Welcome

to

Tax & Investment Planning Seminar

Income Slab Upto Rs 1,00,000 Rs 1,00,000 - Rs 1,50,000 No Surcharge Rs 1,50,000 - Rs 2,50,000 No Surcharge

Income Tax Rates NIL 10% of the amount exceeding Rs 1,00,000 Rs 5,000 + 20% of the amount exceeding Rs 1,50,000 Rs 25,000 + 30% of the amount exceeding Rs 2,50,000/-

Above Rs 2,50,000 10% Surcharge

COMPARISON BETWEEN VARIOUS TAX SAVING OPTIONS

Options Maximum amount Tax Saving Lock-in Period Returns Tax on Returns Option under section 80CCC LIC Jeevan Suraksha Rs 10,000 10% to 33% Options under section 88 Equity Linked Saving Rs 10,000 Scheme (ELSS) Mutual Fund Pension Plan Rs 70,000 Infrastructure Bonds Rs 1,00,000 Public Provident Fund Rs 70,000 15% or 20% (PPF) National Saving Certificate Rs 70,000 (NSC) ULIP of UTI Rs 70,000 LIC premiums Rs 70,000 Return of Principal of Rs 20,000 Housing Loan Maximum amount eligible for tax relief under section Rs 1,10,000 88 and 80CCC.

Term of the policy

5 to 6%

Applicable rate

3 Years > 10% Till the age of 58 yrs > 8% 3 Years 6.75 % to 7%

10% 10% Applicable rate

6 years minimum 6 years minimum 10 or 15 years Term of the policy N/A

8 % compunded yearly Tax Free 8% compounded half yearly Applicable rate >6% Applicable rate >6% Tax Free N/A N/A

Section 88
100,000/=
Infrastructure bond Rs. 30,000/= Repayment of Housing loan principal-20K ELSS-10K 40,000/= LIC, PPF, CPF, and pension plan..etc-40K

Other Deductions
Section 80 CCC: Jeevan Suraksha upto Rs. 10,000/=
Section 80 D : Section DD: Upto Rs. 10,000/= towards mediclaim 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
TOOTHPASTE LPG GAS MASALA DOSA PETROL MOVIE TICKET

1980
4.05 26.25 1.5 7.9 5

2001
19 250 15 32 50

2020
104 960 286 290 310

Inflation .The silent killer!

Present cost of living 30 yrs from now Retire today Retire 30 yrs from now RS. 20,000 p.m Rs.3,83,887 p.m. Rs. 20 lacs @ 12% 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

A p r 8 0O c t 8 2A p r 8 5O c t 8 7A p r 9 0O c t 9 2A p r 9 5O c t 9 7

Value Of Re. 1 After Taxes

(Rs.) Period - April 1980 to December 1997

15

Rs. 13.80
Stocks

10

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

Rs. 1.24
Co. Deposits

Re. 0.68
Bank Deposits

A p r 8 0 O c t 8 2 A p r 8 5 O c t 8 7 A p r 9 0 O c t 9 2 A p r 9 5 O c t 9 7

Post inflation & Taxes

Recap - value of 1 Rupee in 17 years.

Value Bank Co. Deposit Equity 4.81 11.21 33.50

Post-tax Post tax & Inflation 3.00 5.44 13.80 0.68 1.28 3.18

EQUITIES ARE THE BEST LONG TERM BET

% OF STUDIED PERIOD IN WHICH

Other investment outperformed Stocks outperformed

14% 44% 37%

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%

9.19% 7.62%

9.74%

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 Management Diversification

Convenience Tax Benefits

Liquidity

Mutual Funds & Tax Benefits

INCOME TAX BENEFITS
Section 88
Section 88 (2)

CAPITAL GAINS BENEFITS

Section 112

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 x ation @ 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
Accessibility Tenor Tax Benefits Low Fixed (Medium) None

FI Bonds Open-ended

Mutual Funds
Low Fixed (Long) Rs. 5000 80L High No Lock-in Rs. 500 80L , 112

Min. Investment Rs. 1000

Liquidity
Convenience Transparency

Low
Medium None

Very Low
Tedious None

Very High
Very High 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.

Rs. 808

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

SB Rs. 4

COM LIC FD PPF NSC Bk FD Rs. 17

BUSINESS OR EQUITY

Rs. 234

Rs. 67

5%

10%

15%

20%

25%

Invest Early
BOTH ARE OF SAME AGE

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

Prakash starts investing at 35 years age 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 7,643,653 4,999,569 Savings Returns *

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)