Investing

Interest rates are crucial in finance, influencing everything from personal loans to large-scale investments. They represent the cost of borrowing money or the return on invested funds. Understanding how returns are calculated is essential when investing in financial instruments such as mutual funds, fixed deposits, or stocks. 

Traditional interest rate concepts like simple and compound interest help determine growth, but more advanced metrics are needed when cash flows are irregular. Understanding XIRR becomes essential in this case.

What is XIRR? 

XIRR (Extended Internal Rate of Return) is a financial metric used to calculate the annualized return of an investment involving multiple cash flows occurring at irregular intervals. 

Unlike the standard Internal Rate of Return (IRR), which assumes periodic cash flows, XIRR offers a more precise measure of when investments and withdrawals happen at different times. It is widely used in mutual funds, systematic investment plans (SIPs), and stock market advisory services to evaluate portfolio performance.

What is XIRR’s full form?

The full form of XIRR is the Extended Internal Rate of Return. This term reflects its function of extending the IRR calculation to accommodate irregular cash flow intervals.

The formula for Calculating XIRR

XIRR is calculated using this formula:

Where

• di is the last payment date.
• d1 is the 0th payment date.
• Pi is the last payment.
  

However, spreadsheet programs like Microsoft Excel offer a built-in function to compute XIRR. The syntax for the XIRR function in Excel is:

=XIRR(values, dates, guess)

Where

• values: An array of cash flows corresponding to the investment dates. Cash outflows (investments) are negative numbers, while cash inflows (returns) are positive.
• Dates: An array of dates corresponding to each cash flow.
• Guess (optional): An initial guess for the rate of return. If omitted, Excel uses a default value.
  Note: In Excel, the “guess” argument is an optional input that provides a starting point for certain functions. The “guess” argument can be used to improve the accuracy of the result or to find a different result if there are multiple possible answers. 

It’s important to note that the XIRR function calculates the rate of return for a series of cash flows that are not necessarily periodic. The IRR function is used instead to calculate the internal rate of return for a series of periodic cash flows. 

Know More:  SEBI Registered investment advisory |  Stock investment advisory

Step-by-Step Guide to Knowing What is XIRR Calculation in Excel

1. Input Your Data:

   – In one column, list all the dates of your transactions.

   – In the adjacent column, enter the corresponding cash flows. Use negative values for investments (cash outflows) and positive values for returns (cash inflows).

2. Apply the XIRR Function:

   – Select a cell where you want the XIRR result to appear.

   – Enter the formula:

    =XIRR(values, dates)

Replace “values” with the range of cells containing your cash flows and “dates” with the range of cells containing the corresponding dates.

3. Interpret the Result:

The result will be a decimal number. Click the percentage icon at the top taskbar to convert it to a percentage. This percentage represents the annualized return of your investment.

Example

You invested ₹5,00,000 and are receiving returns per the specified dates yearly per the table shared below. Let’s figure out what is XIRR of your investment:

Investment & Returns	Date	Cash flow
Stocks Purchased	27-May-19	-5,00,000
1st share of returns	16-Nov-20	1,00,000
2nd share of returns	18-Aug-21	1,50,000
3rd share of returns	30-Apr-22	2,00,000
4th share of returns	10-Oct-23	3,00,000

In Excel:

– In Column B:
Enter the dates (27-May-2019, 16-Nov-2020, 18 Aug-Jul-2021, 30-Apr-2022, 10-Oct-2023).

– In Column C:
Enter the cash flows (-5,00,000, 1,00,000, 1,50,000, 2,00,000 and 3,00,000).

Then, to find out what is XIRR of your investment, use the following formula:

=XIRR(values, dates)

In this example, it will be
=XIRR (C2:B6, E1:E5)
= 13.98%

This will yield the XIRR value in decimals, which can be easily converted into percentages representing the annualized return of your investment.

Understanding the Result

The XIRR value you obtain represents the annualized effective compounded return rate, considering the exact dates of your cash flows. This provides a more accurate measure of your investment’s performance compared to more straightforward metrics that don’t account for the timing of cash flows.

What is a Good XIRR?

A good XIRR varies depending on the type of investment and market conditions. An XIRR of 12-15% is considered reasonable for equity investments, while an XIRR of 7-10% is common for debt-based investments. However, XIRR alone does not determine an investment’s success—it must be analyzed alongside risk factors, time horizon, and market conditions.

XIRR vs. CAGR

While both XIRR and CAGR (Compound Annual Growth Rate) are used to measure investment returns, they differ in their applications:

• CAGR: Assumes a single investment and calculates a smoothed annual growth rate over a specified period. It suits scenarios with a lump-sum investment and no intermediate cash flows.
• XIRR: Accounts for multiple cash flows occurring irregularly, providing a more accurate return measure for investments like SIPs or those with varying contribution amounts and timings.

CAGR Meaning and Formula
CAGR measures the smooth annualized return of an investment over a specific period. So, if you are wondering how to calculate CAGR, here’s the formula: 

CAGR = [(Ending Value / Beginning Value) ^ (1 / Number of Years)] – 1

CAGR assumes a single investment and calculates a consistent annual growth rate, making it useful for lump-sum investments but unsuitable for investments with irregular cash flows.

Key Differences: What is XIRR, and What is CAGR

Feature	XIRR	CAGR
Cash flow type	Irregular	Fixed
Best used for	SIPs, Irregular investments	Lump-sum Investments
Accuracy for Real-World Investments	High	Moderate

What is a CAGR Calculator, and How Does It Work?

A CAGR calculator is an online tool that computes the compound annual growth rate based on initial investment, final value, and duration. It simplifies manual calculations and helps investors compare different investment options effectively.

Conclusion

Understanding “What is XIRR” is crucial for accurately assessing the performance of investments with irregular cash flows. By utilizing the XIRR function in Excel, investors can gain a clearer picture of their annualized returns, leading to more informed financial decisions.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Understanding how much your investment grows over time is essential. Two widely used metrics for measuring investment returns are XIRR vs CAGR. Both help investors evaluate performance, but they work differently. 

XIRR vs CAGR is a common topic in investing, and understanding them can significantly improve your investment strategy. Professionals in share market advisory often use both metrics to analyze different investment strategies.

CAGR (Compound Annual Growth Rate) is a simple way to measure growth over a specific period, assuming steady returns.

XIRR (Extended Internal Rate of Return) calculates an investment’s annualized return involving multiple cash flows occurring at irregular intervals.

 XIRR vs CAGR comparisons become essential when evaluating systematic investments such as SIPs. If you’re wondering how these metrics differ and which one you should use, this article will provide clear explanations, examples, and formulas to help you make informed financial decisions. 

What is CAGR?

CAGR stands for Compound Annual Growth Rate, a standard formula used to measure the average annual growth of an investment over a specified period. It smoothens out volatility and provides a single growth rate.

How to Calculate CAGR

CAGR is calculated using the Formula:

• Ending Value (EV)  = Final investment value
• Beginning Value (BV) = Initial investment value
• n = Number of years

Example:

Suppose you invest ₹1,00,000 in a stock, and after 5 years, its value increases to ₹1,80,000. 

Using the CAGR formula mentioned above,
EV = ₹1,80,000
BV = ₹1,00,000
and n = 5

CAGR=  [(1,80,000/1,00,000)^ ⅕ – 1] x 100

= 12.47%

This means your investment grew at an average rate of 12.47% annually. Alternatively, you can use an online CAGR calculator to find the average rare. 

What is XIRR?

XIRR (Extended Internal Rate of Return) is a more flexible method of calculating investment returns, especially when there are irregular cash flows. Unlike CAGR, XIRR accounts for multiple investments and withdrawals over time, making it ideal for SIPs, recurring deposits, and phased investments.

Know More:  SEBI Registered investment advisory |  Stock investment advisory

How is XIRR Calculated?

XIRR is calculated using this formula:

Where

• di is the last payment date.
• d1 is the 0th payment date.
• Pi is the last payment.

Spreadsheet applications like Microsoft Excel have a built-in function to calculate XIRR efficiently. The syntax for the XIRR function is

   =XIRR(values, dates)

• values – Cash flows linked to specific dates. Negative for investments, positive for returns.
• dates – The dates corresponding to each cash flow.
• guess (optional) – Estimated return rate; Excel uses a default if omitted.

Example:

Imagine you invest ₹10,000 every year for 5 years. At the end of 5 years, your total investment value grows to ₹70,000. Since investments were made at different times, XIRR vs CAGR comparisons show that CAGR won’t be accurate. Using XIRR in Excel provides an exact return percentage considering each cash flow.

Let’s assume the following dates for the investment:

• Year 1: ₹10,000 on 01/01/2020
• Year 2: ₹10,000 on 01/01/2021
• Year 3: ₹10,000 on 01/01/2022
• Year 4: ₹10,000 on 01/01/2023
• Year 5: ₹10,000 on 01/01/2024
• Value at the end of 5 years: ₹70,000 on 01/01/2025

Using the above formula, the XIRR for the given investment scenario is approximately 11.42%. This means your investment has grown at an annual rate of 11.42% over the 5 years.

Key Differences: CAGR Vs. XIRR 

When comparing XIRR vs CAGR, both metrics are commonly used to measure investment growth, but they cater to different types of investments. Understanding their distinctions is crucial for accurately assessing investment performance.

Parameter	CAGR	XIRR
Meaning	Compound Annual Growth Rate calculates consistent growth over time.	Extended Internal Rate of Return, considering fluctuating cash flows.
Calculation	It uses starting and ending values over a set period.	Factors in the precise dates and amounts of investments.
Timing	Assumes a single starting point with no additional inflows.	Takes into account exact cash flow timings.
Inclusion of Cash Flows	Focuses on a single initial investment.	Accounts for multiple, irregular investments over time.
Investment Type	Designed for lump-sum investments without ongoing contributions.	Best for fluctuating investments like SIPs.
Rate of Return	Calculates a constant growth rate, ignoring timing specifics.	Reflects return rates that adjust for timing differences.
Complexity	It is simpler, assuming uniform growth.	More intricate due to irregular cash flow timings.
Accuracy	Less accurate for investments with varying cash flow patterns.	It is more accurate for investments with irregular cash flows.

Practical Use Cases:

• XIRR Vs. CAGR: Using CAGR to compare long-term lump sum investments. For SIPs, withdrawals, or real-life scenarios, XIRR is more accurate.

XIRR Vs CAGR: Pros and Cons

Metric	XIRR	CAGR
Pros	Handles irregular cash flows.	Simple to calculate for lump sums.
Cons	It is more complex with multiple inputs.	Assumes steady growth, but is not suitable for dynamic investments.

Conclusion

Understanding XIRR vs CAGR helps you make smarter investment decisions. CAGR is excellent for lump sum investments, but for SIPs and irregular cash flows, XIRR provides a more accurate return.

You can make informed financial decisions by knowing when to use XIRR vs CAGR. Whether you are analyzing mutual funds, stocks, or any other investment, knowing XIRR and CAGR meaning and formula can help you make better choices. The ideal way to go about this is to use both metrics as complementary tools rather than relying on a single one.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

If you’re active in the stock market, you have likely come across various financial terms. One such term is Mark to Market (MTM). But what does it mean?

Mark to Market (MTM) helps track the real-time value of assets based on current market prices. It reflects price changes throughout the trading day, giving investors and institutions a clear view of their financial position for better decision-making. However, MTM can be challenging during market volatility or when assets are hard to price. 

Despite these challenges, MTM remains a crucial tool for evaluating financial positions and making informed investment decisions. MTM plays a significant role in India’s stock market, where daily price fluctuations impact investment valuations.

What is Mark to Market (MTM)?

Mark to Market (MTM) is a financial valuation technique that updates the value of assets and liabilities based on current market prices. It shows their real worth if sold or settled at a specific time, giving a more accurate picture of financial health. MTM is widely used in accounting, financial services, and investing, especially for valuing assets like futures and mutual funds that change in price frequently.

Why is MTM Important?

Imagine you bought shares of a company at ₹100 each. A year later, the market price is ₹150. With MTM, your investment is now valued at ₹150 per share, not the ₹100 you initially paid. This method ensures that financial statements reflect the actual value of assets, giving investors and stakeholders an accurate picture.

MTM in the Share Market

The stock market in India operates with its unique dynamics. Understanding MTM in this context is vital for Indian investors. MTM in the share market is essential, especially for futures trading. Each day, open futures contracts are updated to match current market prices. 

This daily adjustment calculates traders’ profits or losses, helping to avoid unexpected financial shocks. By keeping accounts up to date, MTM ensures transparency, lowers credit risk and helps maintain required margins, even in volatile markets.

For investors eyeing high-return stocks, MTM accounting ensures that the reported value of these investments aligns with current market conditions. This alignment is crucial because it affects decision-making processes, especially when considering buying or selling assets.

Mark to Market in Financial Services

MTM is important in financial services for valuing assets, managing credit risk, and following regulations. Banks and investment firms use it to assess loans, investments, and other financial assets. This helps them spot risks, manage portfolios effectively, and meet margin requirements. MTM also gives a clear view of financial health, making it easier to check capital strength and plan risk management strategies.

Know More:  SEBI Registered investment advisory |  Stock investment advisory

Market to Market in Investing

Mark to Market (MTM) in investing helps track the real-time value of assets. In securities trading, it records the current market value of a security or portfolio instead of its original cost. MTM ensures the daily settlement of gains and losses for future accounts to meet margin requirements. 

Mutual funds use MTM to update Net Asset Value (NAV) daily. Additionally, investors compare current market value to initial cost to effectively assess their investment strategies’ performance.

Benefits of MTM

Mark to Market (MTM) is essential in trading and finance because it ensures that asset values reflect current market prices. Here’s why MTM is important:

• Real-time valuation: MTM updates asset and liability values continuously, clearly showing a company’s financial health and helping stakeholders make informed decisions.
• Risk management: It helps identify financial risks by showing the actual market value of investments, allowing companies and investors to adjust their strategies accordingly.
• Transparency: MTM improves financial reporting by accurately reflecting an entity’s position, boosting investor confidence, and ensuring fair market practices.
• Regulatory compliance: Many financial regulators require MTM to ensure firms maintain sufficient capital and meet margin requirements, promoting market stability.
• Performance measurement: By comparing an asset’s current value to its original cost, MTM helps investors assess the success of their strategies and make necessary adjustments.

Challenges with MTM

While MTM provides a realistic valuation, it can introduce volatility into financial statements. Market prices can fluctuate due to various factors, and reflecting these changes can sometimes present a less stable financial outlook. Additionally, during periods of market instability, MTM valuations might not capture the long-term value of assets.

Example of MTM 

Let’s say an investor holds futures contracts in a prominent Indian company. At the day’s end, the contract’s value is adjusted to reflect the current market price—a process known as MTM. If the market price increases, the investor records a profit; a loss is recorded if it decreases. This daily adjustment ensures that the investor’s account reflects the true market conditions.

Conclusion

Mark to market (MTM) is a fundamental concept in finance and investing, ensuring that asset and liability valuations remain aligned with current market conditions. For participants in the stock market in India, understanding MTM is crucial. 

This is where share market advisory services come into play. These services offer guidance on investment strategies, portfolio management, and understanding accounting methods like MTM. By leveraging their expertise, investors can make informed decisions that align with their financial goals.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Knowing how to read chart patterns can be a game changer for making wise decisions in stock market investing. By understanding different patterns, traders can identify potential short-selling opportunities and avoid risky trades. It is especially useful when analyzing high return stocks, as they often experience strong price movements.

One pattern that investors and traders often keep an eye on is the bearish flag pattern. Recognizing a bearish flag can help investors protect their capital and maximize profits in volatile markets. 

This article will break down the bear flag chart pattern, explain its significance, and offer practical investment strategies.

What is the Bearish Flag Pattern?

A bearish flag pattern shows that stock prices will likely keep falling. It begins with a sharp drop (the “flagpole”), followed by a short period where prices move sideways or slightly up (the “flag”). After this pause, prices usually drop again. The pattern looks like a flag on a pole, so it’s called a bearish flag.

How Does the Bear Flag Chart Pattern Form?

Understanding the formation of the bear flag chart pattern can help you identify it in real-time. The formation occurs in three stages:

1. Flagpole: The pattern starts with a sharp price drop, usually caused by negative news, earnings reports, or general market sentiment. This drop creates the initial “flagpole.”
2. Consolidation (Flag): The price moves sideways or slightly up within a small range after the sharp drop. This phase forms the “flag.” The flag should point sideways or slightly up, and trading volume usually decreases during this time.
3. Breakdown: When the price falls below the flag’s lower edge, it confirms the pattern and signals that it will likely continue dropping.

Recognizing the Bearish Flag Pattern in Charts

To identify the bearish flag pattern in real charts, you should look for the following characteristics:

• A steep and rapid decline (the flagpole).
• A brief period of consolidation that forms a rectangular or parallel channel (the flag).
• A price move outside the flag confirms that the fall will continue.

This pattern is more reliable if trading volume is low during the flag and rises when the price drops below it.

Investment Strategies Based on the Bearish Flag Pattern

So, how can you use the bearish flag pattern to make better investment decisions? Here are some practical strategies:

1. Confirming the Trend

The first rule of trading with the bearish flag pattern is ensuring the market or stock is falling. Since the bear flag continues the trend, it works best when the market is weak. Look for stocks that have been dropping before the flag appears.

If you’re unsure whether a stock is falling, investment advisor services can help you understand the market trend.

2. Wait for the Price Drop

Wait for the price to fall below the flag’s lower boundary to confirm the bear flag pattern. This drop is a strong sign that the price will keep falling. Entering the trade after this move helps avoid false signals.

3. Set Entry and Exit Points

Once the price breaks below the flag, consider setting your entry point just under this level. If the pattern fails, place a stop-loss order slightly above the flag’s upper boundary to manage risk. For exit strategies, a common approach is to expect the price to fall by the same height as the initial drop (flagpole).

4. Use Volume as Confirmation

Trading volume is key to confirming the bear flag pattern. Ideally, the volume should be low during the flag phase and increase when the price breaks below. Higher volume at this point strengthens the signal that the price will continue falling.

5. Combine with Other Indicators

Additional technical indicators like moving averages or the Relative Strength Index (RSI) can be used to improve accuracy. The downward trend may continue if the stock is below its 50-day moving average.

However, if the RSI shows the stock is oversold, the price might temporarily rise, so be cautious before entering a trade.

6. Focus on High-Movement Stocks

Consider stocks with a history of sharp price drops and rebounds when using the bear flag pattern. These stocks offer better trading opportunities and stronger price movements.

Know More:  SEBI Registered investment advisory |  Stock investment advisory

Advantages and Disadvantages of the Bear Flag Pattern

Like any trading pattern, the bear flag has its advantages and drawbacks.

Advantages:

• Works in Various Markets – It can be applied to stocks, Forex, cryptocurrencies, futures, and commodities, making it a flexible tool for traders. This versatility allows traders to spot opportunities across different asset classes and adjust their strategies accordingly. 
• Suitable for Different Timeframes – While it works best for intraday trading, it is also effective in longer timeframes like daily or weekly charts. Traders who prefer short-term strategies can use it for quick trades, while long-term investors can apply it to analyze broader market trends. 
• Clear Entry and Exit Points – Traders know when to enter, exit, and set stop losses, which helps manage risk. The defined structure of the pattern allows traders to set their positions confidently, reducing emotional decision-making. 
• Frequent Occurrence – The bear flag pattern appears often in market charts, giving traders multiple opportunities to trade it. Since it forms regularly, traders can practice identifying and executing trades based on this pattern without waiting for rare setups. 

Disadvantages:

• Misidentification Risks – Incorrectly spotting the pattern can lead to losses.
• Difficult for Beginners – It requires confirming signals from indicators, candlestick patterns, and volume analysis.
• Reversal Risk – If the price correction exceeds 50%, it may signal a trend reversal instead of a continuation.

Conclusion

The bearish flag pattern can be a valuable tool for traders looking to capitalize on continuation trends in the stock market. Understanding this pattern and applying innovative investment strategies can enhance your chances of making profitable trades.

Remember, while the bear flag chart pattern can be a reliable signal of downward price movement, combining your analysis with proper risk management strategies is essential, such as using stop-loss orders and consulting investor advisor services for more insights.

Ultimately, chart patterns are just one piece of the puzzle regarding stock market investing. Alongside other patterns like the cup and handle pattern and rounding bottom pattern, the bearish flag pattern can provide the insights you need to make more informed investment decisions.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

The Annual Information Statement (AIS) is an extensive financial summary provided by the Income Tax Department of India. It offers taxpayers a consolidated view of their financial transactions, including income, investments, and tax-related details. AIS was introduced to promote transparency, help individuals file accurate tax returns, and reduce tax evasion.

If you are an Indian taxpayer, understanding AIS is crucial as it helps reconcile your tax data and ensures compliance with tax regulations. This article provides a detailed breakdown of AIS, its components, how to access it, and its significance.

What is Annual Information Statement (AIS)?

The AIS is a comprehensive document issued by the Income Tax Department that includes details of a taxpayer’s financial transactions reported by various sources, such as banks, mutual fund companies, and stock exchanges. It provides a broader picture of one’s taxable income beyond Form 26AS, which primarily contained TDS (Tax Deducted at Source) details.

The AIS serves two primary purposes:

• Helps taxpayers verify their income details before filing tax returns.
• Enables tax authorities to track high-value transactions and detect tax discrepancies.

Key Highlights of the Annual Information Statement (AIS)

• Enhanced Data Coverage: AIS now includes details on interest income, dividends, securities transactions, mutual fund investments, foreign remittances, and more.
• Simplified Tax Filing: A concise Taxpayer Information Summary (TIS) is provided, with pre-filled data to streamline the return filing process.
• User-Friendly Feedback System: Taxpayers can review AIS details, submit online feedback, and download information in multiple formats, including PDF, JSON, and CSV.
• Offline Access via AIS Utility: The AIS Utility allows users to view their AIS data and upload feedback even without an active internet connection.

Know More:  SEBI Registered investment advisory |  Stock investment advisory

Steps to Check Your Annual Information Statement (AIS)

Before proceeding, ensure that your PAN is registered on the Income Tax portal, as this is a mandatory requirement. Follow these steps to access your AIS:

Step 1: Log in to the Income Tax portal at www.incometax.gov.in using your PAN as the User ID and your password.

Step 2: From the dashboard, navigate to the ‘Services’ section and find the AIS option.

Step 3: Click on AIS, which will take you to the AIS homepage on the Compliance Portal. Follow the on-screen instructions.

Step 4: On the AIS homepage, you will see guidelines and available functionalities. Review these carefully.

Step 5: Select the financial year you wish to view, and your Annual Information Statement (AIS) and Taxpayer Information Statement (TIS) will be displayed. Your key details, such as Name, PAN, Aadhaar Number, and Date of Birth, will also be visible.

Step 6: If needed, you can download your AIS or TIS for future reference.

By following these steps, you can easily access and review your AIS.

Types of Information Displayed in AIS

The Annual Information Statement (AIS) serves as an expanded version of Form 26AS, offering comprehensive financial details that play a crucial role in filing income tax returns. AIS provides a detailed breakdown of your financial transactions and is categorized into two main sections:

1. Part A: General Information

This section includes essential personal details such as the Permanent Account Number (PAN), Aadhaar number, date of birth, mobile number, email address, and residential address. These details help in identifying the taxpayer and ensuring that the financial information is accurately linked to the correct individual.

2. Part B: Financial Information

This section provides an in-depth record of financial transactions categorized under different headings:

Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)

The AIS captures details of any tax deducted or collected at source. This includes information about the deductor, their PAN, the amount on which tax was deducted, and the actual tax deducted. This data ensures that taxpayers have clarity on the tax already paid on their behalf and can claim credit accordingly while filing their returns.

Statement of Financial Transactions (SFT)

The SFT section records significant financial transactions reported by various financial institutions. This includes transactions such as high-value deposits, stock market investments, mutual fund purchases, and interest earned on savings accounts. Each transaction is documented with relevant details such as transaction codes, sources, and descriptions to provide complete clarity.

Payment of Taxes

This section tracks payments made by the taxpayer, including advance tax and self-assessment tax. It provides a breakdown of the tax payments, including the BSR code, payment amount, Challan Identification Number (CIN), and classification of tax under major and minor heads. This ensures taxpayers can verify that their self-paid taxes have been recorded correctly by the Income Tax Department.

Demand and Refunds

The demand and refunds section lists any tax refunds issued by the Income Tax Department, as well as any outstanding tax demands against the taxpayer. By reviewing this information, individuals can keep track of their tax obligations and ensure that any dues are cleared on time.

Other Financial Information

This section covers additional financial data such as turnover reported under GST, foreign remittances, and interest received on tax refunds. These details help provide a more holistic view of a taxpayer’s financial profile and aid in accurate tax filings.

Providing Feedback on AIS Transactions

In cases where taxpayers identify discrepancies or incorrect information in their AIS, the Income Tax Department allows them to submit feedback through the compliance portal. The process for rectifying errors is straightforward and ensures that any incorrect transactions are corrected efficiently.

To provide feedback, taxpayers must first log in to the Income Tax Compliance Portal and navigate to the AIS section. After selecting the relevant financial year, they can review the various sources of information displayed. If any transaction appears incorrect, they can expand the transaction details and access the feedback option.

When submitting feedback, taxpayers can choose from several options, including confirming that the information is correct, partially incorrect, not taxable, related to another PAN, duplicated, or denied altogether. Once the necessary corrections are made and submitted, the updated data will be reflected in the Taxpayer Information Summary (TIS) and pre-filled income tax return, ensuring accuracy and compliance.

By regularly reviewing AIS and reporting any discrepancies, taxpayers can maintain transparency in their financial records, minimize errors in tax filings, and avoid potential compliance issues.

Difference Between Annual Information Statement (AIS) and Form 26AS

Many taxpayers may confuse the Annual Information Statement (AIS) with Form 26AS. Below is a clear comparison of both:

Feature	Annual Information Statement (AIS)	Form 26AS
Introduction	Introduced in 2021, AIS provides a comprehensiveview of an individual’s financial transactions.	Existing before AIS, Form 26AS is a tax credit statement showing tax-related details.
Scope	Covers a wider range of financial data beyond tax-related transactions.	Primarily focuses on tax deducted/collected at source (TDS/TCS).
Information Included	– TDS/TCS details  – Savings account interest  – Dividend income  – Rent received  – Sale/purchase of securities & property  – Foreign remittances  – Interest on deposits  – GST turnover (if applicable)	– TDS/TCS details on salary, interest, rent, etc.  – High-value transactions reported by banks and other institutions.
Feedback Option	Taxpayers can provide feedback on reported transactions.	No option for taxpayer feedback.
Availability of Information	Shows both reported and modified values (post taxpayer feedback).	Displays only reported values without modifications.

In conclusion, the Annual Information Statement (AIS) is a vital tool for taxpayers, offering a detailed financial snapshot and ensuring compliance with tax laws. By reviewing AIS, individuals can file accurate returns, avoid legal troubles, and enhance financial planning. Make it a habit to check your AIS before filing your ITR to ensure a smooth and hassle-free tax experience.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

In today’s consumer-driven world, the idea of an aspirational lifestyle feels more attainable than ever. With endless payment options at our fingertips and the next exciting purchase just a click away, convenience fuels spending habits. Social media, e-commerce platforms, and pop culture glorify a maximalist approach to success and good living, particularly influencing younger generations who engage with these influences daily. This environment has paved the way for Buy Now, Pay Later (BNPL) schemes to thrive, offering an easy route to instant gratification while subtly encouraging consumers to spend more than they otherwise might.

What is Buy Now Pay Later (BNPL)?

BNPL is a short-term financing option that allows consumers to purchase products and defer payments. Typically, customers pay in installments over weeks or months without interest if paid on time. Many e-commerce platforms and retailers have partnered with BNPL providers to make shopping more accessible and affordable.

The concept of BNPL is not entirely new. Earlier, installment-based purchases were available through consumer durable loans and credit cards. However, BNPL has gained traction due to its seamless digital integration, quick approval process, and minimal documentation requirements.

How Does Buy Now, Pay Later (BNPL) Work?

The Buy Now, Pay Later (BNPL) system operates through a step-by-step process as follows:

Step 1: Making a Purchase

Customers initiate a BNPL transaction just as they would with any other online purchase. They browse their preferred e-commerce platforms, select products, add them to the shopping cart, and proceed to checkout.

Step 2: Choosing BNPL at Checkout

At the checkout page, various payment methods are available, such as cash on delivery, credit cards, and debit cards. Among these options, the BNPL feature is presented by the retailer’s partnered BNPL provider.

Step 3: Credit Assessment by BNPL Provider

When opting for BNPL, customers are required to enter some personal details, such as their address. The BNPL provider then conducts a soft credit check to assess their repayment ability. This process helps determine whether the user qualifies for BNPL without affecting their credit score, as soft inquiries are not reported to credit bureaus.

Step 4: Transaction Processing

Once approved, the BNPL provider completes the transaction and charges the retailer a fee, usually ranging from 2% to 8% of the total purchase amount. This fee is deducted before the provider transfers the remaining balance to the seller.

Step 5: Interest-Free Repayments

Customers then repay the amount in installments. Most BNPL services offer interest-free payments if the full amount is cleared within a short duration (typically 30 days). However, for extended repayment periods, different plans with varying interest rates apply. To avoid extra charges, customers should aim to clear their dues as soon as possible.\

Know More:  SEBI Registered investment advisory |  Stock investment advisory

What are Benefits of BNPL?

BNPL has gained immense popularity due to its ease of use and affordability. Here are some major advantages:

1. Interest-Free Credit: One of the biggest advantages of BNPL is that it allows consumers to buy items without paying any interest, provided they stick to the repayment schedule. This makes it an attractive alternative to credit cards, which often charge high interest rates on revolving balances.

2. No Credit Card Required: Unlike traditional credit systems, BNPL does not require customers to have a credit card or an extensive credit history. This feature makes it accessible to young individuals and first-time borrowers.

3. Instant Approval with Minimal Documentation: The BNPL approval process is quick and hassle-free, requiring only basic KYC details such as Aadhaar and PAN. Unlike traditional loans, which can take days to process, BNPL approval is usually granted within minutes.

4. Better Budget Management: By breaking down large expenses into smaller payments, BNPL allows consumers to manage their budgets more effectively. This feature is particularly beneficial for those who want to avoid spending a lump sum at once.

What are Risks and Challenges of BNPL?

Despite its benefits, BNPL is not without risks. Consumers need to be cautious of the following pitfalls:

1. Hidden Fees & Late Charges: While BNPL providers market their services as interest-free, late payments can attract hefty penalties. Some providers also charge processing fees and convenience fees that can add up over time.

2. Encourages Over-Spending: Since BNPL offers easy access to credit, it may encourage impulsive buying and lead to unnecessary expenditures. Many consumers tend to buy products they don’t actually need, simply because they can pay later.

3. Credit Score Impact: Although BNPL does not always require a credit score for approval, delayed or missed payments can be reported to credit bureaus, negatively affecting the consumer’s credit history. This can impact future loan approvals.

4. Debt Accumulation: If consumers use BNPL for multiple purchases simultaneously without tracking their repayment schedules, they may accumulate a significant debt burden, leading to financial strain.

BNPL vs. Credit Cards – Which is Better?

Both BNPL and credit cards offer financial flexibility, but they serve different purposes. Here’s a detailed comparison:

Feature	BNPL	Credit Card
Interest Rates	0% (if repaid on time)	18-42% annually
Credit Limit	Lower	Higher
Approval Process	Easy, minimal checks	Requires credit history
Late Fees	High	Standard penalty rates
Reward Points	No	Yes
Impact on Credit Score	Affects if delayed	Affects if delayed
Usage Flexibility	Limited to partnered merchants	Universal Acceptance

Best BNPL Providers in India

India has witnessed a surge in BNPL services, with multiple players offering unique benefits. Some of the top providers include:

• LazyPay: Offers flexible repayment options and is integrated with various online platforms.
• Simpl: Best for small-ticket transactions, widely accepted by food delivery apps and online merchants.
• Amazon Pay Later: Ideal for frequent Amazon shoppers, offering no-cost EMI options.
• Flipkart Pay Later: Tailored for Flipkart users, allowing them to purchase now and pay next month without extra charges.

In conclusion, Buy Now Pay Later is reshaping the consumer credit landscape by offering convenient, short-term financing options. While it provides great benefits like interest-free payments and easy approval, it also comes with risks such as high penalties, credit score impact, and potential overspending.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Investing in government penny stocks in India can be a good opportunity for investors looking to explore the potential of small cap stocks. If you’re wondering what are penny stocks, they are low-priced stocks that typically trade for less than ₹100 per share. While penny stocks often come with high risks, they also present unique opportunities for substantial gains, especially when backed by government influence or public-sector enterprises.

In this article, we’ll explore some government penny stocks worth considering in 2025, provide a government penny stock list, and discuss tools like a stock screener and how a stock market advisor can guide investment decisions.

What Are Penny Stocks?

Before diving into specific stocks, it’s important to understand what are penny stocks. Penny stocks are low-cost shares issued by small-cap companies, often with a market price of less than Rs.100. These stocks are known for their high volatility and potential for rapid price appreciation. Government penny stocks, specifically, are those issued by public-sector undertakings (PSUs) or companies with significant government ownership.

Why Invest in Government Penny Stocks?

Government penny stocks offer a relatively safer bet in the high-risk world of penny stock investing. Here’s why:

• Government Backing: Companies backed by the government are less likely to default or go bankrupt, offering investors a safety cushion
• Growth Potential: Many public-sector companies operate in sectors like energy, infrastructure, and defense, which are critical to India’s economic growth.
• Affordable Entry Point: These stocks allow one to own shares in established companies without a hefty price tag.

Government Penny Stock List for 2025

Here are some government penny stocks that may be considered for 2025 to invest in:

Bank of Maharashtra

Bank of Maharashtra is a public sector bank headquartered in Pune, India. Established in 1935, it offers various banking services, including deposits, loans, and investment products. The bank has a strong presence across India, with a vast network of branches and ATMs.

Market Cap (Rs Cr) as of 26.01.25	CMP (Rs)As of 26.01.25	Debt-to-Equity	PE Ratio	ROE (%)	ROCE ( %)	3 Yr return (%)
₹37,389	₹48.6	14.0	7.09	22.8	5.38	32

Source: Screener

Bank of Maharashtra reported a revenue of ₹6,325 crore for the quarter ending December 2024, reflecting a 22.3% increase compared to ₹5,172 crore in the same quarter of the previous year. The net profit also surged by a significant 36% to ₹1,412 crore for the quarter, up from ₹1,038 crore in the corresponding period last year. Additionally, the bank’s Gross NPA declined from 2.04% in December 2023 to 1.80% in December 2024.

Know More:  SEBI Registered investment advisory |  Stock investment advisory

Indian Overseas Bank

Indian Overseas Bank (IOB) is a prominent public sector bank in India, headquartered in Chennai. Founded in 1937, it offers various banking services, including deposits, loans, and investment products. IOB has a substantial presence across India,  with a vast network of branches and ATMs.

Market Cap (Rs Cr) as of 26.01.25	CMP (Rs)As of 26.01.25	Debt-to-Equity	PE Ratio	ROE (%)	ROCE ( %)	3 Yr return (%)
₹94,570	₹50.0	11.3	30.6	9.98	5.41	33

Source: Screener

Indian Overseas Bank posted a revenue of ₹7,112 crore for the quarter ending December 2024, marking a 15.2% growth from ₹6,176 crore in the same quarter of the previous year. Net profit increased by 20% to ₹874 crore, compared to ₹723 crore in the corresponding period last year. The bank also saw a significant improvement in asset quality, with Gross NPA reducing from 3.90% in December 2023 to 2.55% in December 2024.

Central Bank of India

Central Bank of India is one of India’s largest public sector banks, established in 1911.  It was the first commercial bank in India to be wholly owned and managed by Indians. The bank offers various banking services, including deposits, loans, and investment products. The Central Bank of India has a vast network of branches nationwide. 

Market Cap (Rs Cr) as of 26.01.25	CMP (Rs)As of 26.01.25	Debt-to-Equity	PE Ratio	ROE (%)	ROCE ( %)	3 Yr return (%)
₹44,751	₹51.5	12.5	12.3	8.71	5.29	34

Source: Screener

Central Bank of India registered a revenue of ₹8,542 crore for the quarter ending December 2024, reflecting a 9% increase from ₹7,842 crore in the same quarter of the previous year. The net profit rose significantly by 31% to ₹966 crore, up from ₹738 crore in the corresponding period last year. The bank also demonstrated notable improvement in asset quality, with Gross NPA declining from 4.50% in December 2023 to 3.87% in December 2024.

UCO Bank

Market Cap (Rs Cr) as of 26.01.25	CMP (Rs)As of 26.01.25	Debt-to-Equity	PE Ratio	ROE (%)	ROCE ( %)	3 Yr return (%)
₹51,352	₹42.9	10.5	22.2	6.22	5.34	47

Source: Screener

UCO Bank achieved a revenue of ₹6,220 crore for the quarter ending December 2024, reflecting a 12% increase from ₹5,552 crore in the same quarter a year earlier. The net profit surged by 27% to ₹639 crore, up from ₹503 crore during the corresponding period last year. Additionally, the bank significantly improved its asset quality, with Gross NPA dropping from 3.85% in December 2023 to 2.91% in December 2024.

NHPC Limited

NHPC Limited is India’s premier hydropower company, responsible for planning, promoting, and developing hydroelectric power. Established in 1975, it plays a crucial role in India’s energy sector by harnessing the power of water. NHPC has expanded its operations to include other renewable energy sources like solar, wind, and geothermal, contributing significantly to India’s sustainable energy goals.

Market Cap (Rs Cr) as of 26.01.25	CMP (Rs)As of 26.01.25	Debt-to-Equity	PE Ratio	ROE (%)	ROCE ( %)	3 Yr return (%)
₹75,077	₹74.8	0.85	25.2	9.61	7.67	36

Source: Screener

NHPC Ltd. reported a revenue of ₹3,052 crore for the quarter ending September 2024, registering a 4.12% growth compared to ₹2,931 crore in the same quarter the previous year. However, net profit fell 36% to ₹1,069 crore, down from ₹1,693 crore in the corresponding period last year.

Tools to Analyze Government Penny Stocks

When considering investments in penny stocks, it’s vital to leverage the right tools and strategies. Here are a few essentials:

Stock Screener

A stock screener allows investors to filter stocks based on market capitalization, price-to-earnings ratio, and volume. Using a stock screener can help identify promising government penny stocks that align with your investment goals.

Stock Market Advisor

Working with a stock market advisor can provide expert insights into the potential risks and rewards of investing in penny stocks. Advisors can guide you through market trends and offer tailored recommendations.

Financial Ratios

Analyze financial ratios such as debt-to-equity, return on equity (ROE), and earnings per share (EPS) to evaluate a company’s financial health.

News and Updates

Monitor government policies, sectoral developments, and announcements that might impact public-sector companies.

Risks Associated with Penny Stocks

Investing in penny stocks comes with its share of risks. Here’s what you should be aware of:

• High Volatility: Prices can swing wildly due to low liquidity.
• Limited Information: Penny stocks often lack comprehensive financial disclosures, making it harder to assess their true value.
• Speculative Nature: These stocks are often driven by market sentiment rather than fundamentals.

While government penny stocks may mitigate some of these risks due to their public-sector backing, remaining cautious and diversifying your investments is essential.

• Start Small: Begin with a small investment and gradually increase as you gain confidence.
• Diversify Your Portfolio: Don’t put all your eggs in one basket. Spread your investments across multiple small-cap stocks to reduce risk.
• Stay Informed: Regularly monitor news, financial reports, and government announcements.
• Use Tools: Employ a stock screener and seek guidance from a stock market advisor to make informed decisions.
• Focus on Long-Term Growth: Penny stocks may not deliver overnight returns. Patience is key.

India’s economic growth trajectory and infrastructure push under government programs like “Make in India” and “Atmanirbhar Bharat” could provide a strong tailwind for small-cap stocks, including government penny stocks. Moreover, sectors like renewable energy, defense, and transportation are expected to see significant investments, benefiting many public-sector companies.

Government penny stocks may be a good addition to your investment portfolio in 2025 because of their affordability and growth potential. However, they are also risky, and it’s important to balance the potential rewards with the risks involved.

FAQs on Government Penny Stocks

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.