanced change its equity
Balanced advantage or dynamic funds exposure based on
Advantage will fall into this category. market conditions

61
 Invests in at least three asset
classes with a minimum
A scheme
Multi-Asset allocation of at least 10%
investing in 3
4 Allocation each in all three asset
different asset
Funds classes. Foreign investment
classes.
will be considered as a
separate asset class.

Scheme following arbitrage

A scheme
strategy. Minimum
Arbitrage investing in
5 investment in equity &
Funds arbitrage
equity related instruments –
opportunities
65% of total assets

Minimum investment in
equity & equity related
instruments – 65% of total
assets and minimum
investment in debt – 10% of A scheme
total assets. Minimum investing in equity,
6 Equity Savings
hedged & unhedged to be arbitrage, and
stated in the SID. Asset debt
Allocation under defensive
considerations may also be
stated in the Offer
Document

2. Based on Structure
Mutual funds are also categorised based on different attributes (like
risk profile, asset class, etc.). The structural classification – open-
ended funds, close-ended funds, and interval funds – is quite broad,
and the differentiation primarily depends on the flexibility to purchase
and sell the individual mutual fund units.

a. Open-Ended Funds

62
Open-ended funds do not have any particular constraint such as a
specific period or the number of units which can be traded. These
funds allow investors to trade funds at their convenience and exit
when required at the prevailing NAV (Net Asset Value). This is the sole
reason why the unit capital continually changes with new entries and
exits. An open-ended fund can also decide to stop taking in new
investors if they do not want to (or cannot manage significant funds).

b. Closed-Ended Funds
In closed-ended funds, the unit capital to invest is pre-defined.
Meaning the fund company cannot sell more than the pre-agreed
number of units. Some funds also come with a New Fund Offer (NFO)
period; wherein there is a deadline to buy units. NFOs comes with a
pre-defined maturity tenure with fund managers open to any fund
size. Hence, SEBI has mandated that investors be given the option to
either repurchase option or list the funds on stock exchanges to exit
the schemes.

c. Interval Funds
Interval funds have traits of both open-ended and closed-ended
funds. These funds are open for purchase or redemption only during
specific intervals (decided by the fund house) and closed the rest of
the time. Also, no transactions will be permitted for at least two years.
These funds are suitable for investors looking to save a lump sum
amount for a short-term financial goal, say, in 3-12 months.

3. Based on Investment Goals

a. Growth Funds
Growth funds usually allocate a considerable portion in shares and
growth sectors, suitable for investors (mostly Millennials) who have a
surplus of idle money to be distributed in riskier plans (albeit with
possibly high returns) or are positive about the scheme.

63
b. Income Funds
Income funds belong to the family of debt mutual funds that distribute
their money in a mix of bonds, certificate of deposits and securities
among others. Helmed by skilled fund managers who keep the
portfolio in tandem with the rate fluctuations without compromising
on the portfolio’s creditworthiness, income funds have historically
earned investors better returns than deposits. They are best suited for
risk-averse investors with a 2-3 years perspective.

c. Liquid Funds
Like income funds, liquid funds also belong to the debt fund category
as they invest in debt instruments and money market with a tenure of
up to 91 days. The maximum sum allowed to invest is Rs 10 lakh. A
highlighting feature that differentiates liquid funds from other debt
funds is the way the Net Asset Value is calculated. The NAV of liquid
funds is calculated for 365 days (including Sundays) while for others,
only business days are considered.

d. Tax-Saving Funds
ELSS or Equity Linked Saving Scheme, over the years, have climbed up
the ranks among all categories of investors. Not only do they offer the
benefit of wealth maximisation while allowing you to save on taxes,
but they also come with the lowest lock-in period of only three years.
Investing predominantly in equity (and related products), they are
known to generate non-taxed returns in the range 14-16%. These
funds are best-suited for salaried investors with a long-term
investment horizon.

e. Aggressive Growth Funds

Slightly on the riskier side when choosing where to invest in, the
Aggressive Growth Fund is designed to make steep monetary gains.
Though susceptible to market volatility, one can decide on the fund as
per the beta (the tool to gauge the fund’s movement in comparison
with the market). Example, if the market shows a beta of 1, an
aggressive growth fund will reflect a higher beta, say, 1.10 or above.

64
f. Capital Protection Funds
If protecting the principal is the priority, Capital Protection
Funds serves the purpose while earning relatively smaller returns
(12% at best). The fund manager invests a portion of the money in
bonds or Certificates of Deposits and the rest towards equities.
Though the probability of incurring any loss is quite low, it is advised
to stay invested for at least three years (closed-ended) to safeguard
your money, and also the returns are taxable.

g. Fixed Maturity Funds

Many investors choose to invest towards the of the FY ends to take
advantage of triple indexation, thereby bringing down tax burden. If
uncomfortable with the debt market trends and related risks, Fixed
Maturity Plans (FMP) – which invest in bonds, securities, money
market etc. – present a great opportunity. As a close-ended plan, FMP
functions on a fixed maturity period, which could range from one
month to five years (like FDs). The fund manager ensures that the
money is allocated to an investment with the same tenure, to reap
accrual interest at the time of FMP maturity.

h. Pension Funds
Putting away a portion of your income in a chosen pension fund to
accrue over a long period to secure you and your family’s financial
future after retiring from regular employment can take care of most
contingencies (like a medical emergency or children’s wedding).
Relying solely on savings to get through your golden years is not
recommended as savings (no matter how big) get used up. EPF is an
example, but there are many lucrative schemes offered by banks,
insurance firms etc.

4. Based on Risk

a. Very Low-Risk Funds

Liquid funds and ultra-short-term funds (one month to one year) are
known for its low risk, and understandably their returns are also low

65
(6% at best). Investors choose this to fulfil their short-term financial
goals and to keep their money safe through these funds.

b. Low-Risk Funds
In the event of rupee depreciation or unexpected national crisis,
investors are unsure about investing in riskier funds. In such cases,
fund managers recommend putting money in either one or a
combination of liquid, ultra short-term or arbitrage funds. Returns
could be 6-8%, but the investors are free to switch when valuations
become more stable.

c. Medium-risk Funds
Here, the risk factor is of medium level as the fund manager invests a
portion in debt and the rest in equity funds. The NAV is not that
volatile, and the average returns could be 9-12%.

d. High-Risk Funds
Suitable for investors with no risk aversion and aiming for huge
returns in the form of interest and dividends, high-risk mutual funds
need active fund management. Regular performance reviews are
mandatory as they are susceptible to market volatility. You can expect
15% returns, though most high-risk funds generally provide up to 20%
returns.

5. Specialized Mutual Funds

a. Sector Funds
Sector funds invest solely in one specific sector, theme-based mutual
funds. As these funds invest only in specific sectors with only a few
stocks, the risk factor is on the higher side. Investors are advised to
keep track of the various sector-related trends. Sector funds also
deliver great returns. Some areas of banking, IT and pharma have
witnessed huge and consistent growth in the recent past and are
predicted to be promising in future as well.

b. Index Funds

66
Suited best for passive investors, index funds put money in an index.
A fund manager does not manage it. An index fund identifies stocks
and their corresponding ratio in the market index and put the money
in similar proportion in similar stocks. Even if they cannot outdo the
market (which is the reason why they are not popular in India), they
play it safe by mimicking the index performance.

c. Funds of Funds
A diversified mutual fund investment portfolio offers a slew of
benefits, and ‘Funds of Funds’ also known as multi-manager mutual
funds are made to exploit this to the tilt – by putting their money in
diverse fund categories. In short, buying one fund that invests in many
funds rather than investing in several achieves diversification while
keeping the cost down at the same time.

d. Emerging market Funds

To invest in developing markets is considered a risky bet, and it has
undergone negative returns too. India, in itself, is a dynamic and
emerging market where investors earn high returns from the
domestic stock market. Like all markets, they are also prone to market
fluctuations. Also, from a longer-term perspective, emerging
economies are expected to contribute to the majority of global growth
in the following decades.

e. International/ Foreign Funds

Favoured by investors looking to spread their investment to other
countries, foreign mutual funds can get investors good returns even
when the Indian Stock Markets perform well. An investor can employ
a hybrid approach (say, 60% in domestic equities and the rest in
overseas funds) or a feeder approach (getting local funds to place
them in foreign stocks) or a theme-based allocation (e.g., gold mining).

f. Global Funds
Aside from the same lexical meaning, global funds are quite different
from International Funds. While a global fund chiefly invests in

67
markets worldwide, it also includes investment in your home country.
The International Funds concentrate solely on foreign markets.
Diverse and universal in approach, global funds can be quite risky to
owing to different policies, market and currency variations, though it
does work as a break against inflation and long-term returns have
been historically high.

g. Real Estate Funds

Despite the real estate boom in India, many investors are still hesitant
to invest in such projects due to its multiple risks. Real estate fund can
be a perfect alternative as the investor will be an indirect participant
by putting their money in established real estate companies/trusts
rather than projects. A long-term investment negates risks and legal
hassles when it comes to purchasing a property as well as provide
liquidity to some extent.

h. Commodity-focused Stock Funds

These funds are ideal for investors with sufficient risk-appetite and
looking to diversify their portfolio. Commodity-focused stock funds
give a chance to dabble in multiple and diverse trades. Returns,
however, may not be periodic and are either based on the
performance of the stock company or the commodity itself. Gold is
the only commodity in which mutual funds can invest directly in India.
The rest purchase fund units or shares from commodity businesses.

i. Market Neutral Funds

For investors seeking protection from unfavourable market
tendencies while sustaining good returns, market-neutral funds meet
the purpose (like a hedge fund). With better risk-adaptability, these
funds give high returns where even small investors can outstrip the
market without stretching the portfolio limits.

j. Inverse/Leveraged Funds
While a regular index fund moves in tandem with the benchmark
index, the returns of an inverse index fund shift in the opposite

68
direction. It is nothing but selling your shares when the stock goes
down, only to repurchase them at an even lesser cost (to hold until the
price goes up again).

k. Asset Allocation Funds

Combining debt, equity and even gold in an optimum ratio, this is a
greatly flexible fund. Based on a pre-set formula or fund manager’s
inferences based on the current market trends, asset allocation
funds can regulate the equity-debt distribution. It is almost like hybrid
funds but requires great expertise in choosing and allocation of the
bonds and stocks from the fund manager.

l. Gift Funds
Yes, you can also gift a mutual fund or a SIP to your loved ones to
secure their financial future.

m. Exchange-traded Funds
It belongs to the index funds family and is bought and sold on
exchanges. Exchange-traded Funds have unlocked a new world of
investment prospects, enabling investors to gain extensive exposure
to stock markets abroad as well as specialised sectors. An ETF is like a
mutual fund that can be traded in real-time at a price that may rise or
fall many times in a day.
[Link]

69
Conclusion:

In short if we like to invest and grow our money study with some
fixed returns. We have to select the appropriate mutual fund
schemes through systematic investment process-SIP depending
up on our financial goals and time line through above assert
management companies by understanding the fund portfolio
and their performance over time.

70
 9. Stock market
Stock: Stock is a general term used to refer to a certificate indicating
ownership in a company.
Stock exchange: This is a specific facility where stocks are listed for
sale/purchase. All stock exchanges in India are now digital, and you
can access them online through a brokerage firm.
Share market: Anywhere you can buy or sell shares. All stock
exchanges across India are part of the Indian share market. Any
shares that you buy or sell outside the exchanges are also part of this
share market.
Investors and traders: Stocks are units of a company’s market value.
Investors are individuals who purchase stocks to become part owners
in the company. Trading involves buying or selling this equity. To
understand how to share market works, the next thing is to learn
about primary and secondary markets.

1. Introduction to the Indian Stock Market

Stock markets form the largest avenues for investments. There are
primarily two stock exchanges in India, the Bombay Stock Exchange
(BSE) and the National Stock Exchange (NSE). Companies list their
shares for the first time in the primary market and in the secondary
markets investors can buy and sell their shares during an Initial Public
Offering. The two stock exchanges in India have on some occasions
witnessed stocks worth INR 6,00,000 crores being traded. The
uninitiated in India often consider investing in stocks markets
gambling, but a basic understanding of the share market can change
that perception.

2. Regulation of the Indian Stock Markets

The regulation and supervision of the stocks markets in India rest with
the Securities and Exchange Board of India. SEBI was formed as an
independent identity under the SEBI Act of 1992 and has the power to
conduct inspections of the stock exchanges. The inspections review

71
the operations of the market and the organizational structure along
with aspects of administrative control.

The main role of SEBI includes:

 Ensuring a fair and equitable market for investors to grow in

 Compliance of the exchange organization, the system its
practices in accordance with the rules framed under the
Securities Contracts (Regulation) Act (SC(R) Act), 1956
 Ensure implementation of the guidelines and directions issued
by the SEBI
 Check if the exchange has complied with all the conditions and
has renewed the grants, if needed, under Section 4 of the SC(R)
Act of 1956.

3. Types of Share Markets

There are two kinds of share markets namely the Primary and the
Secondary Markets.

a. Primary Share Market

It is in the primary market that companies register themselves to issue
their shares and raise money. This process is also known as listing on
the stock exchange. The purpose of entering into the primary market
is to raise money and if the company is selling their shares for the very
first time it is referred to as the Initial Public Offering (IPO). Through
this process, the company becomes a public entity.

The primary stock market provides an opportunity to issuers of

stocks, especially corporates, to raise resources to meet their
investment requirements and discharge some obligations and
liabilities.
A company lists its shares in the primary market through an Initial
Public Offering or IPO. Through an IPO, a company sells its shares for
the first time to the public. An IPO opens for a particular period. Within
this window, investors can bid for the shares and buy them at the
issue price announced by the company.

72
Once the subscription period is over, the shares are allotted to the
bidders. The companies are then called public because they have
given out their shares to the common public.

For this, companies need to pay a fee to the stock exchanges. They are
also required to provide all important details of the company’s
financial information such as quarterly/annual reports, balance
sheets, income statements, along with information on new projects or
future objectives, etc. to the stock markets.

b. Secondary Market
The shares of a company are traded in the secondary market once the
new securities are sold in the primary market. This way investors can
exit by selling their shares. These transactions that take place in the
secondary market are called trades. It involves the activity of investors
buying from each other and selling amongst themselves at an agreed
upon price. A broker is the intermediary that facilitates these
transactions.

The last step involves listing the company on the stock market, which
means that the stock issued during the IPO can now freely be bought
and sold. The secondary stock market is where shares of a company
are traded after being initially offered to the public in the primary
market. It is a market where buyers and sellers meet directly.

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4. How do the Share Markets Work?

a. Understanding the Stock Exchange Platform

A stock exchange is precisely a platform that conducts the trading of
financial instruments like stocks and derivatives. The activities on this
platform are regulated by the Securities and Exchange Board of India.
The participants have to register with SEBI and the stock exchange in
order to conduct trades. Trading activities include brokering, issuing
of shares by companies, etc.

b. Listing of the Company in the Primary Market

A new company is listed in the primary market through the process of
an Initial Public Offering, where the company lists details about itself,
the stocks it is issuing, etc. The allotment of stocks take place during
the process of listing and investors who bid for the stocks get their
share.

c. Trading in the Secondary Market

Once the company has been listed and issued stocks, these can be
traded in the secondary market by the investors. This is the
marketplace for the buyers and sellers to transact and make profits or
incur losses.

d. Stock Brokers
Because of the magnitude of investors who number in thousands, it is
difficult to have them assemble in one location. Therefore, to conduct
trade, stock brokers and brokerage firms come in the picture. These
are entities that are registered with the Stock Exchange and act as
intermediaries between the investors and the exchange it self. When
you place an order to buy any share at a given rate, the broker
processes it at the exchange where there are multiple parties
involved.

74
e. Passing of your order
Your buy order is passed on to the exchange by the broker, where it
is matched for a sell order for the same. The exchange takes place
when the seller and the buyer agree upon a price and finalize it; the
order is then considered confirmed.

f. Settlement
Once you finalize on a price, the exchange confirms the details to
ensure that there is no default in the transaction. The exchange then
facilitates the transfer of ownership of the shares which is known as
Settlement. You receive a message once this takes place. This
communication of this message involves multiple parties like the
brokerage order department, the exchange floor traders, etc. The
settlement time earlier took weeks to materialize which now is done
in T+2 days. This means that if you trade today, the shares are
reflected in your demat account in two working days’ time. Investing
in the share market is subject to market risks. It is recommended you
seek expert guidance before investing.

Trading in the Stock Market

Once listed on the stock exchanges, the stocks issued by companies
can be traded in the secondary market to make profits or cut losses.
This buying and selling of stocks listed on the exchanges are done by
stockbrokers /brokerage firms, that act as the middleman between
investors and the stock exchange. Your broker passes on your buy
order for shares to the stock exchange. The stock exchange searches
for a sell order for the same share. Once a seller and a buyer are found
and fixed, a price is agreed to finalize the transaction. Post that the
stock exchange communicates to your broker that your order has
been confirmed. Meanwhile, the stock exchange also confirms the
details of the buyers and the sellers of shares to ensure the parties
don’t default. It then facilitates the actual transfer of ownership of
shares from sellers to buyers.

75
This process is called the settlement cycle. Earlier, it used to take
weeks to settle stock trades. But now, this has been brought down to
T+2 days.

Stockbrokers identify their clients by a unique code assigned to an

investor. After the transaction is done by an investor, the stockbroker
issues him/her a contract note which provides details of the
transaction such as time and date of the stock trade. Apart from the
purchase price of a stock, an investor is also supposed to pay
brokerage fees, stamp duty, and securities transaction tax.

In case of a sale transaction, these costs are reduced from the sale
proceeds, and then the remaining amount is paid to the [Link]
the broker and stock exchange levels, there are multiple
entities/parties involved in the communication chain like brokerage
order department, exchange floor traders, etc.

But the stock trading process has become electronic today. So, the
process of matching buyers and sellers is done online and as a result,
trading happens within minutes.

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Pricing of Shares in the Stock Market
The key to making money in the stock market is to learn how to
properly value a company and its share price in the context of the
Indian economy and the firm’s operating sector.

Let me explain to you how stocks are priced through a simple

example. Let’s say you bought a notebook for ₹100. The next day, a
friend of yours offered you to sell it for ₹150 to him. So, what’s the
price of the notebook then? It is from ₹150. You can encash ₹150 by
selling the notebook to him. But you choose to reject his offer hoping
that your other friends may bid more than ₹[Link] very next day 3
of your friends offer you ₹200, ₹250 and ₹300 for the notebook
respectively. Now, what’s the price of the notebook? It’s ₹300 as this is
the highest bid for your notebook. You now know that your
possession is valuable and decide to reject the current offers, hoping
for a higher bid tomorrow. However, the next day, a fellow student
brings a better quality notebook to school with shinier pages. Your
friends are now attracted to this notebook more than yours and this
leads to a dip in the value of your notebook. Now only a handful of
people are willing to pay for your notebook and that too at the last
quoted price i.e ₹[Link] is exactly how demand and supply affect
the price of a share in the stock market. When the students were
optimistic and ready to pay higher cash than its current price, the price
appreciated. When a lesser number of students wanted your
notebook, the price fell down.

Just keep this small concept in your mind:

When the demand for shares is more than supply, price rises.
When the demand for shares is less than supply, price falls.
The Indian stock exchanges, BSE and NSE, have algorithms that
determine the price of stocks on the basis of volume traded and
these prices change pretty fast. So this is how the stock market
works in India.

77
Stock Market Terms and Definitions

What Is A Stock?
The capital raised by a company or corporation in the course of the
issue and subscription of shares.
What Is Equity?
This refers to the ownership interest in a company and can also refer
to the value of the shares issued by a company

What Is Futures?
Futures is an agreement between two parties to buy or sell
commodities or shares at an agreed price but delivered and paid for
later.

What Is A Derivative?
Derivative refers to a contract that gets its value from the prices and
index of an underlying security that can be a stock, currency
or commodity.

What Is Option?
Option gives the right, but not the obligation to buy or sell an asset at
a fixed price, on or before a designated future date.

What Are Commodities?

A commodity can be termed as a raw material or agricultural product
that traders and investors can buy or sell. Example: Crude
oil, Copper, Natural gas

What Is Swap?
swap is a financial transaction in which two bodies agree to make
payments to each other as per mutually agreed rules.

What Is A Call?
call refers to an option that gives the investor the right to buy an asset
at a certain price within a definite time.

What Is A Put?

78
Put refers to the option that gives an investor the right to sell a certain
number of securities at a particular price before a fixed date.

What Is A Bull Market?

A Bull market can be termed as a cheerful market with plenty of
buyers but few sellers.

What Is A Bear Market?

A Bear market can be termed as a puny market where sellers
outnumber buyers.
Who Is A Broker?
An individual who is a member of the stock exchange and acts as an
mediator between the buyer and seller in exchange for payment of a
commission.
What Is Brokerage?
Commission paid to the broker and this is fixed by the Stock
Exchange in India.
Intraday Trading: Buying and selling securities on the same day
without taking delivery including commodity online trading.

What Is Index?
A measure of the stock market calculated from the prices of some
definite stocks, which helps investors and analysts to describe the
market.

What Is A Blue-Chip?
Blue-chip can be termed as stocks that top the charts in terms of
returns, yield, marketability, safety, and security.

What Is A Return?
The change in the value of a portfolio over a certain time period can
be termed as returns.

What Is Dividend?
The profit paid out by a company to shareholders is known as
dividend.

79
What Is Zero Brokerage Model?
This is a model where the subscription to a plan is done and
zero brokerage is paid on all the trades.

What Is The Lowest Brokerage Plan?

The stock Brokerage is fixed by the Stock Exchange which would be
the maximum. But brokers can offer discounts to clients.
Forex Vs Equity Vs Commodity

Every Investor can invest in 3 segments, namely Forex, Equity,

Commodities

Forex Market:
Deals with currencies
Equity Exchange:
Related to companies and their shares
Commodities
Deals with metals, energy, and agricultural products. It is necessary to
understand the differences.

Trading Options:
The Forex market offers less trading options because a majority of
traders prefer to deal in only the major currency pairs such as
EUR/USD, USD/JPY, and GBP/USD. Whereas, the commodity and stock
market offers more alternatives to traders

Simplicity Of Trading:
Trading in commodities is comparatively simple since it is all to do with
supply and demand. Whereas in forex, success is more dependent on
system and strategy. Trading on the stock exchange requires more
of research work.

Timed Trades: The forex markets are open five days a week and 24
hours each day.

The stock exchange offers the shortest time frame for trading, but
the commodity markets stay open from around 10 am to midnight.

80
Short Selling: The forex market is a great opportunity for short-selling
especially due to its immense liquidity potential. Here, margins are
much lower than with equity. The stock market is prone to high
liquidity risks. Restriction is more with short selling in stock trading.
Volatility: Metal and energy contracts have a cut off barrier of 6
percent up or down while stocks can move even 20 percent in a single
day. For agricultural commodities, this stands at 4 percent. Forex is
conceivably the most constant of the three.

Brokerage: The brokerage rates are similar across all three segments,
but greater volumes of trading will lower brokerage expenses. As a
result, the forex market is liable to get an edge over the other two
[Link] such as online share trading and live tracking of
commodity prices have simplified the process of trading

81
What are the different types of Trading Account and what are
their benefits?

The first step in trading process is opening a trading account and

a demat account. A few banks and registered members of exchanges
(brokers) offer this facility to clients. The trading account can be linked
to a bank account and is used to place buy and sell orders in the stock
exchange. The shares are held in electronic form in demat account
which permits to transfers when you buy or sell shares using your
trading account.

Demat Account

A Demat account can be said as what it is to shares, similar to what

bank accounts are to money. All you need to do is, select a service
provider who is a depository participant with either National Securities

82
Depository Ltd (NSDL) or Central Depository Services Ltd (CDSL) and
complete the application process.
Once your application passes examination, you will be given an
account number or a client ID to access your account online. Payment
of annual fee, transaction charges, and any other associated fees will
be specified in the rules and regulations.

What Are The Advantages Of Using A Demat Account?

Simple & suitable: All securities can be viewed and managed through
a single account. The bonus fixed to the investor or securities bought
and sold will be straight away reflected in the account.
Electronic medium moderates risks: There is no risk of misplacing
certificates, theft or fire, which is unlike physical certificates. Postal
delays and loss of certificates during transit can be avoided. The risk
of fake and damage are also ruled out.
No stamp duty: There is a 0.5 % payable for physical shares, which is
shun here due to reduced transaction costs.
Enables easy transfer of securities: Depositary participants are the
people who are given the right to hold the securities on a
shareholder’s behalf. These Depositories are linked with NSDL & CDSL,
which handle securities in India.
Various modes of access: This makes it likely for traders and
investors to participate from anywhere.
No paperwork: Since all details are electronically available, there is
reduced paperwork for shares or securities transfer and none for
trading.
No restrictions on transactions: You can sell or buy even a single
share. So, with no specific minimum value unlimited trading can be
performed.
There are many firms and agents who offer to help with a Demat
account with zero brokerage charges. So, having a Demat
account is surely advantageous to take part in forex
trading or investing in stocks.

83
Commodity Trading Account
A commodity demat account has to be opened with a commodity
broker registered with the National Securities Depository Ltd (NSDL)
and this will enable you to trade with the National Commodity and
Derivative Exchange (NCDEX), the National Multi Commodity
Exchange of India Ltd, and the Multi Commodity Exchange of India Ltd
(MCX). With a commodity trading account, you can trade in
agricultural, metal and energy commodities.
Forex Trading Account
The procedure of getting a forex trading account is more or less
similar to the others and once this is set up you can buy and sell any
currency.
Preference includes buying currency from the NSE or the MCX. One
noteworthy differentiation in the forex market is that you can buy
futures that are to be settled up to 12 months later.
A number of clients from brokerage houses and banks might be
eligible for perks such as unlimited trading and zero brokerage in all
these segments. All three accounts can be opened simultaneously.

1. What is a Demat Account?

Demat is simply an account that allows you to hold your shares in an

electronic format. A demat account converts the physical shares into
an electronic form, therefore dematerializing it. On opening a demat
account, you will be given a demat account number to be able to
electronically settle your trades. The workings of a demat account is
very similar to that of a bank account where you keep your money
with the option to deposit and withdraw. In your demat account too,
the securities are held and accordingly debited and credited. You do
not need to have any shares to open a demat account; In fact, you can
even have zero balance in your account.

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2. What is a Trading Account?

To conduct your stock trading activities you require a trading account.

This is because when a company lists its shares in the stock market
you can trade the same on an electronic system through a special
account known as a trading account. You can get such an account by
registering with a firm or a stock broker. With this account you are
assigned a unique trading ID which grants you access to conduct
trading transactions.

The following are the main areas where a Demat and a Trading
Account differ:

a. The functionality of a Demat Vs a Trading Account

One major difference between the two accounts pertains to the

functions each performs. A trading account is used for the buying and
selling of the securities by means of it getting debited from your demat
account and sold in the market.
A demat account, on the other hand, allows investors to keep their
financial instruments in an electronic format. This also works in a way
where you can change your electronic format securities into physical
form as well.
b. The nature of the two accounts
A trading account functions in the same way as your current bank
account would; it in fact, links up your demat and your bank account.
It works to sell your shares in the market by withdrawing it from your
demat account. Demat account is the place where the shares and
securities that you buy from the market are stored. Unlike a trading
account that functions like a current bank account, a demat account
works like a saving account.
c. The role of the two accounts

Both these accounts, as different as they may be, are crucial for any
trading in the share markets. When, as an investor, you buy the shares
of any company, you use the trading account to do so. The money is
debited from your bank account and the shares are reflected in your

85
demat account where they are also credited.
Similarly, when you sell your shares through your trading account, the
same gets debited from your demat account and are then sold in the
market. The proceeds of this sale is credited back to your bank
account. Thus, in order to trade in the stock markets, it is mandatory
to have both a demat as well as a trading account.

Opening of this accounts will be done with Stock broker

What is the role of a broker in the share market?

The broker helps you execute your buy and sell trades. Brokers
typically help buyers find sellers and sellers find buyers. Most brokers
will also advise you on what stocks to buy, what stocks to sell and how
to invest money in share markets for beginners. They will also assist
you in how to trade in stock market. For that service, the broker is paid
brokerage.

Brokers are individuals or representatives of brokerage firms who

negotiate transactions between a seller and buyer. Therefore, they
serve as facilitators in stock trading. They usually get a part of the sale
when negotiations are finalized. It is called a commission.
Investment brokers come under different class based on the services
they extend and advice they offer.

Types of Online Trading Brokers

Brokers are individuals or representatives of brokerage firms who

negotiate transactions between a seller and buyer. Therefore, they
serve as facilitators in stock trading. They usually get a part of the sale
when negotiations are finalized. It is called a commission.
Investment brokers come under different class based on the services
they extend and advice they offer.

86
Full-Service Broker

A Full-Service Broker provides a mixture of services to the clients. This

comprises of doing the required research to base their
advice, commodity trading, retirement planning and providing tax-
saving tips are amongst the useful offerings.

Key Benefits :

Research based recommendations

Dedicated resources who can manage and execute all your
transactions
Provides single-point operations across
your investment portfolio.
Reality planning and other services

Discount Broker

Based on your orders, a Discount Broker carries out buying and selling
of stocks at reduced commission possibly at a flat
fee brokerage value.
They may offer recommendations but verifications have to be done by
you. They can consequently give orders to execute on your behalf.
They do not provide personalised investment advice and additional
services.

Key Benefits:

Commission charged is low

Managing trading activities only
Commission charged is low
Anybody willing to invest can do so, even in small amounts

Online Broker

An Online Broker connects and works with you over the internet. They
often work across different brokerage websites. Information like

87
graphs, charts and trending news to complete your research are
provided by them.

Key Benefits:

Zero brokerage or small fee is charged

Can be accessed from anywhere
Useful information is provided
Provides tips on investment
It is necessary to understand the types of brokers and their services
offered to choose the best one for trading online.

**I personally chose Zerodha as my broker as beginner for trading

and demat account for less brokerage on equity market**

Types of share market based on Transaction:

Equity & Equity Derivative

Stock market is a financial place which facilitates transactions in

securities comprising of corporate and government securities. These
are long term, fund raising instruments from public. The various ways
of raising funds include:
Intial Public Offer (IPO) under it, funds are raised from the public for
the very first time by sharing the ownership.
Follow-on Public Offer (FPO) wherein already listed company issues
more shares in the public to raise more funds.
Rights Issue is the method of raising additional finance from existing
shareholders by offering securities to them.
Of late, the Securities and Exchange Board of India (SEBI) created two
new routes for the top 200 listed companies for raising public money
and diluting promoter shareholding to meet the minimum public
shareholding norms before the deadline. The two routes are:

88
Offer for Sale (OFS) and Institutional Placement Programmes
(IPPs) —allow all companies to reduce the promoter stake through an
auction of shares on stock exchanges during normal hours to comply
with minimum public holding norms.
Since the OFS and IPP routes allow promoters to sell shares on the
bourses with faster regulatory clearances, without much paperwork
or the need for road shows, they help companies raise capital faster
than other methods, thereby curbing volatility risks
Authorized Capital is the amount of capital with which a company is
registered with the registrar. This amount is the maximum amount of
capital which a company can raise through shares.
When a company raises funds from more than 50 people, it does not
remain a private placement and is labelled as a public issue. For this
listing requirements as well as other SEBI norms must be followed.
Section 67 of the companies act construes an offering of shares or
debentures to 50 or more persons, as an offer or invitation to the
public for which norms listed out in SEBI regulations would need to be
followed. These include issuing of prospectus, compliance with the
procedures and other disclosure norms.
Developments of aforesaid nature take place in Primary
Market while Secondary Market enables stock holders to adjust
their holdings in response to changes in their assessment of risk and
return which ultimately gives the rise of stock transactions/trading.
Transactions in Cash:
In a transaction, buying and selling of the same securities take place
on same settlement cycle. Any difference in the transactions is paid or
received by the traders at the end of settlement cycle.
There are two types of settlement – Intra-Day and Delivery based.
In an Intra-Day transaction, there are no deliverable/receivable
positions. All open positions are squared off on the same day. Only
fund pay-in/pay-out takes place after two working days of trade.

89
In a Delivery based transaction, all open deliverable/receivable
positions are settled after two working days of trade.

Transaction in Futures:
A futures contract gives the right to buy or sell a given amount of
underlying at specified price and on or before specified date. Both
parties of futures contract must exercise the contract unless they are
deliverable on or before the settlement date.

Features of Futures Trading:

Initial margin amount of contract value is required for taking
positions which is determined by exchange on the basis of SPAN
plus exposure margin.
Mark-to-profit/loss will be adjusted on daily basis.

90
 Positions need to be squared off by last trading day of the
contract failing which exchange will square off those positions.
Transactions in Option:
An option is a contract between two parties to buy or sell a given
amount of underlying assets at pre-specified price on or before a
given date. There are two types of Option – Call option and Put Option.
Call Option is an option which gives the right to buy the underlying at
a specific price on or before a specific date.
Put Option is an option which gives the right to sell the underlying at
a specific price on or before specific date.
Buyer of an option by paying option premium buys the right but not
the obligation to exercise his option on the seller/writer.
The writer of Call/Put option receives the option premium and thus it
becomes obligatory for them to sell/buy the underlying if the buyer
wishes to exercise his option.
Features of Option Trading:
Buying of option requires premium to be paid and selling of
option requires margin to be paid.
The price which option buyer pays to option seller to acquire the
right is called an option price or option premium.
The pre-specified price is called as strike price and the date at
which strike price is applicable is called expiration date.
The asset which is bought or sold is called underlying assets.
Style of Options: American Options can be exercised any time on or
before the expiration date. (Binomial option pricing methodology is
mainly used to price American Option).
European Options can only be exercised on expiry date of contract.
(Black and Sholes methodology is used to price European Options).
All index option is European trade options in India and they can’t be
exercised in between but they can be sold anytime. All stock options
are American options and they can be sold or exercised anytime.

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Option Value
Intrinsic Value of an option is the difference between the spot price
and strike price of the underlying i.e.
Intrinsic Value of Call option = Spot Price - Strike Price.
Intrinsic Value of Put option = Strike Price – Spot Price.
Time Value of an option is the difference between its premium and
its intrinsic value i.e. Premium – (Spot Price – Strike Price)
A Call ATM and OTM have only time value. Usually, the maximum time
value exists when option is ATM.
In-the-Money Option: An ITM option is an option that would lead to
positive cash flow to the holder, if it were exercised immediately. Call
option is said to be in ITM when Spot price > Strike price (i.e. higher)
whereas Put options is said to be ITM when Spot price < Strike price
(i.e. lower/below)
At the money option: An ATM is an option that would lead to zero
cash flow if it were exercised immediately i.e. Spot price = Strike price.
Out-of-the Money: An OTM is an option that would lead to a negative
cash flow if it were exercised immediately. In case of Call option = Spot
Price < Strike Price, then Put Option = Spot Price > Strike Price..
Determinants of Option Price:
Spot Price of the Underlying Asset, Strike Price, Annualized Volatility,
Time to Expiration and Interest Rate.

[Link]
[Link]
[Link]
[Link]
[Link]
beginners

92
Conclusion: In order to understand the stock market in detail you have
to read various articles, study materials and even we can attend some
classes or courses etc. We have to understand the stock indices like
NIFTY, SENSEX and different performance ratios with fundamental
and technical analysis of companies.

Three type of trades in share market:

Forex Market: Trading with currencies
Equity Exchange: Trading with companies and their shares
Commodities: Trading with metals, energy, and agricultural products.

All you need a trading and D-mat account for trading in share market
But easy to start with minimum amount of Rs 200- 500
It simple as provisional store you have to buy things at lower rate sell
it at higher rate …what to buy, when to buy and what to sell, when to
sell is all about you knowledge and understanding about market.

Stock market is sensitive to many factors like..Govt elections, budget

Announcements, Companies annual reports, economics , bank crises,
inflation…War…pandemics natural disasters…..etc..

Stock market is high risk high returns based investment sectors so we

should have at least fundamental knowledge about the stocks and its
operations and its risks it is easy to start trading but making detailed
study and research is advised to be a good and successful investor.

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 10. Real Estate
Real estate is "property consisting of land and the buildings on it,
along with its natural resources such as crops, minerals or water;
immovable property of this nature; an interest vested in this (also) an
item of real property, (more generally) buildings or housing in general

Four Types of Real Estate:

1. Residential real estate:

These includes both new construction and resale homes. The most
common category is single-family homes. There are
also condominiums, co-ops, townhouses, duplexes, triple-deckers,
quadplexes, high-value homes and vacation homes.

2. Commercial real estate:

These includes shopping centres and strip malls, medical and
educational buildings, hotels and offices. Apartment buildings are
often considered commercial, even though they are used for
residences. That’s because they are owned to produce income.
3. Industrial real estate:
These includes manufacturing buildings and property, as well as
warehouses. The buildings can be used for research, production,
storage and distribution of goods. Some buildings that distribute
goods are considered commercial real estate. The classification is
important because the zoning, construction and sales are handled
differently.
4. Land:
These includes vacant land, working farms and ranches. The
subcategories within vacant land include undeveloped, early
development or reuse, subdivision and site assembly.

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A Career in Real Estate: Daily Tasks and Duties
Real estate agents undertake a variety of tasks day-to-day. These
can include:
Evaluating buyers’ needs and finding properties/businesses
for them to consider
Conducting inspections
Preparing listings for properties and businesses for sale and
lease
Offering valuations and advice
Instructing vendors of sales and marketing options such as
sale by auction and open house inspections
Liaising with tenants
Creating and executing business plans, budgets and
practices for the real estate group
Arranging terms of settlement

Property Registration & Stamp Duty Charges In India, 2019 –

2020
More than buying a property, registering it can be taxing. If you are
planning on buying a property, remember that the amount quoted to
you by the seller is not the final price you have to pay. Easily, few lakhs
get added to the price quoted to you when you’ll register it on your
name. Did you know that you will be charged stamp duty and
registration charges, cess, and surcharges when you pick a property?
Yes, all the charges put together can come up to 7% to 10% of the total
market value of the property or more than that. In most states in India,
5% to 7% of the total market value of the property is charged as stamp
duty while 1% is charged as registration fee.

95
STAMP DUTY CHARGES IN INDIA:
Stamp Duty is a tax that is imposed on documents that are charged by
state and the central government in India for the consumers who opt
to take a residential property to the builders which are mandatory for
homebuyers to pay the stamp duty on the sale agreement under
section 3 of the Indian Stamp Act, 1899. With the introduction of stamp
duty, it is clarified that sales tax, indirect taxes, and value-added taxes
will be replaced by GST. The builder or the developer pays various
elements of non- creditable taxes like CST, entry tax, etc. which are
already implanted in the pricing of units that costs up to anywhere
between 22-25% of the price. Stamp duty acts as a major head of
revenue for any state.

Stamp Duty is also defined as the most crucial wage paid by the
homeowner to attain the complete ownership of the house. It acts as
legal evidence of a residential property deal. The residence will not be
registered under the homeowner’s name until the Stamp Duty has
been paid completely. It is usually fixed at 5-7% of the property value.
The amount of Stamp Duty to be paid varies from state to state,
ensuring that the agreement of the sale is appropriately stamped so
that it stands legal and acceptable in a court of law.

A physical stamp has to be attached to the document to denote that

the stamp duty has been paid before the document was legally
effective.
Stamp Duty charges vary from state to state and the amount also
depends on several other factors such as:
 Status of the property: New or Old
 Location of the property: City area, rural area, etc.
 Age of the owner
 Gender of the owner: Some states also offer concessions for
female real estate owners

96
  Usage of property: Commercial or Residential use
 Type of property: Flat or an independent house, etc.

REGISTRATION:
The documents need to be registered under the Registration Act, 1908
within four months from the date of execution after the stamp duty is
paid. Unless the registration is completed, an entitlement of the said
property is invalid. Registration will be done by the Sub Registrar of
Assurances of the Jurisdiction where the property is purchased, If
there is any delay in payment of the stamp duty it attracts a heavy
penalty as it is a legal instrument and can be introduced as evidence
in courts.
To calculate the registration fee and Stamp Duty, different standards
are used for different types of properties depending upon different
city laws
 Super buildup area is considered for calculation for multi-storey
apartments
 For independent houses, the total constructed area is computed
 For plots, the sq ft. area of the plot is multiplied by the
predominant guideline value of that area

What do You Mean By Stamp Duty?

While transferring the title of your property to another person, you
will be charged property stamp duty. This is a fee that is levied by the
state government on the documents you need to register your
property. Stamp duty and Registration Charges differ from one state
to another. You will have to pay Stamp duty while registering a
property as it is mandatory under Section 3 of the Indian Stamp Act,
1899.
The state government collects stamp duty to validate your registration
agreement. A registration document with a stamp duty paid tag on it

97
acts as a legal document to prove your ownership of the property in
the court. Without paying stamp duty charges, one cannot claim the
property to be his/her own legally. Thus, it is very important to pay the
full stamp duty charge.
Stamp Duty and Registration Charges in Different Cities

Factors that Determine Your Stamp Duty Charges

Age of the Property: The age of the property plays a crucial role in
determining the stamp duty charges you will be required to pay. As
stamp duty charges are calculated as a percentage of the total market
value of the property, old buildings usually attract less stamp duty
charges and new buildings attract a high charge. This is because the
market value of old buildings would have depreciated.
Age of the Owner: Almost all state governments have subsidised
stamp duty charges for senior citizens. So, the age of the owner plays
an important role in determining the charge.
Gender of the Owner: Like senior citizens, women in our country also
get a discount on stamp duty charges if the property is registered in
her name. Men pay about 2% extra to get their property registration
documents stamped when compared to women.
Purpose: Commercial buildings attract a high stamp duty fee when
compared to residential buildings. This is mainly because commercial
buildings would need a lot of amenities, floor space, and security
features.

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Location: If your property is located in a municipal locality or an
upscale urban area, be prepared to pay a high stamp duty. If your
property is located in Panchayat limits or outskirts of the town, you
will land up paying less to get it stamped.
Amenities: Did you know that the government will charge you for
every extra amenity you have on your premises while registering the
property? Yes, the government has a list of over 20 amenities that you
will have to pay extra for if you have them on your property. Some of
the amenities are lifts, swimming pool, library, club, gym, community
hall, and sports area.
How is Stamp Duty Charges Calculated?
As mentioned earlier, there are many factors that determine the
stamp duty charge you’ll land up paying. The bottom line is that stamp
duty charge is calculated:
considering the total market value of the property. If the market value
of your property is high, you will land up paying a high charge and vice
versa. In case you have both the market value and the agreement
value of the property, whichever is higher will be charged.
Apart from the cost or the value of the property, the type of the
property, location of the property, gender and age of the owner, usage
of the property, and the number of floors in the property all determine
the property registration fee and stamp duty charges.
Generally, stamp duty officials use Stamp Duty Ready Reckoner to fix
the value of the property. The Stamp Duty Ready Reckoner is
published by the concerned state government every year on 01 of
January.
Procedure For Payment Of Stamp Duty And Registration Charges
There are 3 ways in which you can pay stamp duty. They are:
Physical stamp paper
Franking
E-stamping

99
You must remember that all states will not have all 3 methods. In case
all 3 ways are available, you could choose the method that suits you.
Purchase Of Physical Stamp Papers:
This is the most traditional way of paying stamp duty and registration
charges. Here, you purchase non-judicial stamp paper from an
authorised vendor. Non- judicial stamp paper are papers that have
impressed stamps. Once you purchase the stamp paper, the
transaction details can be written/typed on them. Finding a vendor
selling this type of stamp papers is no easy job. Also, many a time
there is a shortage of such paper. If the stamp duty that has to be paid
is a high amount, then you might require many stamp papers. So, this
method is not preferred by many.
E-Stamping
To avoid counterfeit stamp papers and to make stamping easy, the
Government introduced e-stamping. In some states, e-stamping is
compulsory. E-stamping is essentially stamping done online. Stock
Holding Corporation of India Limited (SHCIL), has been appointed as
the official vendor for e-stamping and is also the Central Record
Keeping Agency for all the e-stamps that are used in the country.
In order to do e-stamping, you have to visit the SHCIL website. Choose
your state to see if e-stamping is allowed. You will get information on
the transactions that you must e-stamp and the list of collection
centres that will issue certificates to those who e-stamp. Fill up the
application form and give it to the collection centre along with the
money for the stamp duty.
There are several ways you can pay such as through Debit Cards,
Credit Cards, cheque, demand drafts and online banking. Once you
pay the stamp duty, you will get the e-stamp certificate. This certificate
will come with a unique certificate number (UIN) that will have the
issue date.
The benefit of e-stamping is that it is convenient. Another benefit is
that the authenticity of your e-stamp can be verified online using the

100
UID number. However, the issue with e-stamping is that a duplicate of
your e-Stamp will not be issued.

Franking:
This is a process where an authorised franking agent will put a stamp
on your document indicating that the stamp duty has been paid.
Before you execute the transaction for which stamp duty has to be
paid (typically this will be before signing on the document), you should
approach an authorised bank who will act as a franking agent, or a
franking agent to deposit the stamp duty. Once you pay the stamp
duty, a franking machine will be used to frank the document with a
special adhesive stamp.
Every state will have a minimum amount prescribed for franking. For
instance, minimum franking charges in Bengaluru are pegged at 0.1%
of the agreement value. So, if you are buying a house for Rs. 50 lakhs,
you need to pay 0.1% or Rs. 5,000 as charges for franking.
This fee will, however, be adjusted against the stamp duty at the time
you execute the sale deed. Say, if the stamp duty for the sale deed is
5.5%, then, you need to pay only 5.4% because you already paid a
franking charge of 0.1%.
Registration Of Documents After Paying Stamp Duty
Once you pay the stamp duty, the document has to be registered
under the Indian Registration Act with a sub-registrar. This registrar
should be of the jurisdiction where the property is situated if the
transaction involves property purchase.
The basic purpose of registration is to record the execution of the
document. Only when you register the document, it becomes legal
and the ownership, if any, is transferred to the right owner.
Registration Fee
The registration fee is a fee that is over and above the stamp duty. This
fee varies from state to state. For example, the registration fee in
Karnataka is pegged at 1% of the value of the transaction.

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What Happens, If You Pay Inadequate Stamp Duty?
It is not lawfully right to pay less stamp duty for your property. It is
required by law, that you pay the right stamp duty when getting your
property registered. Many people undervalue their property and
quote a low market value to escape paying high registration fees and
stamp duty charges. However, it is not advisable to do so. If caught,
you will be asked to pay a huge penalty and can even be imprisoned.
Also, if you are a commercial builder, your reputation will be at stake.
For more details on stamp duty charges, walk into the nearby property
registrar office or talk to a registered property consultant today.

[Link]

Taxation in Real Estate:

The information presented below is mainly applicable to

RESIDENTIAL property transactions and does not necessarily pertain
to commercial property transactions as rules may vary. Also unless
otherwise mentioned, below information is applicable to both
Resident Indians and NRIs as TAX rules pertaining to real estate
transactions are almost similar for both types of investors.

When it comes to purchasing, owning/holding and selling of a

property in India, only 3 kinds of taxes are involved – Capital Gains
Tax (payable only once on SALE of property), Property Tax (payable
every year while holding/owning a property) and Wealth Tax (payable
every year while holding/owning a property).
When you purchase a property, NO TAX is payable – although you
have to pay Registration & Stamp Duty which are not a form of TAX
and hence are not discussed in this article.
When is TAX payable on Real Estate Transactions in India?

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TAX is payable ONLY when you sell a property and is levied ONLY on
the capital gains portion or profits that you make in the transaction
(and hence the name – Capital Gains Tax).
If you sell a property at cost price or at a loss, NO TAX is payable and
you may infact be eligible to use this loss to write-off current or future
gains from either real estate transactions or other sources of income
such as sale of equity mutual funds or shares, etc and thus reduce
your overall capital gains tax. In other words, if you incur a loss by
selling a property, you can set-off this loss against your capital gains
or profits from sale of other investments and hence reduce your
overall capital gains, which in turn means you have to pay lesser tax.*1
NO TAX is payable when you purchase a property (when you purchase
a property, you have to pay Stamp Duty and Registration Charges –
but this is not a form of tax and hence is not discussed here).
Capital Gains on Sale of Property
The profit on sale of real estate assets is treated as capital gains. For
calculation of tax payable on these gains, they are classified as either
short term or long term capital gains on below basis :
Short Term Capital Gains : If asset is held for a period not exceeding
36 months from the date of acquisition. I.e. property is sold within 3
years from date of purchase.
Long Term Capital Gains : If asset is held for a period exceeding 36
months from the date of acquisition. I.e. property is sold after 3 years
from date of purchase/registration (whichever is later).
Rate of Capital Gains Tax :
After the capital gains are classified on above basis (i.e. short term or
long term), the gains are taxed at following rates:
Short Term Capital Gains : Short term gains are simply added to your
total taxable income for the year in which property is sold and taxed
at your applicable slab rate. Due to this, they tend to be taxed at the
maximum rate of 30.9% as such gains from even a small property
would push your total income into the highest tax slab (i.e. beyond the
Rs.10 lakhs tax slab/barrier).
103
Long Term Capital Gains : 20.6% after Indexation (concept of
Indexation is explained below).
Method of Computing Capital Gains :
Sale Proceeds Of Assets : [Link]
Less : Cost Of Acquisition Of Asset : [Link]
Less : Expenses incurred on modification/upkeep : [Link]
Capital Gains : [Link]
TAX is charged as per applicable rate ONLY ON THE CAPITAL GAINS
portion. While the above method is common for calculating both shot
term and long term capital gains, when it comes to calculating Long
Term Capital Gains, the Cost of Acquisition is the “Indexed Cost of
Acquisition” of the property.
Indexed Cost of Acquisition is a system that helps you claim higher
cost than actual cost of acquisition. The term “indexed cost of
acquisition” is the amount which bears, to the cost of acquisition, the
same proportion as cost inflation index for the year in which the asset
is transferred bears to the cost inflation index for the first year in
which the asset was held (i.e. the year in which asset was acquired) by
the assessee or for the year beginning on April 1, 1981, whichever is
later.
In plain English, Indexed Cost of Acquisition or Indexation as it is
popularly referred to, helps you decrease your overall tax liability by
inflating/increasing your cost of acquisition of property – which in turn
reduces the capital gains or profits – which in turn reduces the total
tax payable on the capital gains or profits earned from the sale of such
property.
Exemptions Available for Long Term Capital Gains Tax :
If interested, both Resident Indians and NRIs can claim exemption
from paying long term capital gains tax (this applies to residential
property only ) if they satisfy any of the below conditions :

104
 1. They purchase a residential house property within specified
period* from date of sale of existing house, [Section 54F of the
Income Tax Act] or
2. They construct a residential house within specified period* or
within 3 years from date of sale of existing house, and
3. They do not sell the new residential house in both above cases
for a period of 3 years from the date of its purchase or
construction, or
4. They deposit the funds before due date of furnishing the return
of Income into CAPITAL GAINS ACCOUNTS SCHEME 1988 and
utilize the said deposit for purchase or construction of new
residential house within the specified period as above; or
5. They reinvest (within 6 months of sale) the long-term capital
gains into any of the following assets : Bonds of National Bank
for Agricultural and Rural Development (NABARD) / National
Highway Authority of India (NHAI) / Rural Electrification
Corporation Limited (RECL) / National Housing Bank (NHB) /
Small Industries Development Bank of India (SIDBI) – [Section
54EC of the Income Tax Act] or Eligible public issues of equity
shares by Indian companies (in case of sale of listed securities)
[Section 54ED of the Income Tax Act].
6. Specified Period in this case means one year before or two years
after the date on which the transfer took place or within a period
of three years from the date of its construction.
No exemption is available for Short Term Capital Gains tax.
Amount of Exemption – Lower of the following:
a. The amount of capital gain generated on transfer of residential
house property;
b. The amount invested in purchasing or construction of new
residential property (including the amount deposited in the deposit
scheme/long term bonds)
.

105
Indirect Tax on Real Estate:
While CAPITAL GAINS tax is the only tax levied on real
estate transactions in India, owning or holding a property involves
two types of taxes as explained below:
Property Tax
This is a tax that is payable on the registered or market value of the
property every year and is payable to the local municipality or
government body. The tax rate and basis of calculation varies from
state to state and also from one municipality to the other within a city.
It is generally between 0.5% to 2% of property’s fair market value (this
rate is applicable only to residential property and rate for commercial
property is generally higher and again varies from state to state).
Wealth Tax
Wealth tax is an additional (but rarely applicable) tax payable on non-
productive assets over and above the minimum exemption limit of
Rs.1 crore. UNPRODUCTIVE ASSETS are those that do not generate
any revenue – such as farmhouses, vacation homes, cars, vacant
lands, jewellery, vacant homes, etc. A taxpayer may own unrestrained
value of PRODUCTIVE ASSETS such as shares, bank deposits, units,
rented or leased commercial or residential property, industrial
property, etc. without paying any wealth tax.
Wealth Tax is payable on net taxable wealth which is arrived at after
deducting the debts and liabilities related to the taxable assets. The
items of wealth which are either totally exempt from wealth tax and
or which are so exempt from wealth tax up to a particular limit are
deducted from the gross wealth to arrive at the taxable wealth on the
valuation date. Because it is applicable to only UNPRODUCTIVE
ASSETS, it is possible to not pay any wealth tax at all despite
possessing assets worth crores of rupees; as long as one’s non-
productive assets do not surpass Rs. 1 crore.
Wealth Tax Rate: Currently charged at 1% of net wealth subject to
basic exemption of Rs. 1,00,00,000/- (Rupees One Crore) and is the
same for Resident Indians and NRIs.

106
In case of NRIs having any of the following assets, the same are not
taxable in the hands of NRI under Wealth Tax Act :

i. One house property or

ii. One plot of land provided area is less than 500 square meters or
less.
In addition to the above, OVERSEAS ASSETS held by NRI are also
exempt under Wealth Tax Act.
Specific exemption for an NRI returning to India:
Where an NRI/PIO returns to India for permanent residence, the
money and the value of assets brought by him into India and the value
of assets acquired by him out of such money within one year
immediately preceding the date of his return and at any time
thereafter are totally exempt from wealth tax for a period of seven
years after return to India.
Source: [Link]
CONCLUSION: With proper planning and timing the sale of
property and reinvesting proceeds in appropriate instruments on
time, you can greatly minimize or even avoid having to pay any
capital gains taxes. It is best to consult both your real estate
adviser and your chartered accountant to figure out the best
solution in this case as each one of you will have different
variables to take into consideration.
In short buying and selling of immovable properties like house,
buildings, and lands with all legal process. In India small scale real
estate do not have much competition but in large scale it have
big competition with influence of politics.

Buying land now and selling after 10 years ….will give you good
margin and purely depend on geographical location and other
factors.

107
 11. E-Commerce
India has an internet users base of about 475 million as of July 2019,
about 40% of the population. This number is expected to be 650
million by the end of 2020. Despite being the second-largest user base
in world, only behind China (650 million, 48% of population),
the penetration of e-commerce is low compared to markets like
the United States (266 million, 84%), or France (54 M, 81%), but is
growing, adding around 6 million new entrants every month. The
industry consensus is that growth is at an inflection point.

E-commerce (electronic commerce)

It is the activity of electronically buying or selling of products on online
services or over the Internet. Electronic commerce draws on
technologies such as mobile commerce, electronic funds
transfer, supply chain management, Internet marketing, online
transaction processing, electronic data interchange (EDI), inventory
management systems, and automated data collection systems. E-
commerce is in turn driven by the technological advances of
the semiconductor industry, and is the largest sector of
the electronics industry.
Modern electronic commerce typically uses the World Wide Web for
at least one part of the transaction's life cycle although it may also use
other technologies such as e-mail. Typical e-commerce transactions
include the purchase of online books (such as Amazon) and music
purchases (music download in the form of digital distribution such
as iTunes Store), and to a less extent, customized/personalized
online liquor store inventory services. There are three areas of e-
commerce: online retailing, electronic markets, and online auctions.
E-commerce is supported by electronic business.

108
E-commerce businesses may also employ some or all of the
followings:

Online shopping for retail sales direct to consumers via Web

sites and mobile apps, and conversational commerce via live
chat, chatbots, and voice assistants.
Providing or participating in online marketplaces, which process
third-party business-to-consumer (B2C) or consumer-to-
consumer (C2C) sales
Business-to-business (B2B) buying and selling;
Gathering and using demographic data through web contacts
and social media
Business-to-business (B2B) electronic data interchange
Marketing to prospective and established customers by e-
mail or fax (for example, with newsletters)
Engaging in pretail for launching new products and services
Online financial exchanges for currency exchanges or trading
purposes.

Conclusion: In short we can create selling accounts in e-

commerce websites like Amazon, Flipchart…etc. and sell our
homemade or other commercial goods through online medium
ex : if u have skill set in tailoring ..Painting…crafts work.
Embroidery …etc. we can use this e-commerce platforms to sell it
worldwide Or create our own website or mobile APPs to sell
them.

For detail process we have to go through all terms and conditions.

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 12. Business
A business is an individual or group or organization where people
work together. In a business, people work to make and sell products
or services. ... A business can earn a profit for the products and
services it offers.
Businesses can be for-profit entities or non-profit organizations that
operate to fulfil a charitable mission or further a social cause.

Businesses range in scale from a sole proprietorship to an

international corporation.

Business Structures
Many businesses organize themselves around some sort of hierarchy
or bureaucracy, where positions in a company have established roles
and responsibilities. The most common structures include sole
proprietorships, partnerships, corporations, and limited liability
companies, with sole proprietorships being the most prevalent.

A sole proprietorship, as its name suggests, is a business owned and

operated by a single natural person. There is no legal separation
between the business and the owner; the tax and legal liabilities of the
business are thus that of the owner.

A partnership is a business relationship between two or more people

who join to conduct business. Each partner contributes resources and
money to the business and shares in the profits and losses of the
business. The shared profits and losses are recorded on each
partner's tax return.

A corporation is a business in which a group of people acts together

as a single entity; most commonly, owners of a corporation are
shareholders who exchange consideration for the corporation's
common stock. Incorporating a business releases owners of financial
liability of business obligations; however, a corporation has
unfavorable taxation rules for the owners of the business.

110
For this reason, a relatively new (first available in Wyoming in 1977 and
other states in the 1990s) business structure, a limited liability
company (LLC), is available; this structure combines the pass-through
taxation benefits of a partnership with the limited-liability benefits of
a corporation.

Business Sizes
Business sizes range from small owner-operated companies, such as
family restaurants, to multinational conglomerates such as General
Electric. Larger businesses may issue corporate stock to finance
operations. In this case, the company is publicly traded and has
reporting and operating restrictions. Alternatively, smaller businesses
may operate more independently of regulators.

Industries
A company may describe its business by communicating the industry
in which it operates. For example, the real estate business, advertising
business, or mattress production business are industries in which a
business can exist. Because the term “business” can be interchanged
with day-to-day operations as well as the overall formation of a
company, the term is often used to indicate transactions regarding an
underlying product or service.

Activities in a Business group

Accounting
Accounting is the measurement, processing, and communication of
financial information about economic entities[15][16] such as
businesses and corporations. The modern field was established by
the Italian mathematician Luca Pacioli in 1494.[17] Accounting, which
has been called the "language of business",[18] measures the results of
an organization's economic activities and conveys this information to
a variety of users, including investors, creditors, management,
and regulators.[19] Practitioners of accounting are known
as accountants. The terms "accounting" and "financial reporting" are
often used as synonyms.

111
Finance
Finance is a field that deals with the study of investments. It includes
the dynamics of assets and liabilities over time under conditions of
different degrees of uncertainty and risk. Finance can also be defined
as the science of money management. Finance aims to price assets
based on their risk level and their expected rate of return. Finance can
be broken into three different sub categories: public
finance, corporate finance, and personal [Link] also
include budgeting, forecasting and lending money, and is defined as
the management of money.[20]
Manufacturing
Manufacturing is the production of merchandise for use or sale
using labour and machines, tools, chemical and biological processing,
or formulation. The term may refer to a range of human activity,
from handicraft to high tech, but is most commonly applied
to industrial production, in which raw materials are transformed
into finished goods on a large scale.
Marketing
Marketing is defined by the American Marketing Association as "the
activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients,
partners, and society at large."[21] The term developed from the original
meaning which referred literally to going to a market to buy or sell
goods or services. Marketing tactics include advertising as well as
determining product pricing.
With the rise in technology, marketing is further divided into a class
called digital marketing. It is marketing products and services using
digital technologies.
Research and development
Research and development refer to activities in connection with
corporate or government innovation. Research and development
constitute the first stage of development of a potential new service or
product. Research and development are very difficult to manage since
the defining feature of the research is that the researchers do not
112
know in advance exactly how to accomplish the desired result.[citation
needed]

Safety
Injuries cost businesses billions of dollars annually.[22] Studies have
shown how company acceptance and implementation of
comprehensive safety and health management systems reduce
incidents, insurance costs, and workers' compensation claims.[23] New
technologies, like wearable safety devices[24] and available online
safety training, continue to be developed to encourage employers to
invest in protection beyond the "canary in the coal mine" and reduce
the cost to businesses of protecting their employees.

Sales
Sales are activity related to selling or the number of goods or services
sold in a given time period. Sales are often integrated with all lines of
business and are key to a companies' success.[25]

Types of Business
There are three major types of businesses:
1. Service Business
A service type of business provides intangible products (products with
no physical form). Service type firms offer professional skills, expertise,
advice, and other similar products.
Examples of service businesses are: salons, repair shops, schools,
banks, accounting firms, and law firms.
2. Merchandising Business
This type of business buys products at wholesale price and sells the
same at retail price. They are known as "buy and sell" businesses. They
make profit by selling the products at prices higher than their
purchase costs.

113
A merchandising business sells a product without changing its form.
Examples are: grocery stores, convenience stores, distributors, and
other resellers.
3. Manufacturing Business
Unlike a merchandising business, a manufacturing business buys
products with the intention of using them as materials in making a
new product. Thus, there is a transformation of the products
purchased.
A manufacturing business combines raw materials, labor, and
overhead costs in its production process. The manufactured goods will
then be sold to customers.

4. Hybrid Business
Hybrid businesses are companies that may be classified in more than
one type of business. A restaurant, for example, combines ingredients
in making a fine meal (manufacturing), sells a cold bottle of wine
(merchandising), and fills customer orders (service).

Forms of Business Organization

These are the basic forms of business ownership:
1. Sole Proprietorship
A sole proprietorship is a business owned by only one person. It is
easy to set-up and is the least costly among all forms of ownership.
The owner faces unlimited liability; meaning, the creditors of the
business may go after the personal assets of the owner if the business
cannot pay them.
The sole proprietorship form is usually adopted by small business
entities.
2. Partnership
A partnership is a business owned by two or more persons who
contribute resources into the entity. The partners divide the profits of
the business among themselves.

114
In general partnerships, all partners have unlimited liability. In limited
partnerships, creditors cannot go after the personal assets of the
limited partners.
3. Corporation
A corporation is a business organization that has a separate legal
personality from its owners. Ownership in a stock corporation is
represented by shares of stock.
The owners (stockholders) enjoy limited liability but have limited
involvement in the company's operations. The board of directors, an
elected group from the stockholders, controls the activities of the
corporation.
In addition to those basic forms of business ownership, these are
some other types of organizations that are common today:
Limited Liability Company
Limited liability companies (LLCs) in the USA, are hybrid forms of
business that have characteristics of both a corporation and a
partnership. An LLC is not incorporated; hence, it is not considered a
corporation. But, the owners enjoy limited liability like in a
corporation. An LLC may elect to be taxed as a sole proprietorship, a
partnership, or a corporation.
Cooperative
A cooperative is a business organization owned by a group of
individuals and is operated for their mutual benefit. The persons
making up the group are called members. Cooperatives may be
incorporated or unincorporated.

115
225 Small Business Ideas with Low Investment in 2020

#1 Unique Business Ideas

1. Children Play/Adventure Area
First unique and profitable business idea is children play area or
adventure place. Children love spending time at creative play area or
at place where they can feel adventure. You can start your own
business by establishing such a place. Investment required for this
business is moderate.

2. Pregnant lady Exercise class

The second unique business idea is related to women. It is pregnant
lady exercise class. You need to get trained in order to open this type
of business. It is unique business and success rate of such business is
high.

3. Tea/Coffee Café
One of the best creative business ideas is tea or coffee café. In this
business you need to establish unique tea or coffee café in terms of
ambiance and furniture. You can also think of serving tea or coffee
with unique test. You can start this business at own or rented premise.

4. Custom Gift Store

Custom Gift Store is among one of the best creative business ideas. In
this business you need to serve customer by offering customized gift
as per their requirement. Few examples are printed t-shirt, mug,
customized card, photo album, watch, mirror, card holder etc. You can
open this store online or offline. A success rate of this business is high.

5. Antique Business
Antique product business is very good business idea. In this business
you will be dealing with antique items and furniture. You can start this
business by arranging auction or by opening a small shop. It is
luxurious segment business and finding buyers in this business is
difficult. However, it is highly profitable business.

6. Game Organizer at Event

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Next creative business idea is becoming game organizer at events
such as birthday party, anniversary etc. You have to be extremely
good in communication and creativity in order to succeed in this
business.

7. Hot Air Balloon or Boat Ride Services

Business Ideas in adventure category are Hot Air Balloon service
business or Boat Ride business. This type of business demands huge
investment and skilled manpower. You will also need big space where
you can start this business.

8. DJ Services
Music lover person with creativity can think of starting DJ services
business. You need to have right skill and experience to start this
business. You need CD Players, Turntable and mixtures for DJ
business.

9. Chat bot services

A Chatbot is a next-generation business. In this business, you need to
build bots as per business requirements. A business of chatbot
demands lot of technical expertise and knowledge. Investment
requirement for this business is low.

10. Interior Designer

One of the most popular and creative options for the business is
becoming an interior designer. If you are from civil or architecture
background you can start an interior design business.

Also Read – 10 Unique Business Ideas for 2018

11. Dance Coaching
Dance coaching class is among one of the best business ideas. It is low
investment creative business idea. You can either hire a dance teacher
or plan to become dance teacher by learning dance. Investment
requirement for this business is very low.

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12. Music Tutoring
Setting up Music Tutoring business is next in the list of creative
business ideas. This business demands specialized skill and lot of
experience. If you are new to music, I suggest not to go for this
business. You can start this business from home also.

13. Unique Seasonal Ice Creams

If you are planning something innovative you should look at unique
seasonal ice cream business. However, you need to develop formula
of making unique ice creams. This requires time and skills.

14. Hair Business

Hair business idea may sound unusual to you. However, it is a fact that
hair business is highly profitable business idea. Lot of hair is imported
from India and used for making wigs.

15. Ethnic Food Service

Another home based business idea is ethnic food service. You can
serve Ethnic Food for your community at your home. You can charge
money for this. If you are good at cooking food this could be a very
good business option.

16. Funeral Services

Funeral service is a new concept in India. These type of organization
help families and relative to take a decision and give them advice
about a ritual of the funeral. Not only that they will arrange for all
material required during the funeral ritual.

17. Doula Services

Doula service is a new concept in India. Doula services mean providing
emotional, physical and assistance in getting the information she
needs to make empowered decisions throughout her pregnancy,
birth.

18. Organic Farming

If you have some land, you can think of starting organic farming. You
need to do a research before starting this business.

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19. Mobile garage service
Opening mobile garage by keeping mobile manpower/repairers is
good business idea because usually car breakdown takes place in the
area where garage service is not available.

#2 Best home based business ideas

20. Home Chocolate Business
Chocolate is one of the great product for home business. If you love
making chocolate make it your business. You need chocolate recipe,
utensils, cookware, molds and packing material to start this business.
You need to tie up with shopping malls or small shop keepers to
purchase your chocolate. You can think of creating online presence
also. Investment required for this business is low.

21. Tuition Class

Starting at Tuition Class is one of the best home based business idea.
If you have good teaching skill and knowledge you can start this
business. You just need few wooden benches and blackboard for
starting this business. At an initial stage this business demands mouth
publicity or advertisement.

22. Recruitment Services

One of the most popular home based business idea is recruitment
services business. In this business you just need data of candidates
looking for Job. Just refer a candidate to the company and get
commission out of it. It is very good small business idea.

23. Tailor
If you are housewife and want to earn part time money you can start
tailoring service at home. This business does not require much
investment, you just need tailoring machine and knowledge of sewing
cloths. To begin with you can start cloth altering and cloth
modification. If required get necessary training on sewing.

24. Tiffin Services

Starting a tiffin services is a very viable home based business idea.
Everyone need food, if you are good at cooking tasty food at

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reasonable price you can start this business. You need to do proper
market research before starting this business. Investment required
for this business is very low. Tasty food and timely delivery is success
mantra of this business.

25. Cooking Class

A housewife expert in cooking can start a cooking class at home. You
may need to buy some equipment’s like oven, tandoor, chopper etc.
to make your cooking easy. You may need extra room or space a
kitchen to teach all students. You may need to take training to improve
your culinary skills in making specialized food such as Thai, Chinese,
Italian etc.

26. Hobby Class

Opening Hobby class is next in the list of best small business ideas. In
hobby class you can teach dance, craft, drawing, music etc. This idea
is suitable for women and housewives.

27. Yoga Class

Starting a yoga class is one of the profitable and lucrative home based
business option. Wellness industry in India is growing at faster pace.
People are changing their mindset from remedial to preventive care
approach. If you are certified yoga teacher or expert in yoga you can
start your own Yoga Class. First decide type of Yoga you will be
teaching and your competency. Next is deciding place and investment
required for the business.

Also Read – 5 Small Business Apps to improve your business efficiency

28. Spoken English Coaching Class
Spoken English coaching is popular home based business idea. If you
are fluent in English you can start Spoken English coaching classes.
English is globally recognized language. People are ready to spend
money to develop a skill related to spoken English. The class can be
started with minimum investment. However, you have to be perfect
and professional in teaching English.

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29. Foreign Language Coaching Class
Learning a foreign language is a trend today. Students and working
professional both opt for learning a foreign language. French and
Spanish are popular foreign language. If you expert in any of these
languages you can start foreign language class.

30. Insurance Agent

The next home based business idea or profession is insurance agent.
In this business you need to sell insurance policies. You will earn
commission on every policy. You should have good communication
skill and convincing power to become successful in this business.

31. MLM – Network Marketing

MLM is also known as referral marketing business. In this business
you need to sell product and services of associated company. Your
income includes income from your own sales and percentage income
from the sales group which is recruited by you. It is a team business
which demands a lot of hard work and dedication. I don’t like it
personally….

32. Marriage Bureau

One of the best home based business ideas for housewives is match
making or marriage bureau. It is simplest form of business where
minimum investment is required. All you need is a database of boys
in girls searching for the better half. Your income will be membership
registration fees.

33. Medical Sample Collection

A pathology clinic are always searching for person who can collect
medical sample on their behalf. If you have knowledge of blood
specimen collection you can enter into this profession. It is less
competitive business option.

#3 Best part time business ideas

34. Errand Services
Errand Services is a very good part-time business option. In this
business, you need to extend services of doing errand task such as

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banking, grocery shopping, paying utility bills, delivering things etc.
This business does not demand any special skills.

36. Party planner

The party planner is next in the list of part-time business ideas. In
metro city giving a party is culture. If you are planning to start a
business in the metro city, providing planning service for a party is a
good business idea. This business demands very good management
and planning skills.

37. Fitness Trainer

If you love doing physical exercise and you are certified in a fitness
instructing you can become a fitness trainer. There are various
institutes offering this type of course. You need to do a lot of hard
work and maintain your diet to become a fitness trainer.

38. Accounting and Record Keeping

A finance person with expertise in software can start account and
recordkeeping business. In this business, you need to keep records of
all financial business transactions. You can get fixed money for this.
You will need special training for this business.

Also Read – 5 Best Unique Small Business Ideas

39. Day Care Services
Daycare service is becoming one of the lucrative business ideas in
India. Working couples are always looking for a safe and secure place
to keep children. If you like children you can start child day care to take
care of children for few hours after their school. However, you need
to make a small investment or require a suitable place to start child
daycare.

40. Sofa Cleaning Services

A cleaning service at home and office are always in demand. If you
have a team of semi-skilled or unskilled manpower you can start this
business. You need a vacuum cleaner and chemical for cleaning sofa
business.

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41. Wedding Planning Services
Wedding planners are always in demand. If you have planning skill and
staff, you can start your own wedding planning services. This business
demands moderate investments.

42. Visa Consultant

Good visa consultants are always in demand. If you have knowledge
of visa rules and regulation then you can plan to establish your own
visa constantly firm.

43. Personal Chef

A personal chef is a person hired by different clients for preparing
meals. If you have a skill to make tasty food you can become a
personal chef. You can generate moderate income from this business.

44. Sport Coach

A sports coach is a person involved in the training of the operations of
a sports team or of an individual sportsperson. You need to have an
appropriate qualification like a degree in sports coaching.

45. Business Idea of Event Management

If you are good at planning and execution skills you can become a
good event planner. In this business, you need to do end to end event
management. You need competent manpower to start this business.

#4 Best low-cost business ideas

46. Mobile Food Shop
Mobile Food Shop is becoming popular business option in India. In
mobile food shop you need to serve food on the [Link] can buy
small old vehicle and convert it into mobile food shop. Investment
required for starting mobile food shop business is low.

47. Fast Food Parlor

Fast food is the first choice for everyone. Therefore, starting a fast
food parlor in the center of the city could be a very good business
option. You need to serve tasty and healthy food in economical rate
to get quick success.

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48. Diet Food Shop
Next small business idea is diet food shop. A lot of people are
interested to reduce weight and ready to accept diet food. Thus
starting a Diet Food store will surely turn out to a profitable affair. You
need to do a lot of research before starting this business.

49. Health Drink

Another health-related business idea is starting a health drink parlor.
Neem Juice, Neera are some of the famous health drink. People are
fond of these type of drink. Thus starting a business related to health
drink is a very good affair.

Also Read – 30 Food Business Ideas with low investment

50. Ice Dish & Soda Shop
Ice Dish and Soda Shop are popular low-cost business ideas. A profit
margin in this business is very high. You need to make a small
investment of purchasing ice snow maker and soda maker. You will
also need semi skill manpower for this business.

51. Courier Shop

Courier shop is an evergreen business option. Many people today look
for better shipping costs and timely delivery if you can manage it this
business is for you. You can also take franchise of reputed courier
company.

52. Laundry Shop

Next business idea is laundry shop. You can start laundry shop with a
low investment in a rented shop. You need labor helping you in doing
laundry work. This business is for low-skill uneducated people.

53. Candle Making

Candle making is low investment business idea. This business can be
started from home also. You need raw material such as mold, material
for making wax. You can think of buying readymade candle making
machine for bulk production.

54. Soap Making

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One of the simple business ideas with low investment is soap making.
In order to start this business, you need to understand complete
process of soap making. You will need soap mold and raw material to
make soap. You need to put a lot of effort towards advertisement and
marketing of your soap.

55. Idol Making

One of the creative low-cost business ideas is idol making. This
business demand lot of skill and creativity. Idols are used as a
showpiece or as a decorative item. Festival season like Ganesh
Chaturthi, Durga Puja demands an idol. You can start making an idol
and generating money out of it.

56. Bag Making

Leather and Plastic bags are always in demand. You can start this
business with moderate capital. All machines and raw materials used
for its manufacturing are easily available from indigenous sources and
not much technology is involved in manufacturing. At a later stage,
you can customize and start bag printing also.

57. Pickle Making

A pickle making is a home based business option for women. This
business can be started with low investment. You just need a skill of
making pickle. A good packaging, advertisement, and marketing are
key in order to succeed in this business.

58. Papad Making

Along with pickle making you can think of starting papad making
business. It is one of the best business ideas for women. In order to
start this business at large-scale, you need to employee number of
labors. At long run, this could be a profitable business.

59. Fruit Jam Making

Fruit Jam making is the low-cost business idea. This type of business
is generally suitable in hilly areas, where the cost of raw material (fruit)
is low. You need good fruit jam making machine and raw material to
start this business. You need to spend money on advertising.

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60. Career Counseling
Parents and students are always looking for a good career counselor
for the selection or right career and study option. They generally seek
guidance/support from an expert. If you are expert in this area you
can become a good counselor and earn money.

61. Food Catering Business

Food catering business is an evergreen business option. This business
demands planning and execution skill. You need to serve tasty food in
order to get quick success in this business.

62. Real Estate Agent

One of the highly profitable business ideas is opening real estate
agency. In this business, you need to help people in finding the right
property for rent or sell. You can earn hefty commission from every
transaction.

63. Aggarbati & Beddi Making

Another small-scale business is Aggarbati & Beedi making. This
business does not demand any skill. There are readymade machines
available for making Aggarbati. You just need knowledge of
manufacturing and marketing.

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64. Religious Items
Religious items business is an evergreen business. The religious items
such as Diya, Dhup, Murthi, Shankha are always in demand. You can
start this business and earn moderate income.

65. Pest Control

Many people today call pest control person at home or at the office.
This gives birth to a business idea called as pest control. You need
good labors to start this business.

66. Paan(Leaf) Store

Paan(Leaf) Store is low cost business idea. In this business, you need
to prepare and sell various types of Paan, tobacco, mukhwas and cold
drink items. Paan is widely used as mouth freshener in India. You need
to learn to make unique paan. You can serve it with different style such
as cover with silver foil, spread with gulkand and other items.

67. Landscaping Service

A demand of Landscaping service provider is increasing. If you have
expertise in maintaining and growing good landscape you can start
this business. Make sure to carryout research before starting this
business.

68. Aquarium Shop

Aquarium is good low cost business idea. It is very good to keep fish
tank or aquarium in the home. Aquarium gives pleasant experience
and peace. It is even good for Vastu. You can start your own business
by opening Aquarium shop.

69. House repair Services

Every house demands repairing, thus starting house repairing
business could be very good business option. If you have knowledge
of civil and construction you can start house repair service business.

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70. Palm Reader or Astrology
Palm Reader or Astrology is next business idea. You need to undergo
training or course in order to become palm reader or astrologer. You
can easily earn around Rs.25000 per month from this business.

71. Fumigation Services

Fumigation is a type of pest control where you need to fumigate the
material intended for export. You need special chemical and
equipment for this service.

72. Spy & Security Services

Today more and more people are adopting western culture, this gives
birth to a requirement of spy or detective. Many individuals and
companies take services of detective today.

73. Car Pooling Services

Carpool means sharing a single car for going to the same destination.
This will split fuel cost and thus it will save money for an individual.
You can start a service by identifying potential customers, linking them
up and charging a fee for facilitation of such a service.

74. Software Training

IT expert can start software training business. You need expert
trainers in this field. You can select computer language such as
C,C++,JAVA, HTML etc.

#5 Best online business ideas

75. Blogging
Blogging is among one of the best online business ideas. In this
business, you need to show your expertise by sharing unique
information. You just need a domain name and hosting space. To
make money online from a blog you need to gain large amounts of
traffic from a specific niche. You can make money from the direct
advertisement or by Google Adsense.

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76. Vlogging
Vlogging meaning making a video on various topics and sharing
online. A person making videos and publishing is known as a vlogger
and platform used for sharing is known as a vlog. You can start
uploading videos to youtube and embed in your vlog. You can earn
money from Youtube Channel Partner program.

77. Youtube Channel

Another interesting and creative online business idea is starting own
youtube channel. Youtube offers a lot of money on advertisement for
youtube channel partner. In this business, you need to shoot/make
unique videos and upload it to youtube channel on a regular interval.
After gaining popularity you need to apply for youtube channel
partner program. This program is for placing an advertisement on the
video uploaded by you.

78. Freelance writer

A freelance writer is next business or career option. If you are good at
generating quality content (writing) you can make a lot of money. You
need to tie up with bloggers or websites looking for content. However,
in order to become successful in this field, you have to be extremely
good.

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79. SEO Expert
Search Engine Optimization (SEO) is science. It involves a lot of
techniques and tactics. A task or SEO Expert is helping a website to
increase the ranking. If you are very good at Search Engine
Optimization you can set up your own business for providing SEO
Consultancy.

80. Hosting Paid Webinars

The next online business idea is hosting paid webinar online. If you
are a highly skilled person with extraordinary domain knowledge you
can host a paid webinar. The webinar is web-based seminar
presentation or video hosted on the internet. It requires unique skills
to build successful webinar. In order to host webinar online, you
should be an owner of the website which is well known, with good
traffic ranking.

81. App Development

The next business idea is App development and building an app. In
order to build the app, you should have technical knowledge about
android programming. Once your app is ready you can place it online
or on google play store. Earning from an app is possible by the making
it paid product.

82. Affiliate Marketing

The next part-time job is Affiliate Marketing. Affiliate marketing means
promoting others product on your website and help them to increase
the sale. On every product sell, you will get a commission. There are
multiple websites that provide affiliate marketing program. You need
to enroll in the program and place banner or link on your website. You
need not worry about product shipment, customer handling etc.

83. Products Sell on Facebook

The next online business idea is selling product on Facebook.
Facebook provides facility to make your own store or group online.
Other like-minded people can become a member of this store or
group and you can carry out marketing for product sell.

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84. Domain Flipping
Domain filliping or buying and selling domain is next job cum business
idea. This idea requires an investment of small amount. In this job, you
need to purchase a domain at a low price and sell it at a high price.
There are multiple websites that provide domain auction facility
online.

85. Sell Photos Online

If you are creative and good at clicking photographs. You can sell
photos online and generate a lot of money. There are many
companies, agency, and individuals who are looking for unique
photographs. They are ready to pay money for new and unique
photos.

86. Stock Market Trading

One of the most profitable business is stock market trading. You can
start this business from the moderate capital. However, this business
demands a lot of knowledge and expertise. You have to be extremely
good in trading to make a profit.

87. Data Entry

This is prototype job in which you need to engage yourself in doing a
job of entering data or filling the form as per requirement. Your typing
speed and efficiency is important while doing data entry job. You will

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find multiple website offering data entry job. However, you need to be
careful and select a legitimate website for data entry jobs.

#6 Best Profitable business ideas

88. Restaurant
A restaurant is a food-based best profitable business idea. This
business requires intensive investment and meticulous planning. In
addition to this, you require a good chef for cooking food. The time
requires for getting success in the restaurant business is high.

89. Readymade Namkeen Breakfast Shop

The concept of readymade Namkeen and breakfast is very famous
today. People are fond of Namkeen. They usually prefer readymade
Namkeen and breakfast instead of cooking at home. This makes
Namkeen shop lucrative business idea. You need to do a moderate
investment in this business.

90. Mobile Sales and Repair

Mobile phone sales and repair is a profitable business option. Mobile
phone business is growing exponentially. Every common man today
prefer the smartphone. The increasing smartphone usage offers a
good business opportunity for sale and repair of smartphones. You
need skill and capital in order to start this business.

91. Health Club

Starting a health club is one of the most profitable business
ideas. Health is wealth and people are ready to spend money to
maintain good health. For a daily workout, they prefer to go to gym or
health club. If you have money and suitable place you can start health
club. A chance of getting success in this business is very high.

92. Package Drinking Water

Pure drinking water is in demand today. Nowadays people prefer
package drinking water not only at outside but also at home. This is
because of increase in health awareness. So, starting a package
drinking water supply business is a successful business idea. However,
you need to make a considerable investment for establishing water

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filtering and package drinking plant. However, you need to get
approval from multiple agencies like BIS, pollution control, water test
report etc.

93. Jewelry Production & sale

Jewelry Production and sale is a profitable business option. This
business demands extensive skill, training, and investment. A profit
margin associated with this business is very high. You can start this
business from home.

94. Dairy
The next small profitable business is Dairy serving milk, sweet and
related products. These types of products are always in demand. You
can earn good profit from these products. You need small shop and
small capital in order to establish a dairy business.

95. Commercial and Industrial Machinery Equipment Rental

Commercial and Industrial Machinery Equipment Rental is a business
idea that requires massive capital investment. In this business, you
need to purchase equipment like cranes, earth movers etc and give it
on rent. You can earn a massive profit over a long run.

96. Travel Agency

If you love traveling and enjoys helping other in travel, you can plan to
start travel agency. You need small shop, computer and contact with
various hotel and travel company that’s it. You may need experienced
manpower to run this business.

97. IT Hardware shop

IT Hardware Store is profitable business idea. In this business, you
need to sell IT Hardware items such as laptops, desktops, servers,
hard disks, network devices, mouse, speaker etc. The success of this
business depends on demographic and demand.

#7 Big Investment Business ideas

98. Textile Unit

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Textile unit is business idea that demands lot of investment. In this
business, you need to produce a raw fabric or other textile products
to sell to individual or business. This business requires space and
machinery. In addition to this, you need to evaluate market before
starting this business.

99. Rice Mill

Rice Mill is next big investment business. There is a large marketplace
for rice in India and abroad. Rice is an essential food of majority
population in India. You need to undergo with series of approval for
establishing this business. After approval, you need to purchase and
install machinery for rice mill.

100. Beer and Wine Making

Beer and winemaking is an expensive affair. You need raw material
and a lot of other stuff like storage facility and bottling facility. You
need to take number of approval before starting this business.

101. Manufacturing Fabrication Plant

A manufacturing fabrication plant is facility that does welding,
machining and produces metallic finish goods. It is big investment big
profit business. You need skill manpower and lot of machinery for this
business.

102. Crane and Lifting Service

Crane and liftings service is big investment business. Construction and
manufacturing units require crane or lifting equipment. You can offer
crane & lifting services to the customer and earn money.

103. Transportation services

In this business, you need to provide facility of transportation to the
customer. You can offer car or bus facility to end user. It can be by call
or pre-book facility. You need to invest lot of money for buying car and
bus.

Taxi services like OLA, UBER…….

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104. Car Parking Services
Car parking service is a recent concept, as you know that parking car
in the business area is always a problem if you have huge space you
can utilize this space by providing safe and secure car parking place.

105. Petrol Pump & Gas Station

Petrol pump or Gas station is a business option that demands huge
capital investment. Apart from money, you need a lot of space, labor
and machinery for this business. Cost of setting up is also high.

106. Marriage Hall or Party Plot

A big space can be converted to marriage hall or party plot. You may
need to spend lot of money for decoration and development of the
area. You can generate very good revenue from this business.

107. Luxurious Car Services

If you are keen to start expensive business, Luxurious car business can
be your choice. In this business you need to purchase luxurious cars
and lease them. Many rich people avail such services and they are
ready to pay money for this.

108. Imported Furniture Store

One of the big investment business is imported furniture store. In this
business, you are involved in selling imported furniture. You can
import this furniture from China, UAE or other countries. You need
suitable place and huge capital to start this business.

109. Electronic Store

Electronic store is one of the big investment business ideas. In this
business, you need to sale electronic items such as TV, fridge, washing
machine and other electronic items. You will need big space and lot of
manpower to start this business.

110. Art and Collection Shop

If you love antique items, art and collection business might help you.
In this business, you need to keep art, antique, painting, and other
decorative items in your shop. It is risky business option.

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111. Video Conference and Board Room Services
Many Small and Medium Enterprise do not have a video conference
or boardroom facility. If you have space, capital, and expertise to make
boardroom or video conference facility you can plan to make money
out of it.

112. Night Club

The nightclub is a lucrative business option for big cities. However,
starting a nightclub is challenging as you need manpower, licensing
and other arrangements.

113. Poultry and Fisheries

Poultry and Fisheries business is another big investment business
idea. You need to study market condition before starting this
business. You will need incubator and rack type arrangement to keep
chickens.

114. Building Construction

Building material or construction is growing business in an urban area.
You need to invest a lot of money in order to start this business. You
will also need skill to start this business. Getting a good labor is a
challenge in this business.

115. Solar Farm

Solar generation is next booming business. This business requires a
hefty investment. In this business, you need to produce solar energy
by means of using equipment and sell it to power generation company
or clients.

116. UPS Business

In UPS business, you need to buy and sell UPS. Apart from that, you
can take AMC of old UPS. You can tie up with good UPS Company like
APC for selling their products.

117. Auto Modification Services

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Today people cannot afford an imported car and they often go for
modification of existing car for good design and look. This gives birth
to a good business called as auto modification service.

118. Chemical Unit

Starting a Chemical factory is big investment idea. In Chemical Unit
business, you need to produce chemical, color and dye required for
industrial and household process. It is complicated business which
requires lot of expertise. Licensing and clearance requirement for this
business is also high.

119. Car Driving School

Car Driving School is one of the lucrative business idea. However, you
require lot of money to start car driving school business. You need to
make investment for buying multiple cars. You will also need trainers
for effective training.

120. Gold Ornament Shop

Gold Ornament shop is another big investment business idea. In this
business you need to invest money in buying gold ornament
inventory. Apart from that you require suitable place preferably in the
market area for starting business. A success of this business depends
on your expertise and networking skills.

121. Printing Press

Printing press is another business idea. In this business, you need to
purchase printing machineries. Make sure you have enough business
to establish printing press. It is good idea to start printing press on
lease at initial stage.

122. Peer 2 Peer Lending Business

Peer 2 Peer Lending Business is business of money. In this business
you need to lend money and earn interest income. You have to be
careful in selecting the borrower. Don’t forget to make legal
agreement before lending money.

123. Internet Service provider

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The demand of Internet is growing thus starting internet business
makes sense. You have to be knowledgeable enough to start internet
service provider business. This business demands heavy investment
for buying equipment and establishing network.

124. Computer Class

Knowledge of computer is required in almost every field. This makes
computer class lucrative business option. This business demands
investment in terms of buying computers and other projecting and
networking equipment.

125. Business Idea of Hotel

Starting a Hotel is a very good business idea. This business idea
demands a lot of investment. Apart from money also need competent
and experienced manpower.

126. Oxygen gab bottle

Oxygen gas business is next business idea. Oxygen and other gases
are widely used in medical and industrial field. You can plan to start
your own Oxygen gas cylinder business or other gas supply business.

127. Business Idea of Battery

Next business idea is battery shop. Every two wheeler and four
wheeler requires a battery. Thus starting a trading business of battery
is profitable affair. You need to make lot of investment in order to start
battery shop.

128. Business Idea of Cement

Infrastructure development is on boom and cement is a prime
requirement for this initiative. Thus starting a cement business would
be a profitable affair. You can either take dealership of Cement
Company and start trading or establish your own cement factory.

129. Spice or Masala Powder

Next successful business idea is starting business of Spice or Masala
Powder. You need to spend money in order to start this business. You

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can either develop your own set of spice or take franchise of other
famous masala powder companies.

130. Lender
If you have a lot of money, you can become a moneylender and start
your own lending business. You need to be careful before lending
money else, you may lose it.

131. Nursing school

The nursing school requires a lot of workers and license for this
business. You also need trainers in order to train your staff.

132. Modeling Agency

A modeling agency is a company that represents fashion models, to
work for the fashion industry. A Modeling agency earns income via
commission.

133. Pathology Lab

You need to invest money in buying equipment required for
pathology. Apart from that, you need to hire a technician for the lab.
You need to take permission and license before starting pathology.

#8 Retail Business Ideas

134. Grocery Store
A grocery shop is among one of the easiest and most lucrative retail
business ideas. This business can be started with low investment. You
can start this business from rented shop also. You will need local
municipality clearance (shop establishment license) and GST number
to start this business. Success of this business depends upon location,
type of products and price.

135. Ice Cream Parlor

Ice Cream Parlor is evergreen food based retail business idea. There
are two main ways to start this business. First is manufacturing by
own and second is taking franchise. Apart from shop you will need
cold storage, power backup and other packaging material. You will
need shop establishment license, GST number and FSSAI license.

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136. Organic Food Store
Organic Food store is emerging business in India. Organic food means
food grown naturally without any fertilizer and pesticides. The
demand for these type of food is growing. If you can manage sourcing
of organic food from farmers on regular basis you can start this
business.

137. Hardware Store

A hardware store sells items such as power tools, building material,
fasteners, keys, locks, electrical and plumbing items. This business
demands considerable investment. You need to select a location in a
manner where requirement of such hardware is high. Developing area
could be one of the choice for such business.

138. Auto Spare Part Store

The automobile industry is booming and it will continue to boom. Thus
starting an auto spare part retail store is a lucrative business option.
If you are starting auto spare part store it is advisable to keep product
range of branded and non-branded products in your store. A success
rate of this business is high.

139. Stationary & Book Store

Stationary related items are widely used in school and in business. If
you open stationary shop nearby school or business area, your chance
of getting success in this business will be very high. It is moderate
investment retail business. You do not require any special skill for
opening this business.

140. Cosmetic Store

As people are becoming beauty conscious the demand for beauty
related product and cosmetic items are growing. These type of
products are usually purchased by ladies. If you are women and
looking for the retail business idea you can think of starting a cosmetic
store.

141. Leather Item Shop

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The next retail business idea is leather and perfume business. In this
business, you can keep leather bags, travel bags, wallet, belt,
perfumes and other gift items in your shop. A demand for these type
of product is always there hence it is an evergreen business idea.

142. Xerox Shop

A Xerox shop with associated products like bookbinding, lamination
and small stationary items is very good retail business option in India.
This business can be started by any individual. The capital
requirement of this business is very low. If you are planning to start
this business it is advisable to start nearby school, college or office
area.

143. Beauty Salon

A beauty salon is emerging business option in India. This type of
business is usually preferred by ladies. This business demand special
skills. You need to undergo special training or course before starting
this business. Investment requirement of this business is low. You can
start your own beauty salon or take franchise of well-known brand.

144. Medical Diagnostic Center

A medical diagnostic center is most popular retail business option. A
growth of medical problem demands diagnostic and advance analysis.
If you have skills and qualification you can think of starting own
medical diagnostic center. This business required substantial
investment.

145. Photo Studio

Photo Studio or photography service is easy and evergreen retail
business option. It is low investment business. A success of this
business depends on business location, skill, and contacts.

146. Safety & Security Products Retail Business

Safety and security related products are always in demand. Thus
starting a safety and security product retail business could be very
good business option. In this business you need to keep safety and
security related items such as helmet, safety kit, safety shoes, CCTV

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items, bio metric lock etc. You can think of starting this business
nearby industrial area.

147. Herbal & Ayurveda Products Retail Business

A market of Herbal and Ayurveda products is expanded in last few
years. Especially after entry of players like Patanjali. If you are looking
for niche segment you can start herbal & ayurveda retail business. It
is moderate investment business with good success rate.

148. Scrap Store

It is also possible to make money via scrap. Scrap store is next
business option. In scrap business, you need to collect junk items such
as newspaper, plastic, and other discarded material. You also need to
find out a buyer for accumulated scrap.

149. Gift Card Shop

Gift Card Shop is one of the best retail business idea. This business
require suitable place and collection of gift cards. Gift cards are used
widely at every occasion thus success rate of this business is high.

150. Optician Shop

Optician Shop is moderate investment retail business idea. In this
business, you need to sell sunglass, number glasses and frame of
spectacles. Success rate of this business depends upon location and
quality of product.

151. Colour Shop

Every new or old home and business location requires painting work
on wall. Thus opening a colour shop is very good business option. It is
advisable to take agency of big colour companies like Asian Paints,
Nerolec etc.

152. Seasonal Business

Seasonal Business is another retail business idea. In this business, you
need to start seasonal business as per festival like kite, crackers, rakhi,
raincoat, woollen clothes etc.

156. Utensil Shop

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Utensil shop is an evergreen retail business idea. You require suitable
shop and inventory of steel items to start this business. A success of
this business depends upon location of shop and quality of utensils.

157. Foam Mattress

You can also think of starting your own foam mattress business. You
can either become manufacturer or trader. You require lot of money
in order to start this business.

158. Ice Business

Next small business idea is of Ice. There are many events and purpose
where people need Ice for cooling. Thus starting a business of Ice
could be very good affair.

159. Tattoo Shop

A Young generation is crazy about a tattoo and they are ready to
spend money on the tattoo. Thus starting a tattoo shop could be a
good option. You may need a help of tattoo artist for this business.

#9 Wholesale Business Ideas

160. Agriculture Equipment or Fertilizer Distribution
India is agriculture based country. A demand for Agriculture based
equipment’s and product are growing every day. Thus, starting an
Agriculture Equipment or Fertilizer Distribution would be a profitable
option. There are many local and foreign manufacturers of these
tools, who are looking for distributors for specific regions. If you are
from a rural area where the demand for such products is high, you
can think of starting this business.

161. Automobile Distribution Business

Automobile distribution is one of the most popular business options.
Automobile products such as accessories, lubricants, battery are
always in demand. You can grab this as an opportunity and start your
own business. However, you need to be careful in selecting
products. There are many players in this market and many duplicate
products are also found.

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162. Building Construction Material Distribution Business
The infrastructure sector is booming and future of Building
Construction Material Distribution is very bright. It is a heavy capital-
centric business. Along with capital, you will need a lot of space for this
business. In this business, you need to deal with products like
cement, TMT rods, sand, stone chips bricks, glazed tiles, paints, etc.

163. Colour & Chemical Distribution Business

Colour and Chemicals are used in various industries for different
purposes. You can think of starting distribution business of chemicals,
dyes, rubber, adhesive, plastic etc. Manufacturing of few products
from this segment is banned in the several foreign countries. So, a
demand for such products will be high in that countries. It is
recommended to carry out research before starting this business.

164. Cosmetics Distribution Business

Females in India are fond of cosmetic and personal care product.
These types of product always remain in demand. Thus starting
cosmetics distribution can bring good success. There are multiple
companies in this segment you should select branded company with
very good products.

165. Engineering Equipment Distribution

Engineering equipment is purchased in various manufacturing
industries. Crane, Hydra, earth moving equipment, civil, construction,
and control equipment generally remains in demand. If you have a lot
of capital you can think of starting this business.

166. FMCG Product Distribution

Starting FMCG product business is a lucrative business option in India.
These types of products always remain in demand. It is easy to
establish a supply chain for this type of products. The investment
required for this business is also low. However, there is a lot of
competition in this business.

167. Gems and Jewelry Distribution

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Gems and Jewelry distribution is another lucrative business segment
in India. This business demand lot of investment. You must have
enough cash to start this business. Apart from this, you require a
trustworthy team for starting this business. Make sure to tie up with a
popular company with good brand value.

168. Home Appliance Distribution

Home Appliance and kitchenware like a juicer, grinder, refrigerator,
water purifier, mixture, irons etc. always remain in demand. Apart
from that capital investment required for this business is moderate.
You can get good success in this business provided you select good
brand like Samsung, LG, and Godrej for distribution ship.

169. Hospital Equipment Distribution

If you have knowledge about the medical field, you can think of
starting hospital equipment distribution business. You need to
establish good hospital network to get success in this business. The
hospital equipment includes stretchers, electrocardiographs,
monitors, X-Ray machine, MRI Machine, Operation Theatre bed,
examination couches etc.

170. IT related Equipment Distribution

A demand for computer peripheral like desktops, laptops, servers and
network devices are growing. If you have knowledge in IT field you can
start this business. It is a highly profitable business with good success
rate. You need to select good brand such as Dell, Cisco, HP etc.

171. Medicine Distribution

If you have knowledge about pharmaceutical products, you can start
medicine distribution business. There is ample opportunity in this
business. Capital requirement of this business is also low. However,
you need to work on establishing a good dealer network.

172. Organic Food Distribution

People are becoming health conscious and they are ready to spend
money on the organic food. There are many organic food companies

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looking for a distributor in India. If you have a good dealer network
and if you can market this type of products, you can rule the market.

Food home delivery service…swingy, zamaoto etc…..

173. Safety and Security Product Distribution

Safety and security product has various industrial application. In
addition to that in few industries, it is mandatory to maintain safety
and security-related items due to the mandatory audit requirement.
Common product famous in this segment are fire extinguishers,
helmet, boiler suit, access control system, CCTV etc. If you have
knowledge in this field you can start this business.

174. Seed Distribution Business

Seed distribution is a highly profitable business. Seeds are used in
agriculture and crop quality and yield depend on the quality of seeds.
Farmers are generally looking for high-quality seeds and they are
ready to spend more money for that. If you have a good dealer
network in a rural area you can think of starting this business.

#10 Manufacturing Business Ideas

175. Manufacturing of Paper
Paper making is one of the simple manufacturing business. Papers
and stationary always remain in demand either in education or in the
business field. You can start this business with low investment. You
need raw material such as pulp, cellulose and paper making machine.
You may even think of recycling papers.

176. Soap and detergent manufacturing

A soap and detergent manufacturing is next business in the list. This
business requires big space and understanding about manufacturing
process of soap and detergent. You will need raw material such as
fatty alcohol, chemical ingredients, colors, and perfume. You need to
spend lot of money on marketing of your product.

177. Hair Product Manufacturing

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One of the fast moving FMCG product is hair oil and hair cream. This
manufacturing business can be started even at home This business
does not demand a big investment. However, you need to spend
money on marketing of products.

178. Manufacturing of Sports related items

Sport is the biggest industry in India. People are crazy about sports
especially cricket. Thus starting manufacturing plant related to sports
items could be profitable affair. The items which you can produce are
batting gloves, hockey stick, bat, ball etc. You need to maintain quality
and standard to withstand in this market.

179. Handmade Biscuit making

One of the simplest manufacturing business idea is handmade biscuit
making. You can combine this business with bakery also. This business
can be started at home also. You will need suitable manpower for this
business. If you are planning at larger scale you can even establish
automatic biscuit making plant.

180. Candy making

Chocolate and candy making is evergreen manufacturing business
idea. The key of success in this business is recipe. Based on recipe you
will need confectionery, cream, flavored fruit and nuts, packaging item
etc. Once you are through with making recipe you can go for bulk
production.

181. Honey making

Another manufacturing business idea is honey processing. Honey
processing business can be started in two ways either by using manual
system or by an automatic system. The process is very simple and it
can be started from home.

182. Manufacturing of toys

Children toy is one big industry in India. It is evergreen industry. In
order to start this business first, you need to decide prototype and raw

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material required for the type of toys which you will be manufacturing.
Once you are done you can make machinery. Alternatively, you can
purchase readymade machinery available in the market for the bulk
production of toys. This business can be started at lower scale and can
be expanded at later stage.

183. Manufacturing of Plastic bottles

Pet jar or plastic bottle production is profitable manufacturing
business. It is an essential item for industrial packaging. The demand
and consumption of these types of bottle is increasing. In order to
establish plastic bottle manufacturing, you need appropriate
knowledge of injection molding and manufacturing. You need to take
GST number, factory license and NOC from pollution control board for
this business.

184. Making of Fertilizer

The next business is fertilizer manufacturing. This business can be
started at a smaller scale or at a big scale. If you are new in this field
you should start with compost fertilizer from waste items. Once you
understand process of manufacturing you can go at bigger scale.
Investment requirement in this business is moderate.

185. Water Filter and bottling Plant

Water treatment and purification is one of the prime requirement
nowadays. If you are keen to solve water problem, you can establish
your own water filter plan. You require big space and skill manpower
to start this business. You can either import filtering plant machinery
or purchase from local market. Investment and regulatory
requirement of this business is high.

186. Furniture making

Furniture has become an essential part of our life. Office, home,
school or any business requires furniture such as chairs, tables,
cupboards, beds, wardrobes etc. If you have enough space and if you
want to produce large scale products, furniture making idea is for you.
You require skill manpower in order to start this business.

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187. Production of Leather related items
A leather product such as belt, bags, footwear, garments are always in
demand. If you have skill, expertise and suitable manpower you can
start lather item manufacturing business. Investment and regulatory
requirement for this business is high.

188. Electrical Fitting Production

Nothing work without electricity and electrical equipment. So, starting
an electric fitting business could be a very good business idea. You
can start electrical fitting manufacturing business with small capital
investment. To start this business, you must obtain several licenses
and registrations from Govt. authority. This includes GST number,
Trade license and BIS certification.

189. Embroiderer
The next business in line is Embroidery business. In this business, you
need to develop a skill to design new design of embroidery. You can
do embroidery by low-end machine or by sophisticated tools. It is
lucrative business with very good profit margin.

190. Carpet Making

The market for rubber carpets is indeed a large one; if you open a
production factory for this type of business, you are sure going to
break even within a short period of time. You need to learn an
appropriate skill before starting this business.

191. Tool Manufacturing

If you are technically sound you can produce hand tools. This involves
manufacturing of hammer, cutter, screw, shapping tools, scissors etc.

192. Ceramic Tile Maker

The boom in real estate market always helps other construction
related material such as Ceramic Tiles. This business requires a
considerable amount of investment.

193. Kitchen Utensil maker

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Pots, kettles, fry pans, cutleries and other kitchen utensils are
essentials in our homes. There is a large market for a kitchen utensil.
So, starting kitchen utensil is a very good business idea. You can
purchase readymade machinery for manufacturing of kitchen
utensils.

#11 Renting Business Ideas

194. ATM Space Rental
ATM Space Rental or retail space renting is most profitable business
option. A retail space is always in demand. Banking organization
always look for ATM space for ATM network expansion. Hence the
demand of ATM space is very high. If you have enough capital you can
plan to start ATM space rental business.

195. Audio Equipment Renting

High end audio equipment’s always remain in demand. Any function
such as domestic, social or corporate require public address system
and audio devices. If you have expertise in identifying and managing
audio devices you can start audio equipment renting business.

196. Bus Rental

Bus Rental is a profitable business at the place where domestic travel
is growing. This business demand substantial capital investment.
People opt for bus rental for tourism and social functions like
marriage.

197. Car Rental

Car Renting is traditional business. This business has grown multi fold
due to Uber and Ola. Apart from normal car renting, luxury cars are
also in huge demand. If you have capital for investment you can start
own car rental business.

198. Construction Equipment Rental

One of the high capital intensive business is construction equipment
renting. A demand of construction equipment is at peak due to real

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estate and infrastructure development. Construction equipment’s are
costly hence majority of developer and company prefer to take these
type of equipment on rent.

199. Fancy Dress Renting Business

Fancy dress renting business is low cost investment business. Fancy
dresses are usually in demand at school for celebration of several
events and even during several social functions. You can start own
fancy dress renting business and earn lot of money.

200. Decorator
Decorators deal with supply of decorative materials, chairs, stage, and
other social function related items. These types of items are always in
demand especially during marriage, party, political party, conference
etc. Thus starting own decorator business is profitable affair. You need
to invest lot of money to start this business.

#12 Import Export Business

201. Diamond Import Export
Diamond Import Export business is one of the best idea. This business
requires lot of capital. In this business, you need to import rough
business and process by polishing to convert in the cut diamonds. This
business has lot of potential.

202. Handicraft Item Export

Handicraft item has very good potential out of India. These items are
made up by hands or by tools. Availability of low cost high skill labor
in India is plus point to start this business.

203. Readymade Garment Import Export

Readymade Garment Import Export is next in the list. India is popular
for garment. The garment produce in India is cheap compared to
other countries. You can earn lot of money by doing readymade
garment import export business.

204. Electronic Component Import

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Imported Electronic component such as television, mobile and other
consumer good remains in demand. So, starting electronic
component import business is very good business option. Investment
required for this business is very high.

205. Machinery Import

If you are from mechanical background starting a machinery import
business make sense. Imported machinery always remain in demand.
You should study market before starting this business.

#13 Technology Business

206. Computer Repair maintenance
Computer Repair maintenance is a small investment tech business
idea. In this business, you need to repair computers and IT
peripherals. You will need a small shop or place to start this business.
It is a lucrative business option.

207. IT Support
The IT Support business is next on the list. In this business, you need
to provide remote IT support to the customer. As the usage of the
internet and IT is growing starting IT support business makes sense.
208. Software Development
Software Development or application development is a low
investment business. You require special skills and knowledge to start
this business. You will need the support of an experienced developer
to start this business. This business can be started from home also.
209. Mobile App Development
Mobile application development is becoming an evergreen business.
Most of the business opt for making a mobile application for
connecting with the customer. If you are expert in mobile app
development or learn mobile app development you should think of
starting mobile app development.
210. Cyber Security Services
There are multiple instances of cybercrime, hacking and virus attacks
nowadays. Thus starting cyber-security services is a very good
business option. In this business, you need to provide security services
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to enterprises. This includes the installation of cybersecurity measures
such as firewall, Anti APT appliance, and monitoring equipment as well
as auditing services.
211. Web Hosting Services
Web hosting service is a good technology business idea. Here, you
need to provide web hosting services to the customer. This business
requires a lot of capital investment.

#14 Agriculture Business Ideas

212. Gardening Services
The first agriculture-based business is starting gardening services.
Nowadays, house owners and corporates opt for gardening services
and vertical wall concept. If you are experienced in this area, it makes
sense to start this business. It is a highly profitable business option.
213. Shrimp Farming
Shrimp Farming is an aquaculture business. For Shrimp farming, you
require a suitable marine or freshwater environment. Shrimp are used
locally as well as exported outside. It is a highly profitable business if
you deal in volume.
214. Fish Farming
Fish Farming is also an aquaculture business. In fish farming, you will
need a marine or freshwater environment or various small fish tanks.
Fish are used as food in India as well as outside. You need to invest a
considerable amount to start this business. A risk associated with this
business is high.
215. Florist
Becoming a florist is one of the best agriculture business ideas. In this
business, you need to produce flowers of different types. You require
a suitable place to produce flowers. You can sell these flowers to the
local florist or start your own shop as a florist.
216. Bee Keeping
Bee Keeping is a hobby cum business option. Beekeeping business
makes a profit through the sale of honey and other bee-related
products. You require a suitable place and expert manpower to start
this business.
#15 Service-Based Business

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217. Packing & Moving Service
For the service industry starting own packing and moving service is the
first business option. This business requires a team of manpower and
expertise in moving home & office materials. The investment required
for this business is moderate.
218. Elder Care Services
Elder Care Services is one of the best service business options. Many
elder person are looking for care and support. Thus starting the
eldercare service business makes sense. Here you need to provide
manpower for elder people on a commission basis.
219. Home Maintenance and Repair Services
Each and every home requires maintenance and repair. This could be
electrical, civil, plumbing and carpentry work. You can sell a yearly
package for home maintenance and repair service. You require expert
people in each area to start this business.
220. Legal Services
Legal service is very good business option. Legal service is required in
almost every industry. If you have legal education background you can
offer legal services.
221. Solar Panel Installation Services
The usage of a solar panel has increased multifold. It is becoming an
alternative of electricity. If you can invest money you can start a solar
panel installation service business.

#16 Trading Business Ideas

222. Fruit and Vegetable Trading
Fruit and vegetable trading is a very good business option. The
investment required for this business is low. Here you will be trading
in fruits and vegetables. You can either open a retail store or act as a
wholesaler for the trading of fruits and vegetables.
223. Garment Trading
Garment trading is a lucrative business option. In garment trading,
you need to buy readymade garments at a lower price and sell it at a
higher price. Garment trading has a very good domestic and
international market.
224. Hardware and Sanitary Trading

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Hardware and sanitary trading is good trading business. Hardware
and sanitary will always remain in demand due to growth in the real
estate industry. You need to invest a lot of money to start this
business.
225. Spices Trading
Indian Masala or Spices has a very good market. You can start the
masala trading business from the small store. Once you establish the
masala trading business, you can also think of exporting spices
outside India.

Source: [Link]

Conclusion: Above are various business ideas where we can choose as

part time or fulltime for our financial goals. Plan it & make it…

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 13. Freelancing
A freelancer is a self-employed person who offers services,
often working on several jobs for multiple clients at one time.
... Freelancers usually earn money on a per-job basis, charging
hourly or daily rates for their work. Freelance work is usually short-
term.

When most people think of freelancers, they think of creative jobs:

writing, editing, perhaps advertising and marketing gigs. While those
areas are full of opportunities for entrepreneurial types who want
to work at home, either on a full-time or part-time basis, they're far
from the only occupations that lend themselves to the freelance life.

Here's a roundup of few freelance jobs -- some you'd never expect.

Writing

Let's start with the obvious: freelance writing is the classic work-from-
home job. If you're not already toiling away in virtual ink, however, you
might not realize how many different types of freelance writing
jobs there are. From journalism to copywriting, blogging to
social media, there are writing jobs for every temperament and type
of experience.

Editing and Proofreading

Whether you're a seasoned grammarian or just someone with a solid

eye for detail, the internet teems with editing and proofreading gigs
for your level of skill and experience.

Marketing and PR

If you have a phone and an internet connection reliable enough to

sustain a Skype meeting, you can do your marketing or PR job from
the comfort of your own home. Just be prepared to take the occasional
on-site meeting. In many cases, the client will want to look at their
marketing or PR pro in the eye once in a while -- and not just over a

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webcam. Social media coordinator and manager jobs also fall under
this umbrella, and as easy to do from home as from an office.

Transcription

Transcription jobs generally come in three flavors: medical, legal, and

market research. The latter requires the least amount of study, in
terms of familiarizing yourself with the specialized technical language
of the field. In most instances, transcription jobs are meted out by an
agency, which will require you to take a typing test and then set you
up with jobs as needed.

Data Entry

If you can type 60 words a minute or more, and find repetitive work
more Zen than dull, data entry jobs might work for you. Just beware:
ads for data entry jobs that promise big bucks or ask for bank account
or other personal info before allowing you to get started are red flags
for scams. (More on work-from-home job scams at the end of this
article.)

Virtual Assistant Work

If you have experience as a personal assistant, administrative

assistant, or office manager, you can do a similar job for a variety of
clients, from the comfort of your own home. Virtual assistants provide
administrative support over the phone and internet, often working
through an agency that connects them with clients.

Call Centre

Virtual call center jobs are the same gig as the in-person job, minus
the trip to the call center. One caveat: make sure you know if the
company will provide paid training, or if you're supposed to pony up
for your own start-up costs. The latter scenario could cost you a pretty
penny, or turn out to be a scam.

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Online Tutoring

Coach elementary, middle school, high school, or college students on

a variety of subjects, via the internet. Most companies will want
teaching experience in the subject you're tutoring, plus a college
degree.

Your Full-Time Work, as a Freelance Job

Don't assume that your current occupation is incompatible with

freelance life. Many jobs that seem firmly rooted in the brick-and-
mortar world of physical offices and facilities are actually perfect for
freelancing. For instance, Registered Nurses can find a variety of
freelance gigs that require their licensure, skills, and experience,
including case management for insurance companies, telephone
triage, and medical call centre work.

Also, check out these work-from-home computer jobs for more

options to consider.

Other list is presented in above articles of small business ideas.

Beware of Scams

Hidden among the many legitimate work-from-home job listings are

scams of varying degrees of cleverness and malicious intent. To avoid
getting caught by a work-at-home job scam, always research
companies before you commit. Don't send money, account or social
security numbers, or any information that would make it easier to
steal your identity. Beware of organizations that require you to buy a
kit before you can get started, or promise to help you get rich in a
hurry. Bottom line, remember the adage: if it sounds too good to be
true, it usually is.

Conclusion: We can post and receive various freelancing jobs on

various online job portals. So freelancing is popular area of
working style with current millennials.

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 14. Over –The- Top media service (OTT)
Over The Top (OTT) platform is a media streaming platform that
directly delivers media content over the Internet. The OTT
platform can be an App streaming content over the internet. The OTT
platform bypasses satellite and cable television. An OTT
platform comes to the existence on the back of OTT services.

Refers to the productized practice of streaming content to customers

directly over the web. It represents the future of entertainment — one
that is already unfolding.

WHAT IS OTT?

An “over-the-top” media service is any online content provider that

offers streaming media as a standalone product. The term is
commonly applied to video-on-demand platforms, but also refers to
audio streaming, messaging services, or internet-based voice calling
solutions.

OTT services circumvent traditional media distribution channels such

as telecommunications networks or cable television providers. As long
as you have access to an internet connection — either locally or
through a mobile network — you can access the complete service at
your leisure.

OTT services are typically monetized via paid subscriptions, but there
are exceptions. For example, some OTT platforms might offer in-app
purchases or advertising.

WHY USE OTT?

With over 50% of North Americans maintaining Netflix subscriptions,

it’s clear consumers love OTT content. Here are just a few reasons why
the format is more appealing than traditional alternatives:

 High-value content at low cost: Streaming services are

widely considered a cost-effective alternative to traditional

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 cable packages. A Netflix HD subscription is currently $12.99
per month, while non-HD plans cost $8.99. That’s a
reasonable fee even if you only intend to watch a fraction of
its offered content.
 Original content: In recent years, OTT providers like Netflix
and Amazon Prime have begun producing original content
that is exclusively available through their service. Platforms
like HBO Go and Disney+ also have exclusive streaming
licenses for previously televised content.
 Compatibility with multiple devices: For years, watching
cable television required a television set. Today, we can
watch OTT content from a broad range of devices. Any
account holder can enjoy the same OTT experience from a
gaming console, smartphone, tablet, or smart TV.

HOW IS OTT CONTENT DELIVERED?

Thanks to its internet-based delivery system, OTT platforms bypass

third-party networks that traditionally managed online content. The
only things customers need are an internet connection and a
compatible hardware device.

 Mobile devices: Smartphones and tablets can download OTT

apps from a supported digital storefront.
 Personal computers: Most computers support OTT content
viewing through desktop-based apps or web browsers.
 Smart TVs: The latest TV models often include pre-installed
OTT apps, or provide users with an option to download
them.
 Digital media players: Third-party devices like the Apple TV
support a range of OTT solutions. Many modern video game
consoles also include the ability to download and run OTT
apps.

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WHAT TYPES OF CONTENT ARE SUITABLE FOR OTT SOLUTIONS?

While the OTT conversation largely revolves around video-on-

demand, the technology actually covers a broad range of web-based
content:

 Video: Video streaming is the most-widely recognized

version of OTT media services. Popular platforms include
subscription platforms like Netflix, paid storefronts like
iTunes, and ad-based services like YouTube.
 Audio: Audio streaming is also possible through OTT
solutions. Popular examples include internet radio stations
and podcasts.
 Messaging: OTT-based instant messaging services connect
users directly through internet connections, bypassing
mobile SMS networks. Facebook, Google, Skype, WeChat,
and many other brands have versions of these services.
Most are capable of replacing or integrating with
smartphone text messaging features.
 VOIP: Voice calling platforms such as Skype and WeChat that
operate using internet protocols are considered OTT
services. In some instances, these services can integrate
with mobile phone networks to enhance certain features.

IS OTT REPLACING TRADITIONAL MEDIA DISTRIBUTION?

Most OTT services are associated with “cord cutting” — the practice of
cancelling TV or phone subscriptions to focus on web-based
alternatives. While cord cutting has certainly increased OTT consumer
adoption, that doesn’t mean traditional networks will disappear
entirely. In fact, customers maintain traditional cable
services alongside Netflix or Amazon Prime subscriptions.

It’s also worth remembering that OTT services are still fairly new, and
could undergo significant changes as best practices are refined. For
example, some experts believe OTT platforms could one day be
bundled much like traditional cable packages. In fact, some cable

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companies offer OTT solutions like HBO Go as part of their premium
subscriptions.

WHAT CHALLENGES DO OTT SOLUTIONS FACE?

We no longer live in a world where Netflix is the only OTT game in

town. Increased competition will be a major challenge for video OTT
solutions in the years ahead:

 Disney will launch Disney+ — its own branded video

streaming service — in November 2019.
 Amazon Prime is developing its own critically acclaimed
programming that rivals Netflix’s original content.
 HBO has recently entered streaming license agreements to
stream content like Game of Thrones in select countries.

We’re currently witnessing a new wave of diversification across OTT

markets, creating new opportunities and challenges. Recent studies
suggest 50% of OTT customers are experiencing “subscription fatigue”
from engaging with so many platforms. In time, this could prompt
customers to become more selective with their managed
subscriptions. Meanwhile, the growth of large-scale platforms like
Disney+ could impact the prospects for smaller, niche services.

WHAT ARE THE BIGGEST OTT OPPORTUNITIES?

Despite these challenges, OTT technology has immense potential.

Video streaming services are on the rise globally, with North America
representing the most mature markets at a 51% adoption rate.
Europe and Asia-Pacific are seeing impressive growth as brands like
Netflix expand internationally.

Beyond global adoption rates, major opportunities exist in non-

entertainment markets. One recent survey determined that 50% of
OTT subscribers pay for educational content, usually in the form of
instructional streaming platforms. Streams that emphasize children’s
programming or health-based content might hold immense potential.

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OTT platforms should also consider the benefits of tiered
monetization. While most solutions are subscription based, 20% of
subscribers also made in-app purchases in 2018. Casting a wide net
when it comes to monetization methods could help OTT solutions
grow in the years ahead.

Performance marketing has proven to be an especially successful

method of attracting subscribers to OTT platforms in a way that is
scalable and predictable for marketers.

Over-the-top media services have been with us for years, but they
clearly have room to grow. Increased diversification and competition
suggests the market is healthy and growing, and many opportunities
remain untapped. Whether you’re following up-and-coming
platforms, or enjoying the latest Netflix original series, OTT clearly
represents the future of media. It’s an exciting time to be a part of it.

Source: [Link]

Conclusion: With advancement of internet of things and network

speed now all we need be a OTT content creator in terms of video,
audio, Writings, which have huge potential to generate income.
i.e by posting our original content in YouTube and other ott-
platforms we can generate a proportional income with its Hits

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 15. Basic Economics of India
The economy of India is characterised as a developing market
economy. It is the world's fifth-largest economy by nominal GDP and
the third-largest by purchasing power parity (PPP). According to
the IMF, on a per capita income basis, India ranked 139th by GDP
(nominal) and 118th by GDP (PPP) in 2018.
From independence in 1947 until 1991, successive governments
promoted protectionist economic policies with extensive state
intervention and regulation; the end of the Cold War and an
acute balance of payments crisis in 1991 led to the adoption of a
broad program of economic liberalisation. Since the start of the 21st
century, annual average GDP growth has been 6% to 7%, and from
2014 to 2018, India was the world's fastest growing major economy,
surpassing China. Historically, India was the largest economy in the
world for most of the two millennia from the 1st until 19th century.
The long-term growth perspective of the Indian economy remains
positive due to its young population and corresponding low
dependency ratio, healthy savings and investment rates, and is
increasing integration into the global economy.
The economy slowed in 2017, due to shocks of "demonetisation" in
2016 and introduction of Goods and Services Tax in 2017. Nearly 60%
of India's GDP is driven by domestic private consumption and
continues to remain the world's sixth-largest consumer market.
Apart from private consumption, India's GDP is also fueled
by government spending, investment, and exports. In 2018, India was
the world's tenth-largest importer and the nineteenth-largest
exporter.
India has been a member of World Trade Organization since 1 January
1995. It ranks 63rd on Ease of doing business index and 68th
on Global Competitiveness Report.
With520-million-workers, the Indian labour force is the world's
second-largest as of 2019. India has one of the world's highest
number of billionaires and extreme income inequality.

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Since India has a vast informal economy, barely 2% of Indians
pay income taxes. During the 2008 global financial crisis the economy
faced mild slowdown, India undertook stimulus
measures (both fiscal and monetary) to boost growth and
generate demand; in subsequent years economic growth
revived. According to 2017 PricewaterhouseCoopers (PwC) report,
India's GDP at purchasing power parity could overtake that of the
United States by 2050. According to World Bank, to
achieve sustainable economic development India must focus on
public sector reform, infrastructure, agricultural and rural
development, removal of land and labour regulations, financial
inclusion, spur private investment and exports, education and public
health.
In 2019, India's ten largest trading partners were USA, China, UAE,
Saudi Arabia, Hong Kong, Iraq, Singapore, Germany, South Korea and
Switzerland. In 2018–19, the foreign direct investment (FDI) in India
was $64.4 billion with service sector, computer, and telecom industry
remains leading sectors for FDI inflows. India has free trade
agreements with several nations, including ASEAN, SAFTA, Mercosur,
South Korea, Japan and few others which are in effect or under
negotiating stage. The service sector makes up 55.6% of GDP and
remains the fastest growing sector, while the industrial sector and
the agricultural sector employs majority of the labour force.
The Bombay Stock Exchange and National Stock Exchange are one of
the world's largest stock exchanges by market capitalization. India is
the world's sixth-largest manufacturer, representing 3% of global
manufacturing output and employs over 57 million people. Nearly
70% of India's population is rural whose primary source of livelihood
is agriculture, and contributes about 50% of India's GDP.
It has the world's seventh-largest foreign-exchange reserves worth
$476 billion. India has a high national debt with 68% of GDP, while
its fiscal deficit remained at 3.4% of GDP. However, as per
2019 CAG report, the actual fiscal deficit is 5.85% of GDP.
India's government-owned banks faced mounting bad debt, resulting
in low credit growth, simultaneously the NBFC sector has been

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engulfed in a liquidity crisis. India faces high unemployment,
rising income inequality, and major slump in aggregate demand. In
recent years, independent economists and financial institutions have
accused the government of fudging various economic data especially
GDP growth.
India ranks second globally in food and agricultural production, while
agricultural exports were $38.5 billion. The construction and real
estate sector is the second largest employer after agriculture, and a
vital sector to gauge economic activity. The Indian textiles industry is
estimated at $150 billion and contributes 7% of industrial output and
2% of India's GDP while employs over 45 million people directly
The Indian IT industry is a major exporter of IT services with $180
billion in revenue and employs over four million people.
India's telecommunication industry is the world's second largest by
number of mobile phone, smartphone, and internet users. It is the
world's tenth-largest oil producer and the third-largest oil consumer.
The Indian automobile industry is the world's fourth largest by
production. It has $672 billion worth of retail market which
contributes over 10% of India's GDP and has one of world's fastest
growing e-commerce markets.
India has the world's fourth-largest natural resources, with mining
sector contributes 11% of the country's industrial GDP and 2.5% of
total GDP. It is also the world's second-largest coal producer,
the second-largest cement producer, the second-largest steel
producer, and the third-largest electricity producer.

Source: [Link]

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Economic Growth Measuring Indicators:
Real sector:
Economic Growth (GDP, annual variation in %)
GDP, short for Gross Domestic Product, is defined as the total market
value of all final goods and services produced within a country in a
given period. It includes private and public consumption, private and
public investment, and exports less imports.

GDP is the most commonly used measure of economic activity and

serves as a good indicator to track the economic health of a country.
Economic growth (GDP growth) refers to the percent change in real
GDP, which corrects the nominal GDP figure for inflation. Real GDP is
therefore also referred to as inflation-adjusted GDP or GDP in
constant prices.

What is GDP per capita?

GDP per capita stands for Gross Domestic Product (GDP) per capita
(per person). It is derived from a straightforward division of total GDP
by the population. Per capita GDP is typically expressed in local
current currency, local constant currency or a standard unit of
currency in international markets, such as the U.S. dollar (USD).

GDP per capita is an important indicator of economic performance

and a useful unit to make cross-country comparisons of average living
standards and economic wellbeing. However, GDP per capita is not a
measure of personal income and using it for cross-country
comparisons also has some known weaknesses. In particular, GDP per
capita does not take into account income distribution in a country. In
addition, cross-country comparisons based on the U.S. dollar can be
distorted by exchange rate fluctuations and often don’t reflect the
purchasing power in the countries being compared.

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Consumption (annual variation in %)
Private consumption, also referred to as personal consumption,
consumer expenditure, or personal consumption expenditures (PCE),
measures consumer spending on goods and services. Private
consumption includes all purchases made by consumers, such as
food, housing (rents), energy, clothing, health, leisure, education,
communication, transport as well as hotels and restaurant services. It
also includes durable goods (such as cars), but not households’
purchases of dwellings, which are counted as household investment.

Consumer spending accounts for between half and two-thirds of

Gross Domestic Product (GDP) in most countries. Generally, the
poorer the country the higher the share of consumption, but there are
notable exceptions to this rule (i.e. China, with a rather low ratio, and
the United States, with a high proportion). Since private consumption
accounts for the largest part of GDP, it is the key engine that drives
economic growth.

Investment (annual variation in %)

Investment typically refers to gross fixed investment or, more
precisely, gross fixed capital formation (GFCF). Gross fixed capital
formation is a macroeconomic aggregate used in national accounting
that measures the value of acquisitions of new or existing fixed assets
with a life span of more than one year by the business sector (national
accounting generally considers personal spending and most
government spending as consumption).

Gross fixed capital formation includes spending on factories,

machinery, equipment, buildings (including private residential
dwellings) and infrastructure. Investment is called “gross” because it
does not consider the consumption of fixed assets (depreciation); the
term “fixed” is used because inventories (stocks) are not included; and
the term “capital formation” is used because financial investments are
not included.

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The investment component of Gross Domestic Product (GDP) is much
more cyclical than consumption. When businesses expect economic
growth to be strong, they are more likely to invest. The level of capacity
utilization and interest rates also determine investment decisions.

Industrial Production (annual variation in %)

Industrial production measures the output of the industrial sector,
which typically comprises mining, manufacturing, utilities and, in
some cases, construction. The industrial production indicator is
generally provided as an index in volume terms. Annual variation in
industrial production as a percentage thus reflects the change in the
volume of industrial output as compared to the previous year.

Annual variation in industrial production provides insight into the

state of the economic cycle as the production of consumer durables
and capital goods is likely to decrease during an economic downturn.
Despite the fact that the industrial sector only accounts for a portion
of an economy’s total output, it is a leading indicator of Gross
Domestic Product (GDP) growth and economic performance due to its
sensitivity to consumer demand and interest rates.

What is the Unemployment Rate?

The unemployment rate is defined as the percentage of unemployed
workers in the total labor force. Workers are considered unemployed
if they currently do not work, despite the fact that they are able and
willing to do so. The total labor force consists of all employed and
unemployed people within an economy.

The unemployment rate provides insights into the economy’s spare

capacity and unused resources. Unemployment tends to be cyclical
and decreases when the economy expands as companies contract
more workers to meet growing demand. Unemployment usually
increases as economic activity slows.

There are different types of unemployment: Frictional unemployment

refers to temporary unemployment during the period when people

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are searching for a job. Structural unemployment is a mismatch
between workers’ skills or locations and job requirements. Seasonal
unemployment is caused by seasonal patterns in economic activity,
such as harvesting or tourism.

The methodology for calculating the unemployment rate often varies

among countries since different definitions of employment and
unemployment, as well as different data sources, are used

Fiscal Balance (% of GDP)

Fiscal balance, sometimes also referred to as government budget
balance, is calculated as the difference between a government’s
revenues (taxes and proceeds from asset sales) and its expenditures.
It is often expressed as a ratio of Gross Domestic Product (GDP). If the
balance is positive, the government has a surplus (it spends less than
it receives). If the balance is negative, the government has a deficit (it
spends more than it receives). Fiscal balance as a percentage of GDP
is used as an instrument to measure a government’s ability to meet its
financing needs and to ensure good management of public finances.

Public Debt (% of GDP)

Public debt, sometimes also referred to as government debt,
represents the total outstanding debt (bonds and other securities) of
a country’s central government. It is often expressed as a ratio of
Gross Domestic Product (GDP). Public debt can be raised both
externally and internally, where external debt is the debt owed to
lenders outside the country and internal debt represents the
government’s obligations to domestic lenders. Public debt is an
important source of resources for a government to finance public
spending and fill holes in the budget. Public debt as a percentage of
GDP is usually used as an indicator of the ability of a government to
meet its future obligations.

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Momentary and Financial sector
Money (annual variation in %)
The stock of money in the economy can be measured according to
different definitions. The simplest way to measure it is to use the
amount of cash and reserves held within the banking system and the
cash held by individuals. This definition is also called the “monetary
base” and can be broadened by adding more types of money. For
instance, bank deposits are usually included in a broader measure of
the stock of money in the economy, since they are also used as a
means of payment.

The annual variation of the stock of money refers to the increase with
respect to the previous year. This will influence the evolution of prices,
which will alter consumers’ and businesses’ perceptions of future
prices and, consequently, consumption and investment behavior.
Most central banks use the policy interest rate to curb growth in the
quantity of money available in the economy and thus to influence
prices. However, there are some central banks that try to control the
quantity of money directly and let the money market determine the
interest rat

Inflation Rate (CPI, annual variation in %)

Inflation refers to an overall increase in the Consumer Price Index
(CPI), which is a weighted average of prices for different goods. The set
of goods that make up the index depends on which are considered
representative of a common consumption basket. Therefore,
depending on the country and the consumption habits of the majority
of the population, the index will comprise different goods. Some
goods might record a drop in prices, whereas others may increase,
thus the overall value of the CPI will depend on the weight of each of
the goods with respect to the whole basket. Annual inflation, refers to
the percent change of the CPI compared to the same month of the
previous year.

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Policy Interest Rate (%)
The policy interest rate is an interest rate that the monetary authority
(i.e. the central bank) sets in order to influence the evolution of the
main monetary variables in the economy (e.g. consumer prices,
exchange rate or credit expansion, among others). The policy interest
rate determines the levels of the rest of the interest rates in the
economy, since it is the price at which private agents-mostly private
banks-obtain money from the central bank. These banks will then
offer financial products to their clients at an interest rate that is
normally based on the policy rate.

Different countries have different policy interest rates. The most

common are the overnight lending rate, discount rate and repurchase
rate (of different maturities). Normally, central banks use the policy
interest rate to perform contractive or expansive monetary policy. A
rise in interest rates is commonly used to curb inflation, currency
depreciation, excessive credit growth or capital outflows. On the
contrary, by cutting interest rates, a central bank might be seeking to
boost economic activity by fostering credit expansion or currency
depreciation in order to gain competitiveness.

Reserve Bank of India is central momentary authority in India.

Repo rate and reserve repo rate are two main policy interest rate in
India controlling the inflation rate
Repo rate is the rate at which the central bank of a country (Reserve
Bank of India in case of India) lends money to commercial banks in the
event of any shortfall of funds. Repo rate is used by monetary
authorities to control inflation.

1. How Does Repo Rate Work?

When you borrow money from the bank, the transaction attracts
interest on the principal amount. This is referred to as the cost of
credit. Similarly, banks also borrow money from RBI during a cash
crunch on which they are required to pay interest to the Central Bank.
This interest rate is called the repo rate.

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Technically, repo stands for ‘Repurchasing Option’ or ‘Repurchase
Agreement’. It is an agreement in which banks provide eligible
securities such as Treasury Bills to the RBI while availing overnight
loans. An agreement to repurchase them at a predetermined price will
also be in place. Thus, the bank gets the cash and the central bank the
security.

2. What are the Components of a Repo Transaction?

Below are the parameters on the basis of which the RBI agrees to
execute the transaction with the banks:
Preventing Economy “squeezes” – The Central bank increases or
decreases the Repo rate depending on the inflation. Thus, it aims at
controlling the economy by keeping inflation in the limit.
Hedging & Leveraging – RBI aims to hedge and leverage by buying
securities and bonds from the banks and provide cash to them in
return for the collateral deposited.
Short-Term Borrowing – RBI lends money for a short period of time,
maximum being an overnight post which the banks buy back their
securities deposited at a predetermined price.
Collaterals & Securities – RBI accepts collateral in the form of gold,
bonds etc.
Cash Reserve (or) Liquidity – Banks borrow money from RBI to
maintain liquidity or cash reserve as a precautionary measure.

3. How Does Repo Rate Affect the Economy?

Repo rate is a powerful arm of the Indian monetary policy that can
regulate the country’s money supply, inflation levels, and liquidity.
Additionally, the levels of repo have a direct impact on the cost of
borrowing for banks. Higher the repo rate, higher will be the cost of
borrowing for banks and vice-versa.

a. Rise in inflation
During high levels of inflation, RBI makes strong attempts to bring
down the flow of money in the economy. One way to do this is by
173
increasing the repo rate. This makes borrowing a costly affair for
businesses and industries, which in turn slows down investment and
money supply in the market. As a result, it negatively impacts the
growth of the economy, which helps in controlling inflation.

b. Increasing Liquidity in the Market

On the other hand, when the RBI needs to pump funds into the
system, it lowers the repo rate. Consequently, businesses and
industries find it cheaper to borrow money for different investment
purposes. It also increases the overall supply of money in the
economy. This ultimately boosts the growth rate of the economy.

4. What is meant by Reverse Repo Rate?

Reverse Repo Rate is a mechanism to absorb the liquidity in the
market, thus restricting the borrowing power of investors.
Reverse Repo Rate is when the RBI borrows money from banks when
there is excess liquidity in the market. The banks benefit out of it by
receiving interest for their holdings with the central bank.
During high levels of inflation in the economy, the RBI increases the
reverse repo. It encourages the banks to park more funds with the RBI
to earn higher returns on excess funds. Banks are left with lesser
funds to extend loans and borrowings to consumers.

Exchange Rate (vs USD)

An exchange rate between two currencies is the rate at which one
currency can be exchanged for another. That is, the exchange rate is
the price of a country’s currency in terms of another currency. For
example, if the exchange rate between the U.S. dollar (USD) and the
Japanese yen (JPY) is 120 yen per dollar, one U.S. dollar can be
exchanged for 120 yen in foreign currency markets. An exchange rate
has two elements: a base currency and a counter currency. Given the
relevance of the U.S. dollar as a reserve currency, most exchange rates
use the USD as the base currency and the domestic currency as the

174
counter currency. A few exceptions to this rule include the Euro and
currencies of the Commonwealth (i.e. British Pound, Australian Dollar,
New Zealand dollar), which use the domestic currency as base
currency.

External sector
Current Account (% of GDP)
The current account is one of the two components of a country's
balance of payments, the other being the capital account. It consists
of the trade balance (the difference between the total value of exports
of goods and services and the total value of imports of goods and
services), the net factor income (difference between the return on
investments generated by citizens abroad and payments made to
foreign investors domestically) and net cash transfers, where all these
elements are measured in the domestic currency.

When a country's current account balance is positive (also known as

incurring a surplus), the country is a net lender to the rest of the world.
When a country's current account balance is negative (also known as
running a deficit), the country is a net borrower from the rest of the
world. The ratio of the current account balance to the Gross Domestic
Product (or % of GDP) provides an indication of the country’s level of
international competitiveness.

Trade Balance (USD billion)

The trade balance is the net sum of a country’s exports and imports of
goods without taking into account all financial transfers, investments
and other financial components. A country's trade balance is positive
(meaning that it registers a surplus) if the value of exports exceeds the
value of imports. Conversely, a country's trade balance is negative, or
registers a deficit, if the value of imports exceeds that of exports. The
trade balance is the official term that is used for net exports in the
current account.

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Exports (USD billion)
Exports are defined as movable goods produced within the
boundaries of one country, which are traded with another country.
The sale of these goods generates foreign currency earnings in the
country that produces them and boosts its economic growth. The
greater the proportion of exports in relation to a country’s Gross
Domestic Product (GDP), the larger the boost will be to overall growth
when overseas demand increases. Demand for exports is subject to
economic conditions in foreign countries as well as prices, quality
perception and reliability. In addition, a country’s production and flow
of exports depend on trade restrictions, such as tariffs or quotas, and
on subsidies, both domestically and abroad.

Imports (USD billion)

Imports are defined as goods produced outside the boundaries of one
country, which are then purchased by that country. Together with
exports, imports represent the keystone of foreign trade. A country
buys goods from abroad because it cannot produce them itself or
because there are comparative advantages in purchasing them from
abroad. Imports generally subtract growth from the national gross
output, although they add to well-being. A greater proportion of
imports relative to a country’s Gross Domestic Product (GDP) indicates
a country’s degree of dependence on purchases from abroad. The
higher the degree, the more imports displace domestic output.
Demand for imports depends on economic conditions in the buying
country, as well as the exchange rate and relative prices.

International Reserves (USD)

International reserves (or reserve assets in the balance of payments)
are those external assets that are readily available to and controlled
by a country’s monetary authorities. According to the International
Monetary Fund (IMF), international reserves comprise foreign
currencies, other assets denominated in foreign currencies, gold
reserves, special drawing rights (SDRs) and IMF reserve positions.

176
These reserves may be used for direct financing of international
payments imbalances, or for indirect regulation of the magnitude of
such imbalances via intervention in foreign exchange markets in order
to affect the exchange rate of the country’s currency. A narrower
definition for international reserves only includes foreign currency
deposits and bonds. These assets held by the country’s monetary
authorities are usually denominated in different reserve currencies,
mostly the U.S. dollar (USD), the Euro (EUR), the Japanese yen (JPY) and
the British pound (GBP).

External Debt (% of GDP)

External debt as percentage of Gross Domestic Product (GDP) is the

ratio between the debt a country owes to non-resident creditors and
its nominal GDP. External debt is the part of a country’s total debt that
was borrowed from foreign lenders, including commercial banks,
governments or international financial institutions. Debtors can be
individuals, corporations or the government. The external debt
comprises the outstanding amount of those actual current and not
contingent, liabilities owed to non-residents by residents of country,
which require the debtor to pay principal and/or interest at some
point(s) in the future. External debt is also referred to as foreign debt.

Source: [Link]

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 Economy of India

Mumbai, the financial centre of India

Currency Indian rupee (INR, ₹)

Fiscal year 1 April – 31 March

Trade organisations WTO, WCO, WFTU, BRICS, G-

20, BIS, AIIB, ADB and others

Country group  Developing/Emerging[3]

 Lower-middle income economy[4]

 Newly industrialized country

Statistics

Population 1,326,093,247 (2020 est.)[5]

GDP  $3.202 trillion (nominal; 2020 est.)[6]

 $11.321 trillion (PPP; 2020 est.)[7]

GDP rank  5th (nominal; 2019)

 3rd (PPP; 2020)

GDP growth  6.1% (2018) 4.2% (2019)

 1.9% (2020e) 7.4% (2021e)[7]

GDP per capita  $2,338 (nominal; 2020 est.)[6]

 $9,027 (PPP; 2020 est.)[6]

GDP per capita rank  139th (nominal; 2019)

 118th (PPP; 2019)

GDP by sector  Agriculture: 15.4%
 Industry: 23%

 Services: 61.5

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GDP by component  Household consumption: 59.1%

 Government consumption: 11.5%

 Investment in fixed capital: 28.5%

 Investment in inventories: 3.9%

 Exports of goods and services: 19.1%

 Imports of goods and services: −22%

 (2017 est.)[8]
Inflation (CPI)  6.58% (February 2020)[9]

 3.3% (2020 est.)[7]

Base borrowing rate 6.0% (as on 12 July 2019)[10]
Population below poverty
 6.3% in poverty (2017-18)[11]
line
 3% in extreme poverty (December 2018)[12][13]

 (World Poverty Clock estimate)

Gini coefficient 33.9 medium (2013)[14]
Human Development  0.647 medium (2018)[15] (129th)
Index
 0.538 low IHDI (2018)[16]
Labour force  494,261,397 (2019)[17]

 45.4% employment rate (2018)[18]

Labour force by  Agriculture: 44%
occupation
 Industry: 25%

 Services: 31%

 (FY 2018)[19]

Unemployment  5.4% (2019)[20][note 1]

 6.1% (FY 2018)[21]

 23.3% youth unemployment (15 to 24 year-

olds; 2019)[22][note 2]
Main industries  Textiles

 chemicals

 food processing

 agribusiness

 handicrafts

 petroleum

 petrochemicals

 gems and jewellery

 leather

 iron ore
 steel

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  aluminium

 cement

 mining

 metals

 retail

 machinery

 information technology

 construction

 financial services

 electric power

 consumer goods

 pharmaceuticals

 automotive

 telecommunications

 real estate

 paper

 transportation equipment[23]
Ease-of-doing-business 63rd (easy, 2020)[24]
rank

External

Exports $330 billion (2018–19)[25]

Export goods  Agricultural products 12.8%

 Fuels and mining products 13.8%

 Manufacturers 70.5%

 Others 2.9%[26]
Main export partners  Arab League 17.37%

 European Union 17.34%

 United States 15.88%

 ASEAN 11.38%

 China 5.08%

 Hong Kong 3.94%

 Japan 1.47%

 South Korea 1.43%

 Other 26.11%[26][27]

Imports $514 billion (2018–19)[25]

Import goods  Agricultural products 8.1%

 Fuels and mining products 30%

 Manufacturers 51.7%

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  Other 10.2%[26]
Main import partners  Arab League 19.88%

 China 13.68%

 ASEAN 11.53%

 European Union 11.35%

 United States 6.92%

 Hong Kong 3.50%

 South Korea 3.26%

 Japan 2.48%

 Other 27.4%[26][27]
FDI stock  Inward: $386.35 billion

 Outward: $166.19 billion

 (2018)[28]
Current account −$57.2 billion (June 2019)[29]
Gross external debt $543.0 billion (2019)[30][31]
Net international −$436.4 billion (2019)[32]
investment position

Public finances
Public debt  ₹146.886 trillion (US$2.1 trillion)

 69.037% of GDP (2019)[33]

Budget balance −3.4% (of GDP) (2018-19)[34]

Revenues  ₹39.29 trillion (US$550 billion)

 20.60% of GDP (2018)[35]

Expenses  ₹52.03 trillion (US$730 billion)

 27.28% of GDP (2018)[35]

Economic aid $2.45 billion (2018)[36]

Credit rating  Standard & Poor's:[37]

 BBB− (Domestic)

 BBB− (Foreign)

 BBB+ (T&C Assessment)

 Outlook: Stable

 Moody's:[38]

 Baa3

 Outlook: Stable

 Fitch:[39]

 BBB−
 Outlook: Stable

 ARC's Ratings:[40]

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  BBB+

 Outlook: Stable
Foreign reserves $493.480 billion (29 May 2020)[41] (5th)

Source: [Link]

Conclusion: As citizens of India our participation plays a major

role in Indian economics ….Respect and obey Central, state, and
local laws. Respect the rights, beliefs, and opinions of others.
Participate in your local community, voting in elections. Pay
income and other taxes honestly, and on time, to central, state,
and local authorities. Using Indian products also give great
contribution.

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 16. Financial Goal Setting
Money drives many decisions that we make day to day. Setting goals
can help us take control and feel more confident about those
decisions.

What are financial goals?

Financial goals are the personal, big-picture objectives you set for
how you’ll save and spend money. They can be things you hope to
achieve in the short term or further down the road. Either way, it’s
often easier to reach your goals if you identify them in advance.

Why financial goals matter

Having financial goals can help shape your future by influencing the
actions you take today. For example, say your goal is to pay off a
colossal credit card bill. You might cut back on takeout dinners and
use the money you save to make extra payments instead. Without
establishing that goal, you’re more likely to continue spending as
usual while your debt piles up.

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Here are six steps to setting financial goals.

1. Figure out what matters to you. Put everything, from the practical
and pressing to the whimsical and distant, on the table for
inspection and weighing.
2. Sort out what’s within reach, what will take a bit of time, and which
must be part of a long-term strategy.
3. Apply a SMART- goal strategy. That is, make certain your ambitions
are Specific, Measurable, Achievable, Relevant, and Timely. SMART.
4. Create a realistic budget. Get a strong handle on what’s coming in
and what’s going out, then work it to address your goals. Use your
budget to plug leaks in your financial ship.
5. With any luck, your tough, realistic, water-tight budget will show at
least a handful of leftover dollars. Whatever that amount is, have
it automatically directed into a separate account designed to
address the first couple of things on your list of priorities.
6. Monitor your progress.

Here are Ten examples of financial goals that we can consider

setting for ourself:

1. Make a budget and living by it: Some are sceptical of the

budgeting process. “Budgets are focused on debts and expenses
and nobody got rich by focusing on their debts,’’ said Ric Edelman,
a certified financial planner who is the author of eight books. “You
get wealthy by focusing on your assets and your income.’’ But most
experts agree that budgets are useful, if only to clearly define the
amount of income and fixed expenses in someone’s household.

2. Pay off credit card/high interest debt: “The interest charges (on
credit card accounts) eat up so much of the cash flow that could
be used for other objectives, “Once you pay them off, you should
be conscious about not using the credit card as much. The whole
system enables people to make poor decisions. Once you get
caught up in that culture, you don’t even know what’s happening
until you add it all up.

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3. Save an emergency fund: Three months of liquidity is a minimum
standard. Six months (or more) is better. In a fragile job market,
emergency funds are essential.

4. Save for retirement. Delayed gratification remains an elusive

concept for some Indians. “Everything around us is a push to buy,
a push to consume, “We need to making saving — particularly
retirement saving — as exciting as consumption. And it is exciting
when you consider it gives us the capacity to reach our long-term
dreams. People just need to see it that way.’’

5. Live below your means. It’s a simple math equation. If you spend
more than your income, there’s debt. If you spend less than your
income, there are savings.

6. Develop skills to improve your income. It doesn’t necessarily

mean a return to college for an additional degree. It might mean
taking on additional training or responsibility at your current job.
It might mean finding a mentor, who can provide tips and
feedback, or working a part-time job. It could also mean attending
conferences and workshops, networking in your profession, taking
a class online or offline , anything to acquire more contacts and
knowledge.

7. Save for your children’s education. It’s not getting any easier.
From 1980-2014, the average annual increase in college tuition
grew by nearly 260% compared to the nearly 120% increase in all
consumer items. Why is it important? By 2020, an estimated two-
thirds of all job openings will require post-secondary education or
training.

8. Save a down payment for a home. For most people, it’s the most
significant purchase and investment. The greater the down
payment, the more freedom and flexibility that’s provided for the
life of the loan.

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9. Improve your credit score: In order to get that home — or any
other transaction that requires a loan — it’s always helpful to
qualify for a lower interest rate. In simple terms, an improved
credit score saves you money by qualifying you for lower interest
rates.

10. Get the right insurance: Small financial emergencies can set
you back, but big ones can seriously cripple you. If you have kids
or other people who depend on you, life insurance offers essential
protection. Even if you don’t have any dependents, you may still
want to consider an affordable term life insurance policy. Term life
insurance provides a death benefit to your loved ones if you pass
away during a specific period. You can typically choose a term of
five, 10, 15, 20, 30 or 40 years. In most cases, your premium stays
the same throughout the term. Term insurance is worth having
because it’s relatively inexpensive and protects your loved ones
from suffering financial problems should you pass away during the
term of your policy.

How to Achieve Your Financial Goals

The best way to reach your financial goals is by making a plan that
prioritizes your goals.

When you examine your own goals, you’ll discover that some are
broad and far-reaching, while others are narrow in scope. Your goals
can be separated into three categories of time:

1. Short-term financial goals take under one year to achieve.

Examples may include taking a vacation, buying a new refrigerator
or paying off a specific debt.
2. Mid-term financial goals can’t be achieved right away but shouldn’t
take too many years to accomplish. Examples may include
purchasing a car, finishing a degree or certification, or paying off
your debts.
3. Long-term financial goals (over five years) may take several years
to accomplish and, as a result, require longer commitments and

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 often more money. Examples might include buying a home, saving
for a child’s college education, or a comfortable retirement.

The goal-setting process involves deciding what goals you intend to

reach; estimating the amount of money needed and other resources
required; and planning how long you expect to take to reach each of
your goals.

Develop A Goal Chart: Developing a financial goals chart is a good way

to begin this process. Here are the five steps you should follow in
order to set up your goal chart:

1. Write down one personal financial goal. It should be specific,

measurable, action-oriented, realistic and it should have a
timeline.
2. Decide if your goal is short-term, mid-term, or long-term, and
create a timeline for that goal. This may change at any time based
on your situation.
3. Determine how much money you need to save to reach your goal
and separate that amount by the month and/or year.
4. Think of all ways you can reach that goal. Include saving, cutting
expenses, earning extra money, or finding additional resources.
5. Decide which is the best combination of ways to reach your goal
and write them down.

All of that might sound daunting, but it’s best to set incremental goals.
Prioritize, then achieve. After accomplishing some of the easier goals,
you gain confidence in your decision making that provides motivation
to achieve the more difficult targets that require more time and
discipline.

Short-term Goals
Short-term financial goals tend to be narrow in scope, with a limited
time horizon. Short-term goals can include purchasing household
furniture, minor home improvements, saving for a car or vacation, or
paying for a graduate degree.

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Better still, however, short-term goals should include getting the best
possible handle on your budget, adjusting your spending habits,
eliminating credit card debt, saving a set percentage of your income,
and/or establishing your emergency/rainy-day fund.

Short-term goals can include getting serious about doing away with
unnecessary spending. Do you need a landline phone? Do you need
all those premium cable channels?

Sound daunting already? Then perhaps your key short-term goal is to

find a financial counselor or investment adviser who can help you sort
your priorities and set a plan.

Midterm Goals
The tendency to weight financial plans around the near- and long-term
goals has been called the “barbell” approach. Some attention must be
paid to mid-range goals — those ambitions that will take three to 10
years to pull off.

Again, apply SMART planning. Avoid setting your sights so high that
frustration intervenes to short-circuit your ambitions.

Examples of mid-term financial goals include saving enough for a

down payment on a house, paying off a hefty student loan, starting a
business (or starting a second career), paying for a wedding, stoking
your youngster’s prepaid college fund, taking a dream vacation, or
even a sabbatical.

A key mid-term goal would be developing multiple income streams.

This doesn’t mean working every weekend at the neighborhood big-
box retailer. Instead, it might mean figuring out how to monetize a
hobby, or starting a side business with an underutilized skill.

Your financial counselor or investment adviser can play a valuable role

in guiding your midterm strategy.

Long-term Goals
The ultimate long-term financial goal, of course, is funding a
comfortable retirement. It’s never too early to get that ball rolling with

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regular, automatic deposits in tax-advantaged investment accounts.
It’s hard to beat dollar-cost-averaged investing over a period of 30 to
40 years.

Other long-term financial goals could include living debt-free, paying

off your mortgage; taking a lengthy, once-in-a-lifetime trip; getting
your kids through college debt-free; building an estate that would give
your youngsters options in life; or leaving a legacy to a favorite
nonprofit.

Goal Setting Tips and Resources: There are resources to help everyone
stay on course. Financial apps for goal tracking can be helpful.
Technology offers a number of goal ticklers, alerts and prompts that
can provide a nice road map.

Make use of excel sheet, project all your planning and set few
calculators and charts for our own monitoring.

But life is not about always making budget and living with it ..life will
always give you many surprises on its way …one thing what we can do
is ….getting prepared for the surprises and face it with confidence
with proper planning. Just live the moment………………………..All is well.

எலாம் நல்லத்துகே..........................................................

……………………………….The End…………..………………...
Venkatesh Ramachandran… [Link]
venkataero11@[Link]

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