Welcome to

Tax & Investment Planning Seminar

Income Slab Income Tax Rates

Upto Rs 1,00,000 NIL

Rs 1,00,000 - Rs 1,50,000

No Surcharge

10% of the amount

exceeding

Rs 1,00,000

Rs 1,50,000 - Rs 2,50,000

No Surcharge

Rs 5,000 + 20% of

the amount

exceeding

Rs 1,50,000

Above Rs 2,50,000

10% Surcharge

Rs 25,000 + 30%

of the amount

exceeding

Rs 2,50,000/-

OptionsMaximum

amountTax Saving Lock-in Period Returns Tax on Returns

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

Scheme (ELSS)Rs 10,000

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

(PPF)

Rs 70,000

6 years minimum

8 % compunded

yearly Tax Free

National Saving Certificate

(NSC)Rs 70,000

6 years minimum

8% compounded

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

Housing LoanRs 20,000

N/A N/A N/A

Maximum amount eligible

for tax relief under section

88 and 80CCC.

Rs 1,10,000

15% or 20%

COMPARISON BETWEEN VARIOUS TAX SAVING OPTIONS

Section 88

100,000/=

Rs. 30,000/= Infrastructure bond

LIC, PPF, CPF, and

pension plan..etc-40K

40,000/=

ELSS-10K

Repayment of Housing

loan principal-20K

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 - don’t just live in it.

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).

Insurance

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

2020

104

960

286

290

310

Items 1980 2001

TOOTHPASTE 4.05 19

LPG GAS 26.25 250

MASALA DOSA 1.5 15

PETROL 7.9 32

MOVIE TICKET 5 50

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

Apr-80Oct-82Apr-85Oct-87Apr-90Oct-92Apr-95Oct-970

10

20

30

40

(Rs.)

Rs. 33.52

Rs. 4.81

Rs. 11.21

Stocks

Co. Deposits

Bank Deposits

Period - April 1980 to December 1997

Value Of Re. 1 After Taxes

(Rs.)

Rs. 13.80

Rs. 3.00

Rs. 5.44

Stocks

Co. Deposits

Bank Deposits

Apr-80 Oct-82 Apr-85 Oct-87 Apr-90 Oct-92 Apr-95 Oct-97

0

5

10

15 Period - April 1980 to December 1997

(Rs.)

Rs. 3.16

Re. 0.68

Rs. 1.24

Stocks

Co. Deposits

Bank Deposits

Apr-80Oct-82Apr-85Oct-87Apr-90Oct-92Apr-95Oct-970

2

4

Period - April 1980 to December 1997

Value Of Re. 1 After Taxes & Inflation

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

Post inflation & Taxes

Recap - value of 1 Rupee in 17 years.

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

56% 63% 86%

37%14%

44%

1 year 3 year 5 year

Other

investment

outperformed

Stocks

outperformed

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

BSE Sensitive Index of Equity Prices - BSE

Equities are the best long term bet

Investment avenues

9.19%

7.62%

9.74%

14.47%

20.16%

Inflation Gold Bank FD Co. FD Equities

• Carry out extensive research and identify

the right share/company.

• Identify a reliable broker.

• Track your investment regularly.

How do we invest in equities or

Company Fixed Deposits?

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

Diversification

Liquidity

Professional

Management

Convenience

Tax Benefits

Mutual Funds & Tax Benefits

INCOME TAX

BENEFITS

CAPITAL GAINS

BENEFITS

Section 112

Section 88

Section 88 (2)

Bank F.D. Vs.Mutual Funds Section 112

P T R -Rs.7000

T ax @ 30%

Returns - Rs.10000

B ank F ixed Deposits

P T R -Rs.9000

T ax @ 10%

P T R -Rs.9400

Rs.3000 @ 20%

Indexation @ 7%

Returns - Rs.10000

M utual Funds

A m ount invested Rs.100000

RISK Vs RETURNS

RETURN

Time

RISK

BALANCED FUND

DIVERSIFIED

EQUITY

SECTOR

INCOME FUND

BANK FD

EQUITY

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.

Our saving habits are not disciplined and

systematic in approach

We face the possibility of outliving our savings.

5% 10% 15% 20% 25%

EFFECT OF COMPOUNDING (Re. 1 invested for 30 years)

Rs. 4 Rs. 17

Rs. 67

Rs. 234

Rs. 808

SB

LIC

PPF

NSC

Bk FD

COM

FD

BUSINESS

OR EQUITY

Invest Early

Anu starts investing at 25 year’s age

Invests Rs. 5000 monthly for 10 years

Total Investment : Rs. 6 lakhs

Prakash starts investing at 35 year’s age

Invests Rs. 5000 monthly for 25 years

Total Investment : Rs. 15 lakhs

Who has more money at the age of 60?

BOTH ARE OF

SAME AGE

Invest Early

It costs Prakash Rs. 3.1 crores to wait 10 years

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

At the age of 60….

Assumed 15% p.a. compounded annually

START EARLY; SAVE REGULARLY Every Year Counts

* Return of 15% p.a.

7,643,653

330,000

10,133,456

350,000

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

Savings Returns *

300,000

4,999,569

Rs. 10000/= p.a. or Rs.833.33 p.m.

• Identify Objectives

• Harness the power of compounding

– Start early

– Focus long-term - Stay invested

• Be aware of the effects of inflation

& taxes

• Diversify

Strategy To Smart Investing

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.

• 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)

INVESTMENT OPTIONS