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I, the undersigned, hereby declare that the Project Report entitled

A STUDY OF TAX SAVING INVESTMENT PATTERN ADOPTED BY EMPLOYEES At Steadfast Advisory written & submitted by me to the University of Pune, in partial fulfillment of the requirement for the award of degree of Master of Business Administration under the guidance of PROF. SUPRIYA LAKHANGAONKAR. It is my original work and the conclusions drawn therein are based on the material collected by myself.

Place : Pune Date :

Shruti Kale Signature of the Student


Sr No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Introduction Literature Review



Allowances under different sections Deductions under different sections Tax Saving Instruments Findings Suggestions Conclusion Bibliography


A work begun is half done. These encouraging words from my project supervisor and guide led me to churn out this concise yet comprehensive study. I sincerely thank Mrs. Supriya Lakhangaonkar, faculty and Project Guide, Department of Business Management at Sinhgad Institute of Technology and Science, for her support and guidance all through this study and for her unbiased feedback on by presentations all through the MBA course. I extend my sincere gratitude to all the members of Department of Business Management for extending their co-operation for successful completion of my project. Heartfelt thanks to my parents and my well wishers who made this project possible. Your contributions have been immensely helpful.


It gives me great pleasure to present this project report on Tax Saving investment pattern of employees. The project was carried out from 18th June 2013 to 18th August 2013. In recent years, investment have emerged an essential tool for ensuring ones financial well being. Investments have not only contributed to the existing income of families, but also played an important role in saving tax. As information and awareness is rising more and more, people are enjoying the benefits of investing. As per the current scenario, a very small proportion of people make appropriate investments for saving tax. The main objective of the project is to study the tax saving investment pattern adopted by employees of MphasiS, TTP Hexaware. The secondary objective were to understand the deductions available under different sections and to explore the different tax saving options available to the employees. This project gave me a great learning experience in terms of understanding the Form 16 of employees of different organization since the study is based on the income certificates to ascertain the different deductions for saving tax. However, there were certain limitations/constraints related to data, both qualitatively as well as quatitatively. The entire project can be divided into two parts: The first part gives brief information about deductions under different sections and the various options available to claim those deductions. The secondary part of the project consists of the Research project, data collected through Form 16 of 150 employees and its analysis. For the collection of secondary data I made use of Form 16 that was provided to us by the employees to file their Income Tax Return. The research methodology followed is descriptive type of methodology. After doing analysis of Form 16, it was found that most of the employees do not make investments so as to claim deductions. We can say that the employees are not aware of the different tax saving investment options/avenues available through which they can claim deductions under different sections. Hence, it is advisable that the employees educate themselves with regard the different tax saving options so that they can manage their funds accordingly. We can conclude that, the tax saving investment pattern of MphasiS, TTP, Hexaware employees does not allow them to claim full deductions available under different sections.


In India, most salaried people want to increase their personal savings and yearn to achieve financial freedom. But do they REALLY want to save money or are they too busy? Most people are not motivated enough to learn how they can maximize their savings by efficient budgeting of their personal finances. They are unaware of ways to save tax through tax efficient investment options available in the market. Often, people do not make timely investment and end up paying huge amount of taxes at the end of the year. To make matters worse, lack of updated and timely information makes tax filling a declared chore. Salaried people often falsely believe that they do not need any financial planning as their income and expenses are regular. They presume that their savings automatically accumulate in the bank and do not require any intervention to maximize financial gains. But we believe that with some serious effort and knowledge, salaried people can save huge amount of money and increase their annual income by investing their hard-earned money in tax-efficient schemes.

Tax planning is an integral part of personal financial planning. The amount of scattered and incomprehensible information available in the market prevents people from becoming aware of the options available to maximize their income through tax savings. They are overwhelmed by the hard to understand information and simply shy away from learning about available options. They do not make simple efforts to understand and take control of their personal finances including income tax issues.

In todays competitive market, several firms are trying to sell financial products to people. Everyday people are confronted with agents selling home loans and tax saving products. These agents try to play around with numbers like EMI, interest rates, and annual gains, which people are unable to comprehend and verify.

Imagine having the financial freedom to have better control of your life. The objective of writing this book is to empower the salaried people by raising their awareness and making them more informed so that they can control their money, rather than money controlling them. The book provides tips and facts in a simple to understand language specially targeted towards salaried individuals.

MEANING OF INVESTMENT Investment is an activity that is engaged in by people who have saving, i.e. investments are made from saving, or in other words, people invest their savings. But all savers are not investors. Investment is an activity which is different from savings. Let us see what is meant by investment. It may mean things to many persons. If one person has advanced some money to another, he may consider his loan as an investment. He expects to get back the money along with interest at a future date. Another person may have purchased one kilogram of gold for the purpose of price appreciation and may consider it as an investment. Yet another person may purchase an insurance plan for the various benefits it promises in future. That his investment. In all these cases it can be seen that investment involves employment of funds with the aim of achieving additional benefits it promises in future. That is his investment. In all these cases it can be seen that income or growth in values. The essential quality of an investment is that is involves waiting for a reward. Investment involves the commitment of resources which have been saved in the hope that some benefits will accrue in future. Thus, investment may be defined as a commitment of funds made in the expectation of some positive rate of return . Expectation of return is an essential element of investment. Since the return is expected to be realized in future, there is an essential element of investment. Since the return is expected to be realized in future, there is possibility that the actually realized is lower than the return expected to be realized. This possibility of variation in the actual return is known as investment risk. Thus, every investment involves return and risk.

FINANCIAL AND ECONOMIC MEANING OF INVESTMENT In the financial sense, investment is the commitment of a persons funds to derive future income in the form of interest, dividend, premiums, pension , pension benefits or appreciation in the value of their capital purchasing of shares, debentures, post office savings certificate, insurance policies are all investments in the financial sense. Such investments generate financial assets. In the economic sense, investment means the net additions to the economys capital stock.

SIMPLICITY OF TAX PLANNING Come January, and tax planning becomes the buzz word all round. Investors in their bid to save tax are investing in avenues and asset classes without any understanding of the project. Even if the product is understood, during most occasions it does not suit the investors requirements. Based on the investment pattern seen in the recent past, it is evident that while tax benefit is the primary objective; the asset class and the profile and objectives of the individual investor do not match with the investment being done. Investments need to be aligned to fulfill financial objectives and hence the need for proper tax planning.

To explain this further, if an individual is in the wealth accumulation phase of his life and is looking at enhancing the wealth through various investment avenues available, when it comes to tax saving, invests in products which may not be in line with the investors objective. This is due to the fact that these instruments historically were pertaining to the debt category. Through the Government has introduced various products which might suit the profile of the investors, but these are not being fully exploited by them. Herein sprouts the need to understand tax saving products and more importantly to match the same with the investors profile so as to provide the best products to them. It would be mutually beneficial as it would help the investor in aligning his investments to his financial goals and would allow us to build a long term relationship with him. But before we delve into the idea of tax planning let us try and understand how we can understand different investor profiles and advise accordingly. Investment objective with which tax planning is done can be classified as follows: 1. Maintaining your wealth 2. Cover your risk 3. Create wealth and cover your risk Now it becomes very important for the investor to understand which category or profile does an individual fall into.


The main purpose of doing this project was to know about different tax saving investment avenues available to employees. This helps to know in details about the investment pattern adopted by employees and its effect on their tax liability. It also helps in understanding the Form 16. The study depends upon the income certificate of employees to ascertain the different deductions available for saving tax. Ultimately this would help in understanding the different investment options available to investors which can help them to reduce their tax liability.


This study is limited to employees of MphasiS, TTP and Hexaware.

The study takes into consideration only those details mentioned in the employees Form 16, and ignores any other investment/income of the employees.

Form 16 of only 150 employees were available for the study.


To understand the deductions available under different sections.

To explore the different tax saving investment options available to employees.

To study the tax saving investment pattern adopted by MphasiS, TTP and Hexaware.


METHODOLOGY This project follows descriptive type of research method because this project is going to investigate the different tax saving instruments available.

DATA COLLECTION Collection of data is an important part of project work. The required data has to be grouped, analyzed and interpreted. The factors to be considered while collecting data are nature of data, method of data collection and source of data collection. To achieve the objective of studying the market data has been collected. Research methodology carried for this study can be of two types 1. Primary 2. Secondary

PRIMARY: The data, which has being collected for the first time it is the original data.

SECONDARY: The secondary information is mostly taken from website, books, journals, etc. In this project the secondary data has been taken from Form 16 of employees of TTP, MphasiS and Hexaware.


This part tries to review the literature available on the mutual funds scheme in india and abroad. The existing studies on Investment patterns of investors are very few and very little information is available about investor perceptions, preferences, attitudes and behavior. All efforts in this direction are fragmented. In spite of this limitation, a few of parallel and related studies are reviewed here under. Avinash Kumar Singh (2006) The study entitled Investment Pattern of People has been undertaken with the objective, to analyze the investment pattern of people in Bangalore city and Bhubaneswar analysis of the study was undertaken with the help of survey conducted. After analysis and interpretation of data it is conducted that in Bangalore investors are more aware about various investment avenues and risk associated with that. All the age groups give more important to invest in equity and expect people those who are above 50 give important to insurance, fixed deposits and tax saving benefits. Generally those investors who are invested in equity, are personally follow the stock market frequently i.e. I daily basis. But those who are invested in mutual funds are watch stock market weekly or fortnightly. In Bangalore, investors are more aware about various investment avenues and risk associated with that. But in Bhubaneswar, investors are more conservative in nature and they prefer to invest in those avenues where risk is less like bank deposits, small savings, post office savings etc. Sunil Gupta (2008) the investment pattern among different groups in Shimla had revealed a clear as well as a complex picture. The complex picture means that the people are not aware about the different investment avenues and they did not respond positively, probably it was difficult for them to understand the different avenues. The study showed that the more investors in the city prefer to deposit their surplus in banks, post offices, fixed deposits, saving accounts and different UTI schemes etc. The attitude of the investors towards the securities in general was bleak, though service and professional class is going in for investment in shares, debentures and in different mutual fund schemes. As far as the investments are concerned, people put their surplus in banks, post offices and other government agencies. Most of the horticulturists in Shimla city who belong to Apple belt though being rich have a tendency of investing them in fixed deposits of banks, provident funds, post office savings, real estates etc. for want of safety and suitability of returns,

Manish Mittal and Vyas (2008) Investors have certain cognitive and emotional weaknesses which come in the way of their investment decisions. Over the past few years, behavioral finance researchers have scientifically shown that investors do not always act rationally. They have behavioral biases that lead to systematic errors in the way they process information for investment decision. Many researchers have tried to classify the investors on the basis of their relative risk taking capacity and the type of investment they make. Empirical evidence also suggests that factors such as age, income, education and marital status affect an individuals investment decision. This paper classifies Indian investors into different personality types and explores the relationship between various demographic factors and the investment personality exhibited by the investors.


ALLOWANCES EXEMPT UNDER SECTION 10 Allowances are specific amounts paid by the employer to meet specific expenditures. All allowances are taxable except those, which are specifically exempt under section 10. Exempt in respect of following allowances is allowable to the extent mentioned against each. 1. HOUSE RENT ALLOWANCES: House Rent allowances: Commonly known as HRA, exemption being bestowed through section 10(13) briefed as :

1. An amount equal to 50% of salary, where residential house is situated at Mumbai, Kolkata, Delhi or Chennai and an amount equal to 40% of salary, where residential house is situated at any other place. 2. House rent allowance received by the employees by the employee in respect of the period during which rental accommodation is occupied by the employee during the previous year. 3. Rent paid minus 10% of salary.

Please note: Salary here means Basic+ D.A+ Commission based on fixed % of turnover achieved by an employee. MODE OF COMPUTATION OF EXEMPTION: Under section 10(13A), the amount of exemption in respect of house rent allowance received by an employee depends upon the following: Salary of the employee; House rent allowance; Rent paid; and The place where house is taken on rent.

When these four are same throughout the year, the exemption under section 10(13A) should be calculated on ANNUAL basis. When, however, there is

Change in respect of any of the above factors will make the calculation to be done on MONTHLY basis.

2.ENTERTAINMENT ALLOWANCE : Exemption on receipt of this allowance is allowable only to Central/ State Govt. Employees and not to Privsate Sector employees. Exemption being calculated as least of the following: Rs. 5000/Entertainment allowance actually received. 20% of Salary (Salary= Basic+ D.A+ Commission based on fixed % of turnover)


Allowances specifically exempted to the extent of expenditure incurred: Allowance Travelling/Transfer Allowance Conveyance Allowance Description Any Allowance granted to meet the cost of travel on transfer including any sum paid on connection with transfer, packing and transportation of personal effects on such transfer Any allowance whether granted on tour of for the period of journey in connection with transfer to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty Any Allowance granted to meet the expenditure incurred on conveyance in performance of duties of an office or employment of profit, provided that free conveyance is not provided by the employer Any Allowance granted to meet the expenditure incurred on a helper where such helper is engaged for performance of the duties of an office or employment of profit Any Allowance granted for encouraging the academic, research and training pursuits in educational and research institutions. Any Allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of duties of an office or employment of profit.

Daily Allowance

Helper Allowance

Research Allowance Uniform Allowance


Allowances whose exemption is not dependent on expenditure: Allowance Special Compensatory (Hill Areas) Allowance Tribal Area Allowance Allowance for Transport employees Exemption specified Exemption may range from Rs. 300/- to Rs.7000/- per month Exemption available in specified states upto Rs. 200/- per month An employee working in any transport system for meeting his personal expenditure during his duty performed in the course of running of such transport from one place to another place, provided that such employee is not in receipt of daily allowanceup to 70% of allowance subject to a maximum of Rs. 6000 per month Rs. 100 p.m. per child up to maximum of 2 children Rs. 300 p.m. per child up to maximum of 2 children In specified areas @ Rs. 2600 p.m. In specified areas @ Rs. 1000 p.m Exempt up to Rs. 800 p.m.(in case of Orthopedically handicapped employees exempt up to Rs. 1600 p.m.) For employees in underground coal mines @ Rs. 800 p.m.

Children education allowance Children hostel allowance Compensatory Field Area Allowance Compensatory modified Field Area Allowance Transport Allowance Underground Allowance

DEDUCTIONS FROM TAXABLE INCOME Deduction under section 80C Deduction under section 80CCC Deduction under section 80D Deduction under section 80DD Deduction under section 80DDB Deduction under section 80E Deduction under section 80G Deduction under section 80GG Deduction under section 80GGA Deduction under section 80CCE

Deduction under section 80C This new section has been introduced from the Financial Year 2005-06. Under this section, a deduction of up to Rs. 1,00,000 is allowed from Taxable Income in respect of investments made in some specified schemes. The specified schemes are the same which were there in section 88 but without any sectoral caps (except in PPF).

80C This section is applicable from the assessment year 2006-2007.Under this section 100%deduction would be available from Gross Total Income subject to maximum ceiling given u/s 80CCE.Following investments are included in this section:

Contribution towards premium on life insurance Contribution towards Public Provident Fund.(Max.70,000 a year) Contribution towards Employee Provident Fund/General Provident Fund Unit Linked Insurance Plan (ULIP). NSC VIII Issue Interest accrued in respect of NSC VIII Issue Equity Linked Savings Schemes (ELSS). Repayment of housing Loan (Principal). Tuition fees for child education. Investment in companies engaged in infrastructural facilities.

Notes for Section 80C

1. There are no sectoral caps (except in PPF) on investment in the new section and the assessee is free to invest Rs. 1,00,000 in any one or more of the specified instruments. 2. Amount invested in these instruments would be allowed as deduction irrespective of the fact whether (or not) such investment is made out of income chargeable to tax. 3. Section 80C deduction is allowed irrespective of assessee's income level. Even persons with taxable income above Rs. 10,00,000 can avail benefit of section 80C. 4. As the deduction is allowed from taxable income, the exact savings in tax will depend upon the tax slab of the individual. Thus, a person in 30% tax stab can save income tax up to Rs. 30,600 (or Rs. 33,660 if annual income exceeds Rs. 10,00,000) by investing Rs. 1,00,000 in the specified schemes u/s 80C.

Deduction under section 80CCC Deduction in respect of contribution to certain Pension Funds: Deduction is allowed for the amount paid or deposited by the assessee during the previous year out of his taxable income to the annuity plan (Jeevan Suraksha) of Life Insurance Corporation of India or annuity plan of other insurance companies for receiving pension from the fund referred to in section 10(23AAB) Amount of Deduction: Maximum Rs. 10,000/-

Deduction under section 80D Deduction in respect of Medical Insurance Premium Deduction is allowed for any medical insurance premium under an approved scheme of General Insurance Corporation of India popularly known as MEDICLAIM) or of any other insurance company, paid by cheque, out of assessees taxable income during the previous year, in respect of the following In case of an individual insurance on the health of the assessee, or wife or husband, or dependent parents or dependent children. In case of an HUF insurance on the health of any member of the family Amount of deduction: Maximum Rs. 10,000, in case the person insured is a senior citizen (exceeding 65 years of age) the maximum deduction allowable shall be Rs. 15,000/-.

Deduction under section 80DD Deduction in respect of maintenance including medical treatment of handicapped dependent:

Deduction is allowed in respect of any expenditure incurred by an assessee, during the previous year, for the medical treatment training and rehabilitation of one or more dependent persons with disability; and

Amount deposited, under an approved scheme of the Life Insurance Corporation or other insurance company or the Unit Trust of India, for the benefit of a dependent person with disability.

Amount of deduction: the deduction allowable is Rs. 50,000 (Rs. 40,000 for A.Y. 2003-2004) in aggregate for any of or both the purposes specified above, irrespective of the actual amount of expenditure incurred. Thus, if the total of expenditure incurred and the deposit made in approved scheme is Rs. 45,000, the deduction allowable for A.Y. 2004-2005, is Rs. 50,000

Deduction under section 80DDB Deduction in respect of medical treatment A resident individual or Hindu Undivided family deduction is allowed in respect of during a year for the medical treatment of specified disease or ailment for himself or a dependent or a member of a Hindu Undivided Family. Amount of Deduction Amount actually paid or Rs. 40,000 whichever is less (for A.Y. 20032004, a deduction of Rs. 40,000 is allowable In case of amount is paid in respect of the assessee, or a person dependent on him, who is a senior citizen the deduction allowable shall be Rs. 60,000.

Deduction under section 80E Deduction in respect of Repayment of Loan taken for Higher Education An individual assessee who has taken a loan from any financial institution or any approved charitable institution for the purpose of pursuing his higher education i.e. full time studies for any graduate or post graduate course in engineering medicine, management or for post graduate course in applied sciences or pure sciences including mathematics and statistics. Amount of Deduction: Any amount paid by the assessee in the previous year, out of his taxable income, by way of repayment of loan or interest thereon, subject to a maximum of Rs. 40,000

Deduction under section 80G

Donations: 100 % deduction is allowed in respect of donations to: National Defence Fund, Prime Ministers National Relief Fund, Armenia Earthquake Relief Fund, Africa Fund, National Foundation of Communal Harmony, an approved University or educational institution of national eminence, Chief Ministers earthquake Relief Fund etc. In all other cases donations made qualifies for the 50% of the donated amount for deductions.

Deduction under section 80GG Deduction in respect of Rent Paid: Any assessee including an employee who is not in receipt of H.R.A. u/s 10(13A) Amount of Deduction: Least of the following amounts are allowable: Rent paid minus 10% of assessees total income Rs. 2,000 p.m. 25% of total income

Deduction under section 80GGA Donations for Scientific Research or Rural Development: In respect of institution or fund referred to in clause (e) or (f) donations made up to 31.3.2002 shall only be deductible.

This deduction is not applicable where the gross total income of the assessee includes the income chargeable under the head Profits and gains of business or profession. In those cases, the deduction is allowable under the respective sections specified above.

Deduction under section 80CCE A new Section 80CCE has been inserted from FY2005-06. As per this section, the maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC and 80CCD will be limited to Rs 100,000.


Tax saving instruments are the various tools available to an investor that will help him to save tax and also provide for a secured future. These instruments are the different investment options available to an investor to plan his funds for the future needs and also provide with tax benefits.

Tax Benefit Tax benefits provide an advantage to the taxpayer while typically benefitting another entity. An example of a tax benefit is an energy tax credit, taxpayers can qualify for certain tax credits for installing energy efficient systems in their homes, which benefits the environment while reducing the demand for fuel. Quite often tax benefits may be only available for a certain time period or tax year. A tax benefit is an allowable deduction on tax return intended to reduce a taxpayers burden while typically supporting certassin types of commercial activity. A tax benefit allows some type of adjustment benefiting a taxpayers tax liability. 1.LIFE INSURANCE Life Insurance Products provides Protection against risk for the family of the insured Painless saving premium is less, being long term saving Liquidity - generally policies accepted as collateral for loans from banks and financial institutions, after stipulated period

Various types of policies are available. Common ones are -Term Insurance : Pays death insurance to the legal heirs of the person insured, if he/she dies during the term of the policy. There may not be survival benefits to the insured. -Whole life Insurance : guarantees death benefit to legal of the insured, throughout the course of life. Premiums are payable for 35 years or till the age of 80, whichever is more. -Endowment Assurance : Pays out either on the death of assured, whenever it occurs or after a fixed number of years. -Annuities : A form of pension, in which an Insurance company makes a series of periodic payments to a person or his legal heirs over a number of years.

-Money Back Policies : provides payment of certain percentage of sum assured on survival for fixed period, during the tenure of the policy assured on survival for fixed period. Combination of the benefits of the above policies is possible. Riders (Double accident benefit, Health insurance etc) are also permitted. There are also special products for women and children.

Varishtha Pension Bima Yojana of LIC : This scheme launched on 14/07/2003, guarantees a life long pension at 9% interest for Senior citizens above 55 years. This is a government subsidized scheme and LIC has been given the sole privilege to operate the scheme. In the event of unfortunate death of pensioner, purchase price will be returned to the nominee. Minimum pension Rs.250/- per month and maximum pension Rs.2000/- per month.

2. MUTUAL FUNDS A Mutual fund is a trust that pools the savings of a number of investors and invests the funds in securities in accordance with the objective as disclosed in the offer document. The income earnssed through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. Each Mutual fund scheme has a defined investment objective and strategy. Types of Mutual fund schemes Mutual fund schemes may be classified on the basis of its structure and its investment objective 1] By Structure Open-end funds An open -end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. Closed-end funds A closed end funds has a stipulated maturity period. Which generally ranges from 3 to 15 years. The fund is open for subscription only during a specified period.

2] By Investment objective The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Balanced Funds The aim of Balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short term instruments such as treasury bills, certificates of deposit, commercial paper and inter bank call money.

3. PUBLIC PROVIDENT FUND (PPF) A] Any individual can open only one Account besides his GPF Account. B] Option to pay each contribution in one Account in one lump sum p.a., or in 12 installments, not necessarily monthly. C] Period : 15 years (minimum 16 Annual contributions) option to continue maturity in blocks of 5 years for any number of blocks. D] No withdrawal can be made till end of 6th financial year. Only one withdrawal per year is permissible thereafter. E] Investment : min. 500, max. 70000 p.a. F] after 15 years entire balance can be withdrawal. G] Interest at 8% compounded annually. H] Account can be opened in Post office, any branch of SBI or its subsidiaries or in specified nationalized banks. I] limited loan facility available up to 6 years.

4. NATIONAL SAVINGS CERTIFICATES (NSC VIII ISSUE) 1. 2. 3. 4. 5. Can be bought Singly/ jointly/ HUF Minimum Rs. 100/- no maximum limit Duration 6 years Interest rate from 1.3.2003 is 8% p.a. Interest accrued between 1st and 5th year is deemed to have been reinvested and therefore, is available for rebate 6. Can be offered as security to loans

5. BONDS Bonds are securities issued by the company, financial institution or government. They offer regular payment of interest in return for borrowed money for a certain period. There are the various types of Bonds. Fixed rate bonds carry fixed rate of interest throughout the tenure of the bond. Floating rate bonds carry interest rate which is linked to independent reference rates and may vary with of movement of such independent rates. Deep discount bonds are issued at a discount to the face value. The face value is paid at maturity. These bonds are also known as Zero coupon bonds. Investing in bonds for saving tax Infrastructure bond Infrastructure bonds are floated typically by financial institutions like ICICI, IDBI. They offer a 15% to 20% tax rebate on investments up to Rs.100000/- as per provisions of section 88 in a given financial year. Tax free Bonds These bonds, where interest earned on the bonds is tax free, are beneficial for investors in high tax bracket. Few of such bonds available are 1] RBI 6.5% Tax free bonds -the minimum investment amount is Rs. 1000 and thereafter in multiples of Rs. 1000/No maximum limit for investments. -the date of realization of cheque is date of issue of bond. -Interest is payable either half yearly or cumulatively at maturity. -Bonds are not tradable in secondary market-can not be given as a collateral for loans.

-The bonds shall be repayable on the expiry of 5 years from the date of issue.

6. FIXED DEPOSITS IN BANKS Fixed deposits with banks are also referred to as term deposits. Minimum investment period for bank FDs is 30 days. Fixed deposits in banks are for those investors, who have low risk appetite. Bank FDs is likely to be lower than money market fund returns. Deposits in banks are very safe because of the regulations of RBI and the guarantee provided by the deposit insurance corporation. The interest rate on fixed deposits varies term of the deposits. Bank deposits enjoy exceptionally high liquidity. Loans can raised against bank deposits.

7. POST OFFICE SAVINGS Post office monthly income scheme is a low risk saving instrument, which can be availed through any post office. It provides an interest rate of 8% per annum, which is paid monthly. Minimum amount, which can be invested is Rs.1000/- and additional investment in multiples of Rs. 1000/-. Maximum amount is Rs.300000/- (if single) or Rs.600000/- (if held jointly) during a year. It has a maturity period of 6 years. A bonus of 10% is paid at the time of maturity. Premature withdrawal is permitted if deposit is more than one year old. A deduction of 5% is levied from the principal amount if withdrawal prematurely. The interest rate on deposits is slightly higher than banks. The interest is calculated half yearly and paid yearly.

8. REAL ESTATES Investments in real estate also made when the expected returns are very attractive. Buying property is an equally strenuous investment decisions. Real estate investment is often linked with the future development plans of the location. At present investment in real estate is booming there are various investment source are available for investment which are directly or indirectly investing real estate. In addition to this, the more affluent investors are likely to be interested in other type of real estate, like commercial property, agricultural land, semi urban land, and resorts.

9. GOLD/SILVER/OTHERS The bullion offers investment opportunity in the form of gold, silver, art objects (paintings, antiques), precious stones and other metals, specific categories of metals are traded in the metal exchange. The bullion market presents an opportunity for an investor by offering returns and the end value of future. It has been absurd that on several occasions, when stock market failed, the gold market provided a return on investments.


1. A significant proportion of employees do not make investment in any investment avenue.

2. Majority of the investments were made in traditional investment measures like premiums, followed by home loans, housing loans, NABARD tax saving bonds and PPF. However on the contrary, it was noticed that bank FDs, which is considered to be one the most safe and secure investment, was the one of those with very less investors. 3. Only a few employees have made investments in long term infrastructure bonds, deduction under which are to the extent of Rs. 20000/4. Deductions under section 80D i.e. medical premium, were not most of the employees. 5. Employees who have made donations and claimed its deduction under section 80G is negligible. 6. Majority of the employees are aware of investment options available only under section 80C viz. bank FD, Mutual funds, Insurance premiums, PPF etc. there are very few who know about options available in other sections. 7. None of the employees have claimed full deduction under all the sections combined together, which gives a wide scope for employees to invest in different options.


1. Employees should be educated about various tax saving instruments/avenues/options available to them, so that they can manage their funds accordingly. 2. Organizations should try and create awareness amongst employees regarding different tax saving options available to employees through seminars, circulation of e-mails etc. 3. Employees should consult experts with regards their tax liability and various ethical ways through which they can save tax.


The deductions available under different sections have a certain maximum limit, beyond which deductions can not be claimed for that particular section. There are various tax saving investment options available where employees can invest their money and claim the deductions accordingly. However, the tax saving investment pattern adopted by MphasiS, TTP, Hexaware employees does not prove to be sufficient to claim maximum allotted deductions. We can say that, employees are unaware of the options available to them through which they can save their tax. If the employees invest their funds in proper avenues they can claim maximum benefits available under different sections.

Books: T. N. Manoharan (2007), Direct Tax Laws (7th edition), Snowwhite Publications P.Ltd., New Delhi. Dr. Vinod K. Singhania (2007), Students Guide to Income Tax, Taxman Publications, New Delhi Income Tax Ready Reckoner A.Y. 2007-08, TaxMann Publications, New Delhi

Websites: http://in.taxes.yahoo.com/taxcentre/ninstax.html http://in.biz.yahoo.com/taxcentre/section80.html http://www.bajajcapital.com/financial-planning/tax-planning