1 Marks Questions
Question 1: Define savings.
Answer: Savings are defined as part of the present income that is put aside for future consumption.
Question 2:What are two types of life insurance policies offered by LIC?
Answer: Two varieties of life insurance policies offered by LIC are:
(i) Endowment policy
(ii) Money back policy
Question 3:Mention one benefit and one drawback of opening a savings account in a post office.
Answer: One benefit of opening a savings account in a post office is that the money deposited in the account is secure. One
drawback of opening a savings account in a post office is that the rate of interest given on the money deposited is very low in comparison to a fixed deposit account.
Question 4:Mention any two advantages of opening a recurring deposit account for two years.
Answer: The advantages of opening a recurring deposit account for two years are:
(i) A recurring deposit account gives a higher rate of interest than a savings deposit account.
(ii) We can save money every month in installments,which is very useful for salaried persons.
Question 5 :Present one difference and one similarity between General Provident Fund and Public Provident Fund .Specify one common benefit of each.
Answer: One difference between General Provident Fund and Public Provident Fund is that for government employees,General Provident Fund is compulsory,Whereas Public Provident Fund is totally voluntary.
One similarity between General Provident Fund and Public Provident Fund is that amount invested in it gives tax exemption. One common benefit of both the schemes is that they give good return on investment and are risk free.
2 Marks Questions
Question 6: Explain two difference between a savings bank account opened in a post office and that in a bank.
Answer: Differences a savings bank account opened in a post office and that in a bank are:
(i) The interest earned by the balance in the post office account is exempted from income tax,whereas it is not so for the interest earned by the balance in the bank account.
(ii) The minimum amount required for opening a savings bank account in post office is ₹ 20(with minimum balance requirement of ₹ 50),whereas in a nationalized bank it varies from minimum ₹ 500 to ₹1000
Question 7:Suggest four investment schemes for your sister to save income tax on her income due to working in a government job.
Answer: Four investment schemes for my sister to save income tax are:
(i) Public Provident Fund(PPF)
(ii)LIC Insurance Policy
(iii)National Savings Certificates
(iv)Fixed Deposits in Banks/Post Office
Question 8: List any four long term goals in which your savings will come in handy.
Answer: Some long Term goals for which my savings will come in handy are:
(i)To raise the standard of living of the family
(ii)To provide security to the family when the main earning member retires from service.
(iii)To meet unforeseen expenses
(iv) Enabling investment in assets like land,a house or government/bank/post office savings scheme.
Question 9: List any four emergency situations for which your savings can come in handy.
or
List any four unforeseen expenses for which your savings can come in handy.
Answer: Some unforeseen/emergency situations for which my savings can come in handy re:
(i)Accident to a family member
(ii)An illness in the family
(iii) Loss of job of a family member
(iv) Theft of money/jewellery
3 Marks Questions
Question 10:Suggest Sunil two ways of increasing his monthly income and convince him to record his monthly expenses.Suggest a suitable format for monthly record of his expenses.
Answer: Sunil can increase his family income by following ways:
(i) If he is a student and have spare time,he can take some tuition classes in the evening to supplement his income.
(ii) If he is working in an office and has overtime facility ,he can opt for it.When an employee stays back and works extra time,he is paid extra money.This way he can supplement his income.
Sunil should also form a habit of recording his monthly expenses :
(i) This a very good habit as one can keep a track of income and expenditure.One is aware of money spent,goods purchased and payments made.The left out balance is also in front of them so they can plan accordingly.
(ii) Accounting monthly expenditure also helps in comparing expenditure incurred is one month with that of other month.
A check can be exercised if the expenditure exceeds in a month as compared to the previous months.
A format for monthly record of expenses can be like this:
| Item | 1st Week | 2nd wee | 3rd week | 4th week | Total |
| Milk | 300 | 300 | 450 | 450 | 1500 |
| Vegetables | 180 | 150 | 190 | 205 | 725 |
| Provisions | 750 | 400 | 500 | 300 | 1950 |
| Petrol | 900 | 900 | —— | 900 | 2700 |
| Rent of House | 12000 | 12000 | |||
| Domestic Help | 800 | ——– | ——– | ——– | 800 |
| Electricity Bill | 1500
|
——– | ——– | ——– | 1500 |
| Newspaper bill | 600 | ——– | ——– | ——– | 600 |
| Mobile Bill | 1000 | ——– | ——– | ——– | 1000 |
| Clothing | 1000 | ——– | ——– | ——– | 1000 |
| Extra Expenditure | 200 | 100 | ——– | 200 | 500 |
| Total Income
25000/- |
Total Expenditure 21425
Savings 25000-24275=725 |
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Question 11: Your brother is 30 years old businessman. Suggest him two tax saving schemes which are safe and can help him, in his old age.Justify your choice with two other reasons each.
Answer: Suggested tax savings schemes with reasons are:
Public Provident Fund(PPF)
(i) It is a long term scheme(15 years with extension) so that money can be used in old age.
(ii) The amount to be invested every year is flexible with minimum requirement of ₹1000 only in any year. Thus,in a year when business is good ,more can be invested.
National Savings Certificates
(i) It is long term scheme(5 years) with reinvestment of the accrued amount possible for another 5 years.
(ii) The amount to be invested every year is variable with a minimum requirement of ₹100 only in any year. Thus in a year when business is bad,a small amount only needs to be invested .In a year, when business is good, more can be invested.
Question 12:Your brother earns ₹5 lakhs per year.You have suggested him to either invest in NSC or Fixed Deposit scheme.List six similarities between these two schemes.
Answer: Six similarities between these two schemes are:
(i) There is no maximum limit of investment in either of these.
(ii) There is income tax rebate under Section 80CC of Income Tax Act in both of them
(iii)Premature/partial withdrawal/loan is allowed after one year with deductions and under certain conditions in both of them.
(iv) In both of them,a minimum amount to be invested is specified.
(v) In both of the,the principal amount invested is paid back along with interest after the stipulated period is over.
(vi) In both of them, the rate of interest is higher than that given in savings bank account.
Question 13:Justify with Three reasons as to why you have chosen to invest in Public Provident fund Scheme and not in Monthly Income Scheme(MIS).
Answer: Investment in Public Provident Fund(PPF) instead of in Monthly Income Scheme(MIS) is justifies for the following reasons:
(i)The minimum amount to be invested in PPF is less(₹500 per annum) than MIS(₹1500)
(ii)The rate of interest of PPF (8% currently) is more than that in MIS(7.7% currently)
(iii)In , PPF an income tax rebate is given under Section 80CC of Income Tax act ,whereas there is no such rebate in MIS.
4 Marks Questions
Question 14:Your brother works in a bank and wants to invest one lak rupees.Suggest him two schemes which are safe and provide tax rebate.Mention three other features of these schemes.
Answer: Suggested schemes which are safe and provide tax rebate with other features are:
Public Provident Fund(PPF) Its features are:
(i)
(i) It is long term scheme(5 years) with reinvestment of the accrued amount possible for another 5 years.
(ii) The amount to be invested every year is variable with a minimum requirement of ₹100 only in any year.
(iii) It gives a higher rate of interest(8% currently)
Fixed Deposit If he invests a minimum of 5 years,he will get tax rebate. Its features are:
(i) The rate of interest for a 5 year investment is high(8% currently)
(ii) The principal amount invested is paid back along with interest after the stipulated period is over.
(iii)A loan facility against deposit is available if needed.
Question 15 :A family wants to buy a big refrigerator in 6 years time.Suggest and briefly explain to them two schemes for safe investment of their savings.Give two advantages of each scheme.
Answer: The cost of a big refrigerator after six years will be substantial.However,as time period given is six years,long term schemes suggested for safe investment of their savings are:
Fixed Deposit in banks Advantages of this are:
(i) The rate of interest for a 5 year investment is high(8% currently)
(ii) There is income tax rebate under Section 80CC of Income Tax Act in this scheme.
National Savings Certificates Advantages of this are:
(i) The rate of interest for a 5 year investment is high(8% currently)
(ii) There is income tax rebate under Section 80CC of Income Tax Act in this scheme.
5 Marks Questions
Question 16: Compare five features of Monthly Income Scheme(MIS) and National Savings Certificate(NSC)
Answer: The features are compared in the following table:
| Feature | Monthly Income Scheme(MIS) | National Savings Certificate(NSC) |
| When to invest | This is one time investment | Multiple investments can be made |
| Minimum amount to be invested | ₹1500 | ₹100 |
| Length/Time period | 5 years | Matures after 5 years |
| Maximum limit of investment | ₹4.5 lakhs(singly) or ₹9laks(jointly) | No limit |
| Income Tax rebate | No | Yes,upto a certain amount under section 80CC of Income Tax Act |
Question 17 :In order to save tax,your wants to invest in either a bank or post office. Compare five features each of any two schemes available from each institution so that he can make a wise choice.
Answer: The features are compared in the table given below:
| Feature | Fixed Deposit in bank | National Savings Certificate(NSC) bought from Post Office |
| Minimum amount to be invested | ₹1000 | ₹100 |
| Length/Time period | Variable from 15 days onward | Matures after 5 years |
| Maximum limit of investment | No limit | No limit |
| Income Tax rebate | Yes,upto a certain amount under section 80CC of Income Tax Act(if deposited for minimum 5 years) | Yes,upto a certain amount under section 80CC of Income Tax Act |
| Premature/Partial withdrawal | Allowed after one year with deductions and under certain conditions | Allowed after one year with deductions and under certain conditions |
Question 18 :Compare any five features of Monthly Income Scheme(MIS) and Public Provident Fund(PPF)
Answer: The features are compared in the table below:
| Feature | Monthly Income Scheme(MIS) | Public Provident Fund(PPF) |
| When to invest | This is on time investment | Investments of the minimum amount are to made at least once a year |
| Minimum amount to be invested | ₹1500 | ₹1000 annually |
| Length/Time period | 5 years fixed | 15 years(optional extension of 5 years which can be repeated) |
| Maximum limit of investment | ₹4.5 lakhs(singly) or ₹9laks(jointly) | ₹1.5 lakhs annually |
| Income Tax rebate | No | Yes, under section 80CC of Income Tax Act |
Question 19 : Compare the features of LIC and National Savings Scheme(NSC)
or
Differentiate between LIC and National Savings Scheme(NSC) investment
Answer: The features are compared in the table given below:
| Feature | LIC | National Savings Certificate(NSC) |
| Minimum amount to be invested | According to the Life Insurance policy taken | ₹100 |
| Length/Time period | According to the Life Insurance policy taken | Matures after 5 years |
| Maximum limit of investment | Investment limit is according to the sum of the policy holder is insured for | No limit for investment |
| Income Tax rebate | Yes, under section 80CC of Income Tax Act | Yes, under section 80CC of Income Tax Act |
| Premature /Partial withdrawal/Loan facility | Allowed with deductions and under certain conditions | Allowed after one year with deductions and under certain conditions |
| When to invest/pay premium | Periodically every year(quarterly/bi annually /annually) | Multiple investments can be made |
Question 20:Compare the features of Public Provident Fund(PPF) and Employee Provident Fund(EPF)
or
Differentiate between Public Provident Fund(PPF) and Employee Provident Fund(EPF).
Answer: The features are compared in the table below:
| Feature | PPF | EPF |
| Who can invest | Anyone can invest | Only Salaried persons can invest |
| Minimum amount to be invested | ₹1000 annually | 12% of salary |
| Length/Time period | 15 years(optional extension of 5 years which can be repeated)
|
During the salary period |
| Maximum limit of investment | ₹1.5 lakhs annually
|
12% of salary upto a maximum salary of 15000 per month currently |
| Income Tax rebate | Yes, under section 80CC of Income Tax Act | Yes, under section 80CC of Income Tax Act |
| Premature /Partial withdrawal/Loan facility | Partial withdrawal of 50% of the amount standing to your credit at the end of the third preceding year is allowed after you complete 6 years in the scheme | Partially allowed under certain conditions |
| Rate of Interest | 8% currently(changes from time to time) | 8.65% currently on both employee and employer deposits(changes from time to time) |
| Loan facility | This will not be available with effect from 1st April 2017 | This is available any time during the earning period under certain conditions |
Question 21 : Compare the features of NSC and PPF
Answer: The feature are compared in the table below:
| Feature | NSC | PPF |
| Minimum amount to be invested | ₹100 | ₹1000 annually |
| When to invest | Multiple investments can be made
|
Investment of minimum amount are to made at least once every year |
| Length/time period | Matures after 5 years | 15 years(optional extension of 5 years which can be repeated)
|
| Maximum limit of investment | No limit for investment | ₹1.5 lakhs annually |
| Income Tax rebate | Yes, under section 80CC of Income Tax Act | Yes, under section 80CC of Income Tax Act |
| Interest is taxable or not | Only at the end of the time period of 5 years | No |
| Premature /Partial withdrawal | Allowed after one year with deductions and under certain conditions | Partial withdrawal of 50% of the amount standing to your credit at the end of the third preceding year is allowed after you complete 6 years in the scheme |
| Rate of Interest | 8% currently(changes from time to time) | 8% currently(changes from time to time) |