Gambling in India

Care recipients receive adequate nourishment and hydration. Generally, you can deduct entertainment expenses including entertainment-related meals only if they are directly related to the active conduct of your trade or business. Regarding Wikifolio, I ran into these guys yesterday at a finance convention in Zurich. JosephTax Commented on March 12, In the case of a separate structure not attached to your home, in connection with your trade or business. What coordination are you talking about. Fines and penalties, such as parking tickets.

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Typhoon periphery brings heavy rain to northern Taiwan. Most flights between Taiwan and Okinawa Friday canceled. Wade, Haslem get big cheers at Heat end-of-camp scrimmage. Backup withholding does not apply to payments reported on Form MISC other than payments by fishing boat operators and royalty payments unless at least one of the following three situations applies. The payer made payments to you last year that were subject to backup withholding.

When you open a new account, make an investment, or begin to receive payments reported on Form , the bank or other business will give you Form W-9, Request for Taxpayer Identification Number and Certification, or a similar form. You must enter your TIN on the form and, if your account or investment will earn interest or dividends, you also must certify under penalties of perjury that your TIN is correct and that you are not subject to backup withholding.

You are required, but fail, to certify that you are not subject to backup withholding. The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends on your income tax return.

The IRS will do this only after it has mailed you four notices over at least a day period. An ITIN is for federal tax use only. It does not entitle you to social security benefits or change your employment or immigration status under U. If you have been notified by a payer that the TIN you gave is incorrect, you usually can prevent backup withholding from starting or stop backup withholding once it has begun by giving the payer your correct name and TIN.

You must certify that the TIN you give is correct. This may happen if both the following conditions exist. The incorrect TIN is still being used on the account when the payer receives the second notice. If you have been notified that you underreported interest or dividends, you must request and receive a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun.

Your request must show that at least one of the following situations applies. You have a bona fide dispute with the IRS about whether an underreporting occurred.

Backup withholding will cause or is causing an undue hardship and it is unlikely that you will underreport interest and dividends in the future. If the IRS determines that backup withholding should stop, it will provide you with certification and will notify the payers who were sent notices earlier. There are civil and criminal penalties for giving false information to avoid backup withholding.

This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. For information on when the penalty applies, see chapter 4. It would be helpful for you to have a copy of your tax return and an estimate of your income nearby while reading this chapter. See How To Get Tax Help at the end of this publication for information about how to get this publication and form.

You may need to use several of the blank worksheets included in this chapter. See Worksheets for Chapter 2 to locate what you need. If you receive salaries and wages, you may be able to avoid paying estimated tax by asking your employer to take more tax out of your earnings. To do this, file a new Form W-4 with your employer. This is the flowchart used to determine if a taxpayer has to make estimated tax payments. Do not subtract any estimated tax payments.

Your return must have covered a month period. You MUST make estimated tax payment s by the required due date s. You can use the following general rule as a guide during the year to see if you will have enough withholding, or should increase your withholding or make estimated tax payments.

The percentages in 2a or 2b just listed may be different if you are a farmer, fisherman, or higher income taxpayer. See Special Rules , later. Figure 2-A takes you through the general rule. You may find this helpful in determining if you must pay estimated tax.

Jane Smart uses Figure 2-A and the following information to figure whether she should pay estimated tax for She files as head of household, takes the standard deduction, and expects no refundable credits for Jane does not need to pay estimated tax. Jane must increase her withholding or pay estimated tax for Jane does not need to pay estimated tax for If you qualify to make joint estimated tax payments, apply the rules discussed here to your joint estimated income. Either spouse is a nonresident alien unless that spouse elected to be treated as a resident alien for tax purposes.

These individuals can take credit only for the estimated tax payments that he or she made. If you plan to file a joint return with your spouse for , but you filed separate returns for , your tax is the total of the tax shown on your separate returns.

You filed a separate return if you filed as single, head of household, or married filing separately. If you plan to file a separate return for , but you filed a joint return for , your tax is your share of the tax on the joint return. You file a separate return if you file as single, head of household, or married filing separately.

To figure your share of the tax on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for using the same filing status for Then multiply the tax on the joint return by the following fraction.

For , they plan to file married filing separately. Joe figures his share of the tax on the joint return as follows: To determine whether two-thirds of your gross income for was from farming or fishing, use as your gross income the total of the income not loss amounts.

On a joint return, you must add your spouse's gross income to your gross income to determine if at least two-thirds of your total gross income is from farming or fishing. This is income from cultivating the soil or raising agricultural commodities. It includes the following amounts. Income from operating a stock, dairy, poultry, bee, fruit, or truck farm. Income from a plantation, ranch, nursery, range, orchard, or oyster bed. For , gross income from farming is the total of the following amounts.

Your gains from sales of draft, breeding, dairy, or sporting livestock shown on Form , Sales of Business Property. Wages you receive as a farm employee and wages you receive from a farm corporation are not gross income from farming. This is income from catching, taking, harvesting, cultivating, or farming any kind of fish, shellfish for example, clams and mussels , crustaceans for example, lobsters, crabs, and shrimp , sponges, seaweeds, or other aquatic forms of animal and vegetable life.

Income for services as an officer or crew member of a vessel while the vessel is engaged in fishing. Certain taxable interest and punitive damage awards received in connection with the Exxon Valdez litigation.

Shore service as an officer or crew member of a vessel engaged in fishing; and. Services that are necessary for the immediate preservation of the catch, such as cleaning, icing, and packing the catch.

Resident and nonresident aliens also may have to pay estimated tax. Resident aliens should follow the rules in this publication, unless noted otherwise. Estimated Tax for Nonresident Alien Individuals. You are an alien if you are not a citizen or national of the United States. You are a resident alien if you either have a green card or meet the substantial presence test.

Estates and trusts also must pay estimated tax. However, estates and certain grantor trusts that receive the residue of the decedent's estate under the decedent's will are exempt from paying estimated tax for the first 2 years after the decedent's death.

To figure your estimated tax, you must figure your expected AGI, taxable income, taxes, deductions, and credits for the year. When figuring your estimated tax, it may be helpful to use your income, deductions, and credits for as a starting point. Use your federal tax return as a guide. You can use Form ES to figure your estimated tax. You must make adjustments both for changes in your own situation and for recent changes in the tax law. Some of these changes are discussed earlier under What's New for The instructions for Form ES include a worksheet to help you figure your estimated tax.

Keep the worksheet for your records. Use Worksheet to help guide you through the information about completing the Estimated Tax Worksheet. You can also find a copy of the worksheet in the instructions for Form ES.

Your expected AGI for line 1 is your expected total income minus your expected adjustments to income. Include in your total income all the income you expect to receive during the year, even income that is subject to withholding. Total income includes all income and loss for that, if you had received it in , would have been included on your tax return in the total on line 22 of Form , line 15 of Form A, or line 4 of Form EZ. Social security and railroad retirement benefits.

If you expect to receive social security or tier 1 railroad retirement benefits during , use Worksheet to figure the amount of expected taxable benefits you should include on line 1.

Be sure to subtract from your expected total income all of the adjustments you expect to take on your tax return. If you expect to have income from self-employment, use Worksheet to figure your expected self-employment tax and your allowable deduction for self-employment tax. Include the amount from Worksheet in your expected adjustments to income.

If you file a joint return and both you and your spouse have net earnings from self-employment, each of you must complete a separate worksheet. Reduce your expected AGI for line 1 by either your expected itemized deductions or your standard deduction. If you expect to claim itemized deductions on your tax return, enter the estimated amount on line 2a. Itemized deductions are the deductions that can be claimed on Schedule A Form If you expect to claim the standard deduction on your tax return, enter the amount on line 2a.

Use Worksheet to figure your standard deduction. The standard deduction for some individuals is zero. Your standard deduction will be zero if you: File a return for a period of less than 12 months because you change your accounting period. After you have figured your expected taxable income line 3 , follow the steps next to figure your expected taxes, credits, and total tax for Most people will have entries for only a few of these steps.

Figure your expected income tax line 4. Generally, you will use the Tax Rate Schedules to figure your expected income tax. However, see below for situations where you must use a different method to figure your estimated tax. Children who are full-time students at least age 19 but under age 24 at the end of Although the ages and dollar amounts in the publication may be different in the revision, this reference will give you basic information for figuring the tax.

Instead, your net capital gain is taxed at a lower maximum rate. The term "net capital gain" means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss.

Tax on capital gain and qualified dividends. If the amount on line 1 includes a net capital gain or qualified dividends, use Worksheet to figure your tax. Tax if excluding foreign earned income or excluding or deducting foreign housing. If you expect to claim the foreign earned income exclusion or the housing exclusion or deduction on Form or Form EZ, use Worksheet to figure your estimated tax.

Total your expected taxes line 6. Include on line 6 the sum of the following. Subtract your expected credits line 7. If you are using your return as a guide and filed Form , your total credits for were shown on line If you filed Form A, your total credits for were on line If you expect to claim the credit for other dependents on your tax return, include this on line 7.

Also keep in mind that the child tax credit has been increased for If your credits on line 7 are more than your taxes on line 6, enter "0" on line 8 and go to Step 4.

Add your expected self-employment tax line 9. Other taxes include the following. The total of these taxes are entered on line You will have federal income tax withheld from wages, pensions, annuities, gambling winnings, or other income; or. Amounts written on Form on the line for "other taxes" line 62 on the Form Medicare wages and self-employment income are combined to determine if your income exceeds the threshold.

A self-employment loss should not be considered for purposes of this tax. RRTA compensation should be separately compared to the threshold. Your employer is responsible for withholding the 0. You should consider this withholding, if applicable, in determining whether you need to make an estimated payment.

The NIIT is 3. Subtract your refundable credits line 11c. These include the earned income credit, additional child tax credit, fuel tax credit, net premium tax credit, refundable American opportunity credit, and refundable amount from Form The result of Steps 1 through 6 is your total estimated tax for line 11c.

On lines 12a through 12c, figure the total amount you must pay for , through withholding and estimated tax payments, to avoid paying a penalty.

Your tax return must cover all 12 months. There are special rules for higher income taxpayers and for farmers and fishermen. This rule does not apply to farmers and fishermen. If at least two-thirds of your gross income for or is from farming or fishing, your required annual payment is the smaller of: For definitions of "gross income from farming" and "gross income from fishing," see Farmers and Fishermen , earlier, under Special Rules.

Your total tax, if you filed Form , is the amount on line 63 reduced by the following. Excise tax on excess golden parachute payments identified as "EPP".

Excise tax on insider stock compensation from an expatriated corporation identified as "ISC". Look-back interest due under section g identified as "From Form ". Look-back interest due under section b identified as "From Form ". Any refundable credit amounts on lines 66a, 67, 68, 69, and 72, and credit from Form included on line If you filed Form A, your total tax is the amount on line 39 reduced by the amount on line 38, and any refundable credits on lines 42a, 43, 44, and If you filed Form EZ, your total tax is the amount on line 12 reduced by the amount on lines 8a and Use lines 13 and 14a to figure the total estimated tax you may be required to pay for Subtract your expected withholding from your required annual payment line 12c.

You usually must pay this difference in four equal installments. Your expected withholding for line 13 includes the income tax you expect to be withheld from all sources wages, pensions and annuities, etc. It includes excess social security and tier 1 railroad retirement tax you expect to be withheld from your wages and compensation. It also includes Additional Medicare Tax you expect to be withheld from your wages or compensation.

For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If a payment is mailed, the date of the U.

The general payment periods and due dates for estimated tax payments are shown next. For exceptions to the dates listed, see Saturday, Sunday, holiday rule. Janet Adams does not pay any estimated tax for She files her income tax return and pays the balance due shown on her return on January 26, Janet's estimated tax for the fourth payment period is considered to have been paid on time.

However, she may owe a penalty for not making the first three estimated tax payments, if required. Any penalty for not making those payments will be figured up to January 26, If your tax year does not start on January 1, your payment due dates are: If you have income subject to estimated tax during the first payment period, you must make your first payment by the due date for the first payment period.

If you choose to pay in installments, make your first payment by the due date for the first payment period. Make your remaining installment payments by the due dates for the later periods. To avoid any estimated tax penalties, all installments must be paid by their due date and for the required amount.

You can pay your entire estimated tax by the due date for that period or you can pay it in installments by the due date for that period and the due dates for the remaining periods. Table shows the general due dates for making installment payments when the due date does not fall on a Saturday, Sunday, or holiday.

To determine how much you should pay by each payment due date, see How To Figure Each Payment , later. If at least two-thirds of your gross income for or is from farming or fishing, you have only one payment due date for your estimated tax, January 15, If you are a farmer or fisherman, but your tax year does not start on January 1, you can either: Pay all your estimated tax by the 15th day after the end of your tax year, or.

File your return and pay all the tax you owe by the 1st day of the 3rd month after the end of your tax year. After you have figured your total estimated tax, figure how much you must pay by the due date of each payment period. You should pay enough by each due date to avoid a penalty for that period.

The penalty is discussed in chapter 4. If your first estimated tax payment is due April 17, , you can figure your required payment for each period by dividing your annual estimated tax due line 14a of the Estimated Tax Worksheet Worksheet by 4. Enter this amount on line However, use this method only if your income is basically the same throughout the year.

After you make an estimated tax payment, changes in your income, adjustments, deductions, or credits may make it necessary for you to refigure your estimated tax.

Pay the unpaid balance of your amended estimated tax by the next payment due date after the change or in installments by that date and the due dates for the remaining payment periods. See Annualized Income Installment Method , later. If you refigure your estimated tax during the year, or if your first estimated tax payment is due after April 17, , figure your required payment for each remaining payment period using Worksheet On July 10, she sells investment property at a gain.

The penalty is figured separately for each payment period. If you figure your payments using the regular installment method and later refigure your payments because of an increase in income, you may be charged a penalty for underpayment of estimated tax for the period s before you changed your payments.

The annualized income installment method annualizes your tax at the end of each period based on a reasonable estimate of your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. To see whether you can pay less for any period, complete the Annualized Estimated Tax Worksheet Worksheet Use the result you figure on line 32 of Worksheet to make your estimated tax payments and complete your payment vouchers.

If you use the annualized income installment method to figure your estimated tax payments, you must file Form with your tax return. Use Worksheet to help you follow these instructions. The purpose of this worksheet is to determine your estimated tax liability as your income accumulates throughout the year, rather than dividing your entire year's estimated tax liability by four as if your income was earned equally throughout the year. The top of the worksheet shows the dates for each payment period.

The periods build; that is, each period includes all previous periods. After the end of each payment period, complete the corresponding worksheet column to figure the payment due for that period. Enter your AGI for the period. This is your gross income for the period, including your share of partnership or S corporation income or loss, minus your adjustments to income for that period.

If you had self-employment income, first complete Section B of this worksheet. Use the amounts on line 43 when figuring your expected AGI to enter in each column of Section A, line 1. Be sure to consider deduction limits figured on Schedule A Form , such as reducing your medical expenses by 7. Generally, you will use the Tax Rate Schedules to figure the tax on your annualized income. For , your capital gain and dividends rate will depend on your income. Tax on capital gain or qualified dividends.

If the amount on line 1 includes a net capital gain or qualified dividends, use Worksheet to figure the amount to enter on line If you expect to claim the foreign earned income exclusion or the housing exclusion or deduction on Form or Form EZ, use Worksheet to figure the amount to enter on line If you file Form , add the tax from Forms , , and for the period. Also include any recapture of an education credit for each period. You may owe this tax if you claimed an education credit in an earlier year and you received either tax-free educational assistance or a refund of qualifying expenses for the same student after filing your return.

Use the forms or worksheets to see if you will owe any of the taxes just discussed. Figure the tax based on your income and deductions during the period shown in the column headings. Multiply this amount by the annualization amounts shown for each column on line 2 of the Annualized Estimated Tax Worksheet Worksheet Enter the result on line 13 of this worksheet. Include all the nonrefundable credits you expect to claim because of events that will occur during the period.

If you expect to claim the credit for other dependents on your tax return, include this on line When figuring your credits for each period, annualize any item of income or deduction to figure each credit. For example, if you need to use your AGI to figure a credit, use line 3 of Worksheet to figure the credit for each column. Amounts on Form written on the line for "other taxes" line 62 on the Form Repayment of the first-time homebuyer credit if the home will cease to be your main home in See Form for exceptions.

Include all the refundable credits other than withholding credits you can claim because of events that occurred during the period. These include the earned income credit, additional child tax credit, fuel tax credit, net premium tax credit, any refundable credit from Form , and refundable American opportunity credit. The amount of the additional child tax credit has increased for When figuring your refundable credits for each period, annualize any item of income or deduction used to figure each credit.

If line 28 is smaller than line 25 and you are not certain of the estimate of your tax, you can avoid a penalty by entering the amount from line 25 on line For each period, include estimated tax payments made and any excess social security and railroad retirement tax. Also include estimated federal income tax withholding. One-fourth of your estimated withholding is considered withheld on the due date of each payment period. To figure the amount to include on line 31 for each period, multiply your total expected withholding for by: However, you may choose to include your withholding according to the actual dates on which the amounts will be withheld.

For each period, include withholding made from the beginning of the period up to and including the payment due date. You can make this choice separately for the taxes withheld from your wages and all other withholding. On line 1, enter your income for the period that is effectively connected with a U.

On line 26, enter one-half of the amount from line 14c of the Form ES NR Estimated Tax Worksheet in column b , and one-fourth in columns c and d of Worksheet Pay by direct transfer from your bank account, or pay by debit or credit card using a pay-by-phone system or the Internet.

If you show an overpayment of tax after completing your Form or Form A for , you can apply part or all of it to your estimated tax for On Form , or Form A, enter the amount you want credited to your estimated tax rather than refunded.

Take the amount you have credited into account when figuring your estimated tax payments. If you timely file your return, treat the credit as a payment made on April 15, If you are a beneficiary of an estate or trust, and the trustee elects to credit trust payments of estimated tax to you, you can treat the amount credited as paid by you on January 15, Kathleen knew she would owe additional tax in Individual Income Tax Return.

IRS offers an electronic payment option that is right for you. Paying online is convenient and secure and helps make sure we get your payments on time. To pay your taxes online or for more information, go to IRS. You can pay using any of the following methods. For online transfers directly from your checking or savings account at no cost to you, go to IRS. To pay by debit or credit card, go to IRS. There is a convenience fee charged by these service providers. Once you complete the online process, you will receive immediate notification of whether your agreement has been approved.

A user fee is charged. Paying by phone is another safe and secure method of paying electronically. Use one of the following methods: Call one of our service providers. Each charges a fee that varies by provider, card type, and payment amount.

To make a cash payment, you must first be registered online at www. Before submitting a payment through the mail, please consider alternative methods.

One of our safe, quick, and easy electronic payment options might be right for you. Each payment of estimated tax by check or money order must be accompanied by a payment voucher from Form ES. If you use your own envelopes and not the window envelope that comes with the ES package , make sure you mail your payment vouchers to the address shown in the Form ES instructions for the place where you live.

Follow the instructions to make sure you use the vouchers correctly. This limit doesn't apply to other methods of payment such as electronic payments. If you file a joint return and are making joint estimated tax payments, enter the names and social security numbers on the payment voucher in the same order as they will appear on the joint return. You must notify the IRS if you are making estimated tax payments and you changed your address during the year.

Complete Form , Change of Address, and mail it to the address shown in the instructions for that form. If you plan to itemize deductions, enter the estimated total of your itemized deductions. When you file your income tax return, take credit for all the income tax and excess social security or railroad retirement tax withheld from your salary, wages, pensions, etc. Also take credit for the estimated tax you paid for These credits are subtracted from your total tax.

If the total of your withholding and your estimated tax payments for any payment period is less than the amount you needed to pay by the due date for that period, you may be charged a penalty, even if the total of these credits is more than your tax for the year. If you had income tax withheld during , you generally should be sent a statement by January 31, , showing your income and the tax withheld.

Depending on the source of your income, you will receive:. Your employer is required to provide or send Form W-2 to you no later than January 31, You should receive a separate Form W-2 from each employer you worked for.

If you stopped working before the end of , your employer could have given you your Form W-2 at any time after you stopped working. However, your employer must provide or send it to you by January 31, If you ask for the form, your employer must send it to you within 30 days after receiving your written request or within 30 days after your final wage payment, whichever is later.

Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Total the federal income tax withheld shown in box 2 of all Forms W-2 received and enter that amount on the appropriate line of your tax return. In addition, Form W-2 is used to report any taxable sick pay you received and any income tax withheld from your sick pay. Your sick pay may be combined with other wages in one Form W-2 or you may receive a separate Form W-2 for sick pay.

If you had gambling winnings in , the payer may have withheld income tax. If tax was withheld, the payer will give you a Form W-2G showing the amount you won and the amount of tax withheld.

Report the amounts you won on line 21 of Form Take credit for the tax withheld on line 64 of Form Gambling losses can be deducted on Schedule A Form as a miscellaneous itemized deduction. File Form W-2G with your income tax return only if it shows any federal income tax withheld in box 4.

Most forms in the series are not filed with your return. In general, these forms should be furnished to you by January 31, Unless instructed to file any of these forms with your return, keep them for your records. If you received the types of income reported on some forms in the series, you may not be able to use Form A or Form EZ.

See the instructions for these forms for details. Attach Form R to your paper return if federal income tax withholding is shown in box 4. If you receive a form with incorrect information, you should ask the payer for a corrected form. Call the telephone number or write to the address given for the payer on the form. In certain situations, you will receive two forms in place of the original incorrect form.

This will happen when your taxpayer identification number is wrong or missing, your name and address are wrong, or you received the wrong type of form for example, a Form DIV instead of a Form INT. One new form you receive will be the same incorrect form or have the same incorrect information, but all money amounts will be zero. If you are married but file a separate return, you can take credit only for the tax withheld from your own income.

However, different rules may apply if you live in a community property state. Generally, if you live in a community property state and file a separate return, you and your spouse each must report half of all community income in addition to your own separate income.

If you are required to report half of all community income, you are entitled to take credit for half of all taxes withheld on the community income. If you were divorced during the year, each of you generally must report half the community income and can take credit for half the withholding on that community income for the period before the divorce.

For more information on these rules, and some exceptions, see Pub. If you file your tax return on the basis of a fiscal year a month period ending on the last day of any month except December , you must follow special rules, described next, to determine your credit for federal income tax withholding.

You can claim credit on your tax return only for the tax withheld during the calendar year CY ending within your fiscal year. You will be able to claim credit for that withholding on your return for your next fiscal year. The Form W-2 or you receive for the calendar year that ends during your fiscal year will show the tax withheld and the income you received during that calendar year.

Although you take credit for all the withheld tax shown on the form, report only the part of the income shown on the form that you received during your fiscal year. Add to that the income you received during the rest of your fiscal year.

Miles Hanson files his return for a fiscal year ending June 30, On his return for the fiscal year ending June 30, , he will take the credit for any tax withheld during but not for any tax withheld during If income tax has been withheld under the backup withholding rule, take credit for it on your tax return for the fiscal year in which you received the income.

Take credit for all your estimated tax payments for on line 65 of Form or line 41 of Form A. Include any overpayment from that you had credited to your estimated tax. You must use Form or Form A if you paid estimated tax. If you were a beneficiary of an estate or trust, you should receive a Schedule K-1 Form , Beneficiary's Share of Income, Deductions, Credits, etc.

If you have estimated taxes credited to you from the estate or trust from Schedule K-1 Form , you must report the estimated taxes on Schedule E Form On the dotted line next to the entry space for line 37 of Schedule E Form , enter "ES payment claimed" and the amount.

Instead, enter the amount on Form , line This estimated tax payment for is treated as being made by you on January 15, If you changed your name, and you made estimated tax payments using your former name, attach a statement to the front of your paper tax return indicating: The statement should cover payments you made jointly with your spouse as well as any you made separately.

Be sure to report the change to your local Social Security Administration office before filing your tax return. This prevents delays in processing your return and issuing refunds. It also safeguards your future social security benefits.

For more information, call the Social Security Administration at Anyways, 1 is right, Eliminate choices that do not have 1 Only 1 2 and 4 1 and 3 2, 3 and 4 Now the final answer depends on whether statement 3 is right or wrong? How does Government borrow from Central bank?

Does Mohan just callup Rajan and demand 1 lakh crores? Mohan will have to give Rajan that much government securities vegetables and Rajan will give him cash. Is money supply increased? Yes Mohan sold veggies to Rajan and got Money. Whenever Rajan buys veggies and pays — the money supply is increased.

Hence 3 is wrong. Therefore final answer A only 1. Anyways, what to do in the exam? If you apply some concepts, you can eliminate wrong choices. But still if doubt persists in the mind e. Because bank can used it to expand loanable credit. Because Bank will have to put some money aside as CRR- so that much money is less in the system.

Bank can borrow money without pledging government securities to RBI Bank rate is not the main tool to control money supply these days. Penal rates are linked with Bank rate. Then RBI can impose penalty interest on such notorious bank. Less people get home loan, bike loan, business loans.

Less business expansion Less jobs Less incomes Less demand Ultimately shopkeeper will bring down the prices to attract people into buying more things. By the way, who are the clients of RBI? So they made a simple formula: Sometimes police raids the den, and clients run away with cash and register. If such things happen, Rajan will be at loss. She gives her stash of government securities to Rajan. Rajan gives her Rs. All clients are welcome i.

Central and state governments Banks — be it commercial bank or RRB or cooperative bank Non-banking financial institutions. Not all clients welcome here. Only scheduled commercial banks can borrow under this window. This MSF facility is specially created to help them solve short-term cash mis-match.

You bankers cannot pledge securities from SLR quota to borrow from this window. Can use securities from SLR quota. You may borrow as much as you want. To put this in crude words, if SBI received crores from aam-admi under savings account, current account, fixed deposit etc. Reverse repo Rate Although self-explanatory. What if police raids this gambling-den, and Rajan runs away to Nepal? What have we learned so far? That Rajan controls money supply using monetary policy.

Open market operation clomid infertility drug Rates: Just like how things roll in Onion biz. Donot expand existing business. Less jobs Less income Less demand Ultimately shopkeeper will bring down the prices to attract people into buying more things. Agreed that prices of onion, sugar, pulses and food are subject to vagaries of monsoon and black marketeering.

Rajan cannot do anything about it. The current system is following: Banks are free to decide their base rate.

SBI will link all of its loan products with Base rate. If Rajan changes his repo rate, will SBI change her base rate? Because those common men are the main suppliers of money to SBI. Does it mean Repo rate system is bogus and ineffective?

In developing countries like India, most people park their money in only four things: Commercial banks have large deposits. Rajan is not the main or even prominent money supplier for these banks. Whatever Rajan does, its effect will be felt only after months but by that time, new factors would cause another rise in inflation and Rajan will have to start from scratch again.

Lack of financial inclusion. Since most people are not in the banking net. They rely on Shroffs and moneylenders. Rajan has no control over them. Monsoon uncertainty, cyclone, flood, draughts and their effect on food production. Fiscal deficit, illogical schemes.

Subsidy leakage, Black money, underground economy. And most importantly, because Rajan uses Multi-indicator approach, he focuses on WPI minus food and fuel. More on that in next article. Using this tool, Rajan can control money supply. If Rajan changes repo rate, it is not compulsory for SBI to change her loan interest rates. But if Rajan changes margin requirements, then SBI and all other banks must obey it.

In other words, this tool has direct impact on money supply. It means customer must bring Rs. How can Rajan fight inflation with this tool? Thus, Rajan can control money supply by changing downpayment and installment EMI rules. Selective credit control Under this, Rajan can specifically instruct bankers not to give loans to traders of certain commodities e. Moral Suasion Here Rajan tries to persuade the bankers to do xyz thing.

Example Please reduce giving automobile loans- instead park your money in government securities. Additional loans cannot be given to that borrowers from that sector.

This also controls money supply. Direct action Means RBI gives punishment to erring banks.

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