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Tax Structure, Currency & Inflation, Mints, Banking System, Stock Exchange

Tax Structure, Currency, Mints

Indian Tax Structure

India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies.

  • Central Government levies taxes on income (except tax on agricultural income, which the State Governments can levy), customs duties, central excise and service tax.
  • Value Added Tax (VAT), stamp duty, state excise, land revenue and profession tax are levied by the State Governments.
  • Local bodies are empowered to levy tax on properties, octroi and for utilities like water supply, drainage etc.

During the last decade Indian taxation system has undergone tremendous reforms. The tax rates have been rationalized and tax laws have been simplified resulting in better compliance, ease of tax payment and better enforcement. The process of rationalization of tax administration is ongoing in India.

Direct & Indirect Taxes

Direct Tax

The tax in which the impact and incidence of tax is on the same entity. In case of direct tax the burden of the tax cannot be shifted. Examples of Direct taxes are income tax, corporate tax, annual tax on wealth, estate duties, land revenue etc.

Indirect Tax

The tax in which the impact and incidence of tax is on different entities. In case of Indirect taxes the burden of the tax is shifted to another entity. Examples are Service tax, Custom Duty, Central excise, state level VAT, entertainment tax etc.

Currency & Inflation

  • Rupee was first minted in India during the reign of Sher Shah Suri in 1942.
  • India became the member of International Monitory Fund (IMF) in 1947 and after that the exchange value of Indian Currency came to be fixed by IMF Standards.
  • All coins and 1 rupee notes are issued by Government of India that’s why it bears the signature of Finance Secretary, Government of India.
  • Other notes and coins are issued by RBI so it bears the signature of Governor of RBI.

Mints & Press

  • Postal and judicial stamps, cheques and bonds are printed by the Indian Security Press, Nasik Road.
  • Notes of Rs.10 and under denominations are printed by the Currency Note Press, Nasik.
  • Notes of Rs. 20, 50, 100 and above denominations are printed at Bank Note Press, Dewas (MP).
  • Ink Factory is the 2nd unit of Bank Note Press, Dewas (MP) and it manufactures security papers.
  • Papers for making currency notes and other security papers are manufactured in Security Paper Mill, Hoshangabad.
  • Security Printing Press situated in Hyderabad.
  • Government medals are minted at Kolkata and Noida.

 

Banking System in India

  • History of Indian banking started in 19th century.
  • First bank in India was ‘Bank of Hindustan’ in 1877 but it failed.
  • First successful bank in India was ‘Bank of Bengal’ set up in 1806.
  • First commercial bank in India was ‘Awadh Commercial Bank” established in 1881.
  • ‘Imperial Bank of India’ was set up in 1921.
  • In 1969, 14 banks which have deposits of more than Rs.50 crore were nationalized.
  • In 1980, 6 other banks were nationalized.

 

List of Nationalize Bank in 1969:

  • Central Bank of India
  • Bank of India
  • Punjab National Bank
  • Canara Bank
  • United Commercial Bank
  • Syndicate Bank
  • Bank of Baroda
  • United Bank of India
  • Union Bank of India
  • Dena Bank
  • Allahabad Bank
  • Indian Bank
  • Indian Overseas Bank
  • Bank of Maharashtra

List of Banks Nationalized in 1980:

  • Andhra Bank
  • Punjab and Sind Bank
  • New Bank of India
  • Vijaya Bank
  • Corporation Bank
  • Oriental Bank of Commerce

 

Reserve Bank of India

  • Reserve Bank of India was set up on 1st April, 1935.
  • It was nationalized in 1949.
  • Its initial capital was 5 crore which was divided into 5 lakhs equity shares of Rs.100 each.
  • Initially it has share holders and majority of share were held by the private share holders.
  • It has 14 Directors, 4 deputy Governors and 1 Governor.
  • The Governor is the Chairman of the Board & Chief Executive of the bank.
  • 1st Governor of RBI was Sir Smith (1935-37).
  • 1st Indian Governor C.D. Deshmukh (1948-49).

Functions

Issue of Notes

  • It regulates issuance if bank notes above 1 rupee.
  • After the 2nd world war the RBI act was amended and the ‘proportional reserve system’ was replaced by ‘minimum reserve system’.
  • Since 1957, the RBI of India has to keep Rs.200 worth of gold and foreign currency reserves for issue of currency notes (Rs.115 crore worth of gold and Rs.85 crore worth of foreign currency).

Bank to the Government

  • It acts as the Banker, agent and advisor to the Government of India.
  • It controls the transaction of all business of the central and state Governments except Jammu & Kashmir.
  • It buys and sells the securities of the central and state Governments for the purpose of loan.
  • It also manages the debt of the Government.

Banker’s Bank

  • RBI of India is empowered to control and regulate the banking system in the whole country.
  • It acts as the financial assistant and clearing house of other commercial banks.

 

Credit Controller

  • It is empowered to take various steps to control Credit in the country.
  • It has power to measure:

Bank Rate, Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and Open Market Operation (OMO).

Custodian of Foreign Reserves

  • It has responsibility of keeping the foreign exchange stable.
  • It buys and sells the foreign currencies and also protects the country’s foreign exchange funds.

Imperial Bank of India

  • It was established in January, 1921 as 3 presidency banks-
  • Bank of Bengal,
  • Bank of Bombay &
  • Bank of Madras
  • In 1955 it was nationalized and named as State Bank of India (SBI).

 

State Bank of India (SBI)

  • It is the biggest commercial bank in the public sector of India.
  • SBI has 7 subsidiary Banks:

St. Bank of Bikaner & Jaipur
St. Bank of Hyderabad
St. Bank of Indore
St. Bank of Mysore
St. Bank of Patiala
St. Bank of Saurashtra
St. Bank of Travancore

 

Stock Exchanges

  • It plays a vital role in corporate sector.
  • It deals with shares debentures and financial securities.
  • Presently India has 24 Stock exchanges.
  • Bombay Stock Exchange (BSE) is the oldest one.
  • BSE is the Asia’s oldest stock exchange.

Some Important Share Price Index of India

BSE SENSEX :

it is the most sensitive share index of the Mumbai Stock Exchange. It represents the index of 30 main shares. It was established in 1978-79.

BSE 200 :

It represents 200 shares of Mumbai Stock Exchange. It was founded in 1989-90.

DOLLEX :

Index of 200 BSE Dollar Value Index is called DOLLEX. It was founded in 1989-90.

NSE-50 :

It is related to Delhi. Firstly its name was NSE-50. It includes 50 companies’ shares. Now its name is S and P CNX Nifty.

  • World’s first Share market was established in Amsterdam, Netherlands in 1602.
  • 8 companies listed in New York stock Exchange:
    1. Da Reddy Laboroteries,
    2. HDFC, ICICI Bank,
    3. MTNL,
    4. Sattyam computers,
    5. Videsh Sanchar Nigam Limited (VSNL),
    6. WIPRO,
    7. Tata Motors

Security Exchange Bank of India (SEBI)

  • It was established in April 1988.
  •  It was granted statutory status by an act of Parliament in 1992.
  • SEBI has 6 members including the Chairman.
  • The term of members is 3 years and or up to the age of 65 years.
  • It has power of regulating the stock exchanges.
  • It has now hiked the monetary penalties for various offences to either three times the unlawful gains made by a market player or a maximum of Rs. 25crore.