Welcome

to

Tax & Investment Planning Seminar

Income Slab Income Tax Rates
Upto Rs 1,50,000
No Surcharge NIL
10% of the amount
Rs 1,50,001 - Rs 2,50,000
exceeding
No Surcharge
Rs 1,00,000
Rs 5,000 + 20% of
Above Rs 2,50,000 the amount
10% Surcharge exceeding
Rs 1,50,000
 COMPARISON BETWEEN VARIOUS TAX SAVING OPTIONS
Maximum
Options Tax Saving Lock-in Period Returns Tax on Returns
amount
Option under section
80CCC
LIC Jeevan Suraksha Rs 10,000 10% to 33% Term of the policy 5 to 6% Applicable rate
Options under section 88
Equity Linked Saving
Rs 10,000
Scheme (ELSS) 3 Years > 10% 10%
Mutual Fund Pension Plan Rs 70,000 Till the age of 58 yrs > 8% 10%
Infrastructure Bonds Rs 1,00,000 3 Years 6.75 % to 7% Applicable rate

Public Provident Fund Rs 70,000 8 % compunded

(PPF) 15% or 20% 6 years minimum yearly Tax Free
National Saving Certificate 8% compounded
Rs 70,000
(NSC) 6 years minimum half yearly Applicable rate
ULIP of UTI Rs 70,000 10 or 15 years >6% Applicable rate
LIC premiums Rs 70,000 Term of the policy >6% Tax Free
Return of Principal of
Rs 20,000
Housing Loan N/A N/A N/A
Maximum amount eligible
for tax relief under section Rs 1,10,000
88 and 80CCC.
 Section 88

100,000/=

Infrastructure bond Rs. 30,000/=

Repayment of Housing
ELSS-10K loan principal-20K
40,000/=
LIC, PPF, CPF, and
pension plan..etc-40K
 Other Deductions

Section 80 CCC: Jeevan Suraksha

upto Rs. 10,000/=
Section 80 D : Upto Rs. 10,000/= towards
mediclaim
Section DD: Handicapped dependant expenses
upto Rs. 40000/=
Section 80 DDB: Medical expenses towards
chronic disease - upto Rs. 40,000/=
 Section 24 (I) Upto Rs 1,50,000/- paid towards
interest on housing loan is
deductible from taxable income.

Recommendation
Make a house - dont just live in it.
 Insurance
Myths:
Insurance is just another tax saving instrument.
I do not need an insurance now. May be later...
Why wait for 30 years? - let me take a policy for 15
years (or may be 10).
The Facts:
Lower the age, lower the premium, - higher the age
higher the premium.
As we get older - Health becomes a major impediment to
getting high insurance cover.
Longer the duration of policy - lesser is the premium.
 A THIEF CALLED INFLATION

Items 1980 2001 2020

TOOTHPASTE 4.05 19 104

LPG GAS 26.25 250 960

MASALA DOSA 1.5 15 286
PETROL 7.9 32 290
MOVIE TICKET 5 50 310
 Inflation .The silent killer!

Present cost of living RS. 20,000 p.m

30 yrs from now Rs.3,83,887 p.m.

Retire today Rs. 20 lacs @ 12%

Retire 30 yrs from now Rs.3.83 crores

 Value Of Re. 1 Invested In 1980
(Rs.)
Period - April 1980 to December 1997
4
0

Rs. 33.52
3
0 Stocks

2
0
Rs. 11.21
Co. Deposits
1
0
Rs. 4.81
Bank Deposits
0
A
p
r
-8
0Oc
t
-
82A
p
r
-8
5Oc
t
-
87A
p
r
-9
0Oc
t
-
92A
p
r
-9
5Oc
t
-
97
 Value Of Re. 1 After Taxes
(Rs.)
Period - April 1980 to December 1997
15

Rs. 13.80
Stocks

10

5
Rs. 5.44
Co. Deposits

Rs. 3.00
Bank Deposits
0
Apr-80 Oct-82 Apr-85 Oct-87 Apr-90 Oct-92 Apr-95 Oct-97
 Value Of Re. 1 After Taxes & Inflation
(Rs.)
Period - April 1980 to December 1997

Rs. 3.16
Stocks

2
Rs. 1.24
Co. Deposits

Re. 0.68
Bank Deposits

0
A
p
r
-8
0Oc
t
-
82Ap
r
-
85Oc
t
-
87Ap
r
-
90Oc
t
-
92Ap
r
-
95Oc
t
-
97
 Post inflation & Taxes
Recap - value of 1 Rupee in 17 years.

Value Post-tax Post tax & Inflation

Bank 4.81 3.00 0.68

Co. Deposit 11.21 5.44 1.28

Equity 33.50 13.80 3.18

EQUITIES ARE THE BEST LONG TERM BET
% OF STUDIED PERIOD IN WHICH

Other 14%
investment 44% 37%
outperformed

Stocks
outperformed
56% 63% 86%

1 year 3 year 5 year

Source : RBI Report on Currency and Finance (1997-98)

BSE Sensitive Index of Equity Prices - BSE
Equities are the best long term bet
20.16%

14.47%

9.74%
9.19%
7.62%

Investment avenues
Inflation Gold Bank FD Co. FD Equities
 How do we invest in equities or
Company Fixed Deposits?
Carry out extensive research and identify
the right share/company.
Identify a reliable broker.
Track your investment regularly.

Time is money
 MUTUAL FUND

AS AN ENTITY - IT IS A TRUST

AS A CONCEPT - IT IS A SERVICE

AS A FUNCTION - IT IS INVESTMENT MANAGEMENT

 What Is A Mutual Fund?

It is an investment company through

which an investor can pool his
money with other investors who have
a similar objective.
 Mutual Funds:
A Packaged Product
Professional Diversification
Management

Convenience
Liquidity

Tax Benefits
 Mutual Funds & Tax Benefits

Section 88
INCOME TAX
BENEFITS Section 88 (2)

CAPITAL GAINS Section 112

BENEFITS
 Bank F.D. Vs.Mutual Funds
Section 112
A m ou nt inv e ste d R s.1 0 00 00

B a nk F ixe d D e po sits M utu al F un ds

R e turn s - Rs.1 00 00 R e turn s - Rs.1 00 00

T a x @ 3 0% T a x @ 1 0% In de xation @ 7%

P T R -R s.7 0 00 P T R -R s.9 0 00 R s.3 00 0 @ 2 0%

P T R -R s.9 4 00
 RISK Vs RETURNS

EQUITY

Time
SECTOR

DIVERSIFIED
EQUITY

RETURN BALANCED FUND

INCOME FUND

BANK FD

RISK
 Mutual Fund - The Top Scorer
FDs FI Bonds Open-ended
Mutual Funds
Accessibility Low Low High
Tenor Fixed (Medium) Fixed (Long) No Lock-in
Min. Investment Rs. 1000 Rs. 5000 Rs. 500
Tax Benefits None 80L 80L , 112

Liquidity Low Very Low Very High

Convenience Medium Tedious Very High
Transparency None None Very High
 What Is Wrong With The Way We Save?

Over 50% of our household savings are invested in

assets that are
poor inflation fighters
not tax efficient.

disciplined and
Our saving habits are not
systematic in approach

We face the possibility of outliving our savings.

 Rs. 808
EFFECT OF COMPOUNDING
(Re. 1 invested for 30 years)
BUSINESS
OR EQUITY
LIC COM
PPF FD
NSC Rs. 234
SB Bk FD
Rs. 67
Rs. 4 Rs. 17

5% 10% 15% 20% 25%

 Invest Early

BOTH ARE OF
SAME AGE

Anu starts investing at 25 years age Prakash starts investing at 35 years age
Invests Rs. 5000 monthly for 10 years Invests Rs. 5000 monthly for 25 years

Total Investment : Rs. 6 lakhs Total Investment : Rs. 15 lakhs

Who has more money at the age of 60?

 Invest Early

At the age of 60.

Anu has Rs. 4.6 crores Prakash has Rs. 1.5 crores

It costs Prakash Rs. 3.1 crores to wait 10 years

Assumed 15% p.a. compounded annually

START EARLY; SAVE REGULARLY
Every Year Counts
Rs. 10000/= p.a. or Rs.833.33 p.m.
10,133,456
Savings Returns *

7,643,653

4,999,569

350,000 330,000 300,000

Saves from age 25 to 60 Saves from age 27 to 60 Saves from age 30 to 60

* Return of 15% p.a.

 Strategy To Smart Investing

Identify Objectives
Harness the power of compounding
Start early
Focus long-term - Stay invested
Be aware of the effects of inflation
& taxes
Diversify
 SUMMARY
Banks effectively destroy purchasing power.
Manage salary pro-actively and get that raise in
salary.
Insure adequately - 5 times annual gross.
Have liquidity in Income Funds.
Use all products - judiciously and maximize your
wealth.
Be disciplined.
 INVESTMENT OPTIONS

MUTUAL FUNDS

LIFE INSURANCE

GENERAL INSURANCE

PRIMARY AND SECONDARY MARKET OPERATIONS

RBI BONDS, POST OFFICE DEPOSITS, NSC

54EA INVESTMENTS

HOUSING LOANS (IDBI BANK)

REAL ESTATE (BUYING AND SELLING OF PROPERTY)