Tax Saving Options

Agenda

• Options available for tax saving investment.

• Why ELSS scores over traditional options.

• Performance of ELSS schemes.

• Conclusion.

• Section 88 was scrapped and 80 C was introduced in finance bill 2005.

• Instead of offering tax rebates, investment under Section 80 C qualifies for deduction from gross total income.

• Sectoral investment cap has been removed under Section 80 C as was the case under Section 88.

• This allows investor to invest as per his/her risk profile.

Section 80 C

Options Available under Section 80 C

• Apart from these, insurance premium on life insurance policies and principal component of housing loan are also eligible for Section 80 C benefit.

Investment Avenue % ReturnMinimum

InvestmentMaximum

InvestmentLock In Period Feature

National Saving Certificate

8 100 No Limit 6 Years Interest is taxable

Public Provident Fund 8 Rs500 Rs.70,000 15 Years Tax Free Return

Time Deposit 6.25-7.5 Rs200 No Limit5 Years (to avail

80C benefit)Interest is taxable

Senior Citizen Saving Scheme

9 Rs1000 Rs15 lakh5 Years (to avail

80C benefit)minimum age is 55 to

avail this option.

Bank F.D. 9 - No Limit5 Years (to avail

80C benefit)Interest is taxable

Equity Linked Saving Scheme

market driven but one can

expect 15-17% return.

Rs.500 to Rs.5000

No Limit 3 YearsLowest lock in period

with maximum possible return.

Are You One of Those Who Still Go for Traditional

Instruments like Bank F.D. and PPF?

OR

Smart Enough to Take Dual Advantage of Low

Valuations and Tax Benefit by Investing in ELSS.

Lets Take a Case Study 1 to help you in

Decision making.

• Mr. Ram prefers investing Rs.70000 in PPF to earn secured return. He has invested this amount of 31st March of every year since 1996.

• Mr. Shyam has invested Rs.70000 every year on 31st March in ELSS scheme (Birla Sunlife Tax Relief 96) since 1996.

• Both have invested Rs.9.1 lacs till 31st March 2008.

Who has taken Wise Decision?

• Stock markets are down by 60% in 2008 from 21000 to 9000.

• Mr. Ram feels proud on his decision of not investing in ELSS and choosing PPF.

So you will also agree with Mr. Ram as PPF has given

Him fixed return of 8% over the years.

But Is It Really a Smart Decision?

Look Who Has Made More Profit?

Returns as on 31.10.08

Shyam has made almost 4 times more money than Ram by investing in Birla Sunlife Tax Relief rather than PPF

9.1

16.89

62.78

0

10

20

30

40

50

60

70

Value (Rs. Lacs)

Investment Ram Shyam

ELSS v/s PPF

Dual Benefit of Wealth Creation and Tax Saving

Strong History of Consistent Return of ELSS

Note: Returns are as on 3rd January, 2009 and are on CAGR basis.

Despite carnage in equity market in 2008, ELSS schemes have done well by giving healthy returns.

5 Years 7 Years 9 Years

Scheme Name % return % return % return

HDFC Long Term Advantage Fund - Gr 192541 14.08 627485 30.54 NA NA

ICICI Prudential Tax Plan-Gr 184244 13.1 504190 26.18 255804 11.99

Principal Personal Tax Saver 161051 10.37 NA NA NA NA

Principal Tax Savings Fund 176234 12.8 450767 24.75 NA NA

Sundaram BNP Paribas Tax Saver - Div 248832 20.6 594467 29.07 410840 17.18

Value of Rs.100000

Value of Rs.100000

Value of Rs.100000

Real Example of Wealth Creation through Equity MF in Long Term

• If client wouldn’t have redeemed, the current value is approx. Rs.91 lacs inspite of index(sensex) at 9000.

• Mr. A decided to invest Rs.30000 in ELSS scheme on 4th Jan 2008 when SENSEX was at 20600 level.

• After seeing market correcting by more than 50% in one year of his investment, he fell in ‘Fear Trait’ and decided not to invest again in ELSS.

Case Study 2 of ELSS Investors ::

Regular Investing to Gain in Long Term

• Mr. B decided to invest Rs.30000 in ELSS scheme on 4th Jan 2008 when SENSEX was at 20600 level.

• After heavy correction in equity market, he decided to invest another Rs.30000 in the same scheme on 7th Jan 2009 to take advantage of lower NAV.

Regular Investing to Gain in Long Term

• Mr. C (smartest of three) decided to invest Rs.30000 in ELSS scheme on 4th Jan 2008 when SENSEX was at 20600 level.

• After heavy correction in equity market, he decided to invest another Rs.60000 in the same scheme on 7th Jan 2009 to take advantage of lower NAV.

Regular Investing to Gain in Long Term

Mr. B and C got clear advantage of rupee cost averaging by investing at lower level.

Mr. A's investment

Date NAV Investment Units

4th Jan 08 132.21 30000 226.91

Mr B's investment

HDFC Long Term Advantage Fund

Date NAV Investment Units

4th Jan 08 132.21 30000 226.91

7th Jan 09 64.33 30000 466.35

Total 60000 693.26

Average Cost 86.55

Date NAV Investment Units4th Jan 08 132.21 30000 226.917th Jan 09 64.33 60000 932.69Total 90000 1159.60Average Cost 77.61

Mr C's investment

HDFC Long Term Advantage Fund

Regular Investing to Gain in Long Term

As we can see, Mr. C who invested higher amount at lower level requires just 21% growth to break even whereas Mr. A would need more than 100% growth for the same.

Investment

Jan-08 Jan-09

Mr. A 30000 Nil 105%

Mr. B 30000 30000 33%

Mr. C 30000 60000 21%

Return required to start making profit

Dual Benefit: Dividend + Capital Appreciation

Scheme Name InvestmentDividend Received

Current ValueCurrent

Value+DividendCAGR

Principal Tax Saving 100000 118624 400584 519208 27%

UTI Equity Tax Saving Plan 100000 227513 104974 332487 19%

ICICI Tax Plan 100000 354759 130037 484796 25%

Sundaram BNP Paribas Tax Saver 100000 346859 118063 464921 25%

HDFC Long Term Advantage Fund 100000 304979 247759 552739 30%

Investment Date is taken as 1st Jan 2002 and Current Value is taken as on 31st Dec 2008

Sensex Levels P/E Ratio

1st Jun 2002 3246 15.49

1st Jan 2009 9903 12.87

% change 205% - 18%

But should the investor invest in Equities now?

ELSS : Effective way of saving taxes.

Your earning

Tax without ELSS Tax with ELSS You save

200,000 5,150 0 5,150

300,000 15,450 5,150 10,300

500,000 56,650 36,050 20,600

750,000 123,600 92,700 30,900

1,000,000 211,150 180,250 30,900

Amount in Rs.

Based on Tax Slab for FY 08-09

Assuming an investment of Rs. 100,000 in ELSS in this Financial Year

Operational Efficiency.

• ELSS scores over other options as it comes with lowest lock in period of just three years.

• Very easy to operate as it requires only PAN card on part of investor.

• Investment can be get done just by signing an application form and cheque.

• It is one of the most transparent of all the options available as portfolio of the scheme gets published on a monthly basis.

Fundz Networkwww.njfundz.com

Compared to other products available in the market for

tax saving, ELSS schemes provides

Better Returns to customers

Fantastic Earnings to you as an advisor (with almost 10%+ earnings

including trail)

Easy for you to acquire and retain customers

Long Term investment Mandate for Fund Manager resulting in

superior returns over a period of time

In short a win win situation for everyone – Investor, Advisor

ELSS: A great earning opportunity.

• It provides opportunity to create wealth in long term which allows investor to combine tax saving with wealth creation objective.

• The only option that can beat inflation by wide margin in long term return.

Conclusion.

So BE Wise by Taking Wise Decision of Choosing

ELSS and make Tax Saving a Step Toward Wealth Creation.

"A pessimist sees the difficulty in  every opportunity; an optimist sees the 

opportunity in every difficulty."  ~   Winston Churchill

Thank You