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)
