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Study of the tax saving instruments 2009-2010

Project Report

On

Study of tax saving instruments


Submitted By,

Patel Dhruti . p (Exam seat No)

Under the guidance of

Radha vyas .

In Partial Fulfillment of the Requirement For The subject in Third


Year (SEM –VI) BBA Programmed.

Submitted To

NAVNIRMAN INSTITITE OD MANAGEMENT (NIM- BBA


College), Bharthana, Surat.
Affiliated to VNSGU, Surat
ACADEMIC YEAR 2009-10

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

NAVNITMAN INSTITUTE OF MANAGEMENT.

DECLARATION
I here by declare that the winter project report entitled “STUDY OF tax
saving instruments” is submitted in partial fulfillment of the requirement for the
fulfillment of the requirement for the degree of BBA, to NAVNIRMAN INSTITUTE
OF MANAGEMENT is my original work and it is not submitted for the award of any
other degree or other similar title.

I acknowledged that the use of data from other sources.

Place - Surat ___________________


Date - Patel Dhruti .p

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Study of the tax saving instruments 2009-2010

 ACKNOWLEDGEMENT

Here, this is my great pleasure that I acknowledge Prof. Radha vyas for their
great valuable assistance and excellent co- operation by allowing me to have experienced
the things practically and working on the topic of “STUDY OF TAX SAVIMG
INSTRUMENTS”
I am also thankful to all of them who have directly or indirectly helped me in
preparing the project report. It is the great pleasure to have this opportunity to express my
heartily gratitude for their valuable guidance, suggestions and ideas on my report.

I also thankful to my family members and my friends for helped and support me
during my project work.

Last, but not least, my sincere thanks go to all staff of our MBA Program, who
fives their valuable co-operations for the fulfilling this project report.

Finally, all faculties and students are invited for giving their suggestions to
improving the standard of this report.

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Study of the tax saving instruments 2009-2010

 EXECUTIVE SUMMARY

In accordance with my BBA course, I have gone under the winter project on Tax
saving instruments.

I have selected this subject ““STUDY OF TAX SAVING INSTRUMENTS” as a


part of my project work. It aims to get practical and immense knowledge about the
strategies and planning of the Bank, post office , Mutual Fund , insurance company in
accordance with the all the fields. After the completion of this project, I am very well
capable to understand different strategies of tax saving instruments and as well as capable
to take some action or planning whenever required.

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Study of the tax saving instruments 2009-2010

 TAX SAVING INSTRUMENTS IN INDIA

 OVER-VIEW OF INDIAN FINANCIAL MARKET

The Indian financial market is one of the fastest growing emerging markets
of the world, thanks to the new economic policy – liberalization, deregulation and
measures of restructuring – which has dismantled entry barriers in the financial markets,
allowed the entry of new players and created an environment for efficient allocation of
resources. The major investors in the markets are the Individual Investors, Corporate
Sectors, and Charitable Trusts etc.

Mutual Funds, Bank Deposits, Post Office Schemes, RBI Relief Bond,
Public Provident Fund, Unit Trust of India, Life Insurance and Equity are the investment
avenues where generally investors invest their savings.

 INVESTMENT AVENUES IN INDIA

As an investor one may have vast spectrum of investment avenues offering different
rights & benefits to investors. Some avenues have risk free returns where as some with
high risk.

Various Investment Avenues:

[1] Equity Shares

Equity represents the membership of the company. Equity shareholders are the owner of
the capital of the company. Equity shares may by subscribe directly in a public issue of a
company or right issue of an existing Company or by bonus or share can be purchase
from the share market also. Prices are fixed according to movements the market. It pays
the higher return, but not fixed, it’s highly risky because no one can judge what the right
time to purchase and sell shares is.

[2] Fixed Income Schemes

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They are paying fixed rate of interest. They are low risky high rate but lower than the
equity i.e., 10% - 12%.
Preference Shares
Non Convertible Debentures
Indira Vikas Patra
Government Securities (Gilt Edged Securities)
Money Market Instruments – Treasury bills, commercial papers & certificates of
Deposits.

[3] Deposits

They are similar to fixed income securities with fixed return but they are not negotiable.
Bank Deposits – F.D’s, Saving Accounts and Recurring Accounts.
Post offices saving accounts, Post offices recurring accounts
Corporate Deposits

[4] Tax Sheltered Saving Schemes

Here the return is less but the safety is high and also some taxation benefit is allowed.
National Saving Schemes
Public Provident Fund
Recognized Provident Fund
Insurance
Mutual fund

[5Mutual Funds

Mutual fund is a trust that pools the saving of numbers of invertors who shares common
financial goals.

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Study of the tax saving instruments 2009-2010

 ANALYSIS OF INVESTMENT AVENUES

Convenience Investment Objective Return Safety Risk Liquidity


Tolerance

Equity shares Capital appreciation High Low High High or Low


Moderate
FI Bonds Income Moderate High Low Moderate
High

Corporate Income Moderate Moderate H-M-Low Low


Debentures Low
Fixed Deposits Income Moderate Low H-M-Low Low

Bank Deposits Income Low High High Generally High


Low
PPF Income Moderate High Low Moderate
High
Life Insurance Risk cover Low High Low Low
Moderate
Gold Inflation Hedge Moderate High Low Moderate
Low
Mutual Funds Capital Growth High High H-M-Low High
Income

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 INTRODUCTION OF TAX SAVING INSTRUMENTS

There are lots of financial schemes available in India. Many of them provides
you guaranteed returns, high interest rates ,tax savings under various sections of Indian
Income Tax Act and much more benefits.
These financial plans not only provide you money growth but also provide
you with financial security at various steps in your life. It depends on your needs which
product suits you best.
What are your requirements? i.e.(Short term or Long term.)
How much risk can u take? i.e. (High risk or moderate risk or less risk)
How would you like to invest? (One time or regular)
How much you know about the product? (Are you aware of pros and cons of
your investment?)

There are following some avenues in India which is tax deductible By the
Government under Govt. Act
1. Post office schemes
National Savings Certificates [NSC]
Public provident fund
Fixed deposit

2. 5 years fixed deposit with the bank


3. Senior Citizens Savings Scheme (SCSS)
4. Public provident fund
5. Insurance premium
6. Mutual fund

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Study of the tax saving instruments 2009-2010

 TAX SLAB IN INDIA 2009 -2010

Income tax slab for man


Income tax slab Tax rate
0 to 1,60,000 Nil
1,60,001 to 3,00,000 10%
3,00,001 to 5,00,000 20%
Above 5,00,000 30%

Income tax slab Tax rate


0 to 1,90,000 Nil
1,90,001 to 3,00,000 10%
3,00,001 to 5,00,000 20%
Above 5,00,000 30%
Income tax slab for women

Income tax slab for senior citizens


Income tax slab Tax rate
0 to 2,40,000 Nil
2,40,001 to 3,00,000 10%
3,00,001 to 5,00,000 20%
Above 5,00,000 30%

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Study of the tax saving instruments 2009-2010

CH 1 POST OFFICE SCHEMES

 HISTORY OF POST OFFICE


No other institution ever has come closer to human lives as the Post
Office. Post office reaches every nook and corner of the country. This is one of the
reasons why many of the Government, non-government organizations, when faced with
difficulties of reaching the largest possible number of people, have thought of utilizing
the agency of the Post Office for the purpose.

The Indian Post Office was recognized as a separate organization of


national importance and was placed, for the first time, under the unitary control of a
Director General of the Post Office in India on October 01, 1854. It thus completes 150
years of its operations this year.

In post office there are lots of schemes is available but, the some of the
schemes is given tax benefit under the Indian government act:

1. NSC (National saving certificate )


2. Public provident fund
3. Fixed deposit

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Study of the tax saving instruments 2009-2010

1. 1.NSC ( NATIONAL SAVING CERTIFICATE)

National Savings Certificate is a saving plan offered by Indian Post


office. National Savings Certificate is most popular among the middle class
families and salaried persons in India.

➢ Advantages of the NSC

• Tax benefits are available on amounts invested in NSC under section 88, and
exemption can be claimed under section 80L for interest accrued on the NSC.
Interest accrued for any year can be treated as fresh investment in NSC for
that year and tax benefits can be claimed under section 88.

• NSCs can be transferred from one person to another through the post office on
the payment of a prescribed fee.

• They can also be transferred from one post office to another.

• The scheme has the backing of the Government of India so there are no risks
associated with your investment

• Government guarantee.

• May get bank loan on NSC

➢ Disadvantages of the NSC

1. Long investment
2. Low return
3. Post office don’t cover which you have to pay as advance tax or what ever mean
you want

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➢ Tax benefit

Annual interest earned is deemed to be reinvested and qualifies for tax rebate for
first 5 years under section 80 C of Income Tax Act.

➢ Features and benefit available in NSC

investment amount Min: 500

Max : no limit
Interest 8% compounded half yearly

Who can purchase? Two adults, Individuals, and minor through


guardian can purchase.

Companies, Trusts, Societies and any other


Institutions not eligible to purchase.
Who can not purchase? Non resident of Indian

Tax benefit Annual interest earned is deemed to be


reinvested and qualifies for tax rebate for
first 5 years under section 80 C of Income
Tax Act.
Withdrawal facility After 2 years

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Study of the tax saving instruments 2009-2010

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

1.2. PUBLIC PROVIDENT FUND

Public Provident Fund, popularly known as PPF, is a savings cum tax


saving instrument. It also serves as a retirement planning tool for many of those who do
not have any structured pension plan covering them. The balances in PPF account cannot
be attached by any authority normally.

PPF scheme was introduced by the Government of India in 1968 with


the aim to include more and more individuals to the scheme and get profit.

➢ Advantages and Disadvantages of PPF

Public provident fund scheme is normally of 15 years but can be extended for 1
or more terms of 5 years while the individual holds the rights to terminate the PPF funds
at any time.

PPF or Public Provident Fund is a public growth scheme under which people
can contribute a part of their income and claim is income tax rebate.

➢ Tax benefit

• Deposits in PPF are eligible for rebate under section 80-C of Income Tax Act.
• The interest on deposits is totally tax free.
• Deposits are exempt from wealth tax.

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Study of the tax saving instruments 2009-2010

➢ Features and benefit of PPF (public provident fund)

investment amount Min : 500

Max: 70,000

Max number of deposit is 12 is twelve in one


year.
Interest 8% compounded half yearly
Who can buy? In his own name, on behalf of a minor of
whom he is a guardian, a Hindu Undivided
Family.
Maturity After 15 years
Locking period After 5 years
Withdrawal Premature withdrawal is permissible every
year after completion of 5 years from the
Transferability A/C can be transferred from one post office
to another post office ; from a bank to bank
Tax benefit
Deposits in PPF are eligible for rebate under
section 80-C of Income Tax Act.
The interest on deposits is totally tax free.
Deposits are exempt from wealth tax.

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Study of the tax saving instruments 2009-2010
1.
1.3. FIXED DEPOSIT IN POST OFFICE

Government of India has designated certain schemes as eligible for tax savings
under Sec 80c of the IT Act. Amounts up to Rs. 1 lakh per year are deductible from
taxable amounts under this provision. Schemes eligible under this provision include
certain Post Office schemes, tax savings bank fixed deposits (which have to be of at least
5 years duration)

These fixed deposits are also tax deductible under the sec. 80 c

➢ Post office time deposit


➢ Post office recurring deposit

1.3.1. POST OFFICE TIME DEPOSIT

A Post-Office Time Deposit Account (RDA) is a banking service similar to a


Bank Fixed Deposit offered by Department of post, Government of India at all post
office counters in the country. The scheme is meant for those investors who want to
deposit a lump sum of money for a fixed period; say for a minimum period of one year to
two years, three years and a maximum period of five years. Investor gets a lump sum
(principal + interest) at the maturity of the deposit. Time Deposits scheme return a lower,
but safer, growth in investment.

➢ ADVANTAGES

In this scheme your investment grows at a pre- determined rate with no risk
involved. With a Government of India-backing, your principal as well as the interest
accrued is assured under the scheme.
The rate of interest is relatively high compared to the 4.5% annual interest rates
provided by banks. Although the amount invested in this scheme is not exempted as per

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Study of the tax saving instruments 2009-2010

section 88 of Income Tax, the amount of interest earned is tax free under Section 80-L of
Income Tax Act.

➢ DISADVANTAGES

Long investment

Low return

➢ Features and benefit in Post office time deposit

Who can buy? A single adult or two adults jointly.

Public account local authority or body , co – operative society .

Who can not buy? Non resident Indian can not open the account.

Invested amount Min: 200

Max: No limit
Term of investment It may be 1 year, 2 year , 3 year , 5 year
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Study of the tax saving instruments 2009-2010

1.3.2. POST OFFICE RECURRING DEPOSIT

Post-Office Recurring Deposit Account (RDA) is a banking service offered by


Department of post, Government of India at all post office counters in the country. The
scheme is meant for investors who want to deposit a fixed amount every month, in order
to get a lump sum after five years. The scheme, a systematic way for long term savings,
is one of the best investment options for the low income groups.

➢ Advantages

The post office offers a fixed rate of interest unlike banks which constantly
change their recurring deposit interest rates depending on their demand supply position.
As the post office is a department of the government of India, it is a safe investment.

The principal amount in the Recurring Deposit Account is assured. Moreover


Interest earned on this account is exempted from tax as per Section 80L of Income Tax
Act.

➢ Disadvantages

Long period

Loss of interest if the withdrawal before maturity

➢ Features and benefit in recurring deposit

Who can buy A single adult or two adults jointly

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A guardian on behalf of minor

Maturity period 5 years


Amount deposit facility sixty equal monthly deposits shall be
made in an account in multiples of Rs.
five subject to a minimum of ten
rupees.
Interest on maturity of the accounts opened on
or after 1st March, an amount 728. 90 is
payable to a subscriber of rupees : Ten
domination account.
Pass book facility Depositor is provided with a pass book
with entries of the deposited amount
and other particulars duly stamped
by the post Office.
Pre mature withdrawal After 3 years

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Study of the tax saving instruments 2009-2010

1.4. NATIONAL SAVING CERTIFICATE

CH-6 NATIONAL SAVING CERTIFICATE

National Savings Certificate, popularly known as NSC, is a time-tested tax saving


instrument that combines adequate returns with high safety. NSCs are an instrument for
facilitating long-term savings. A large chunk of middle class families use NSCs for
saving on their tax, getting double benefits. They not only save tax on their hard-earned
income but also make an investment which is sure to give good and safe returns.

CH - 2. 5 YEARS BANK FIXED DEPOSIT

 HISTORY OF BANKING INDUSTRY

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Study of the tax saving instruments 2009-2010
Banking in India originated in the last decades of the 18th century. The oldest
bank in existence in India is the State Bank of India, a government-owned bank that
traces its origins back to June 1806 and that is the largest commercial bank in the
country. Central banking is the responsibility of the Reserve Bank of India, which in
1935 formally took over these responsibilities from the then Imperial Bank of India,
relegating it to commercial banking functions. After India's independence in 1947, the
Reserve Bank was nationalized and given broader powers. In 1969 the government
nationalized the 14 largest commercial banks; the government nationalized the six next
largest in 1980.

After that there are so many co-operative, nationalized, private banks in India.

They rendered the following services

1. Loan and credit facility


2. Mobile banking service
3. E-banking
4. Deposit account

 5 YEARS BANK FIXED DEPOSIT

In a Fixed Deposit Saving Scheme a certain sum of money is deposited in the


bank for a specified time period with a fixed rate of interest.

When you want to invest your hard earned money for a longer period of time and
get a regular income, Fixed Deposit Scheme is ideal. It is SAFE, LIQUID and FETCHES
HIGH RETURNS.
Loan / Overdraft facility is available against bank fixed deposits. Now many
banks don’t charges for premature withdrawal.

➢ Advantages

1. It is the safest investment in fixed deposit .

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2. We can avail 75% to 90% loan against our FD without many formalities. It can be
rapid in period we desire.
3. It is totally risk free provided fixed deposit with nationalized bank or well reputed
bank.

➢ Disadvantages

1. Growth of our investment very slow


2. Loss of interest on account of before maturity payments.
3. Our amount locked in FD for few days or years. So, we can not invest in another
avenue.

For the study of Bank deposit I selected following two Banks

➢ BANK OF INDIA
➢ ICICI BANK

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2.1 BANK OF INDIA

 Introduction

Bank of India was founded on 7th September, 1906 by a group of eminent


businessmen from Mumbai. The Bank was under private ownership and control till
July 1969 when it was nationalized along with 13 other banks. Beginning with one
office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank
has made a rapid growth over the years and blossomed into a mighty institution with
a strong national presence and sizable international operations. In business volume,
the Bank occupies a premier position among the nationalized banks.

The Bank has 3101 branches in India spread over all states/ union territories
including 141 specialized branches. These branches are controlled through 48 Zonal
Offices. There are 29 branches/ offices (including three representative offices)
abroad. The Bank came out with its maiden public issue in 1997 and follow on
Qualified Institutions Placement in February 2008. . Total number of shareholders as
on 30/09/2009 is 2,15,790.

While firmly adhering to a policy of prudence and caution, the Bank has
been in the forefront of introducing various innovative services and systems.
Business has been conducted with the successful blend of traditional values and
ethics and the most modern infrastructure. The Bank has been the first among the
nationalised banks to establish a fully computerised branch and ATM facility at the
Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder

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Study of the tax saving instruments 2009-2010
Member of SWIFT in India. It pioneered the introduction of the Health Code System
in 1982, for evaluating/ rating its credit portfolio.

The Bank's association with the capital market goes back to 1921 when it
entered into an agreement with the Bombay Stock Exchange (BSE) to manage the
BSE Clearing House. It is an association that has blossomed into a joint venture with
BSE, called the BOI Shareholding Ltd. to extend depository services to the stock
broking community. Bank of India was the first Indian Bank to open a branch
outside the country, at London, in 1946, and also the first to open a branch in
Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 29
branches (including five representative office) at key banking and financial centres
viz. London, Newyork, Paris, Tokyo, Hong-Kong and Singapore. The international
business accounts for around 17.82% of Bank's total business.

The bank of India provide following interest on fixed deposit.

Time period Rate of interest


7 days to 14 days 3%
15 days to 30 days 4.5%
31 days to 45 days 4.5%
46 days to 90 days 5.25%
91 days to 179 days 5.75%
180 days to 364 7.25%
1 years to 2 years 8.25%

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Study of the tax saving instruments 2009-2010
2 years to 3 years 8.75%
3 years to 5 years 8.75%
5 years and above 9%

They also provide different schemes of fixed deposit

1. BOI saving plus schemes


2. Star flexi recurring deposit
3. Star shatabdi deposit
4. Star retail floating rate deposit
5. Star sunidhi Tax- Saving deposit

2.1.1 BOI saving plus schemes


This scheme is combination of short term deposit and saving deposit.

Condition Min: 25,000 in saving bank account

Max: 5,000 in BOI saving plus account


Rate of interest For BOI saving plus account as applicable
for term deposit of similar nature.
Features 1. Automatic swap in / swap out and
renewal on maturity for original
tenure in multiples of 5,000
2. No loss of interest on account of
before maturity payments.
Additional benefits Tax concession available under section 80 c
of income tax rules.

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2.1.2. Star – flexi recurring deposit

Minimum amount Rs. 1000 minimum core monthly


installment

Maximum amount Rs. 10000 maximum monthly installment

Period Min: 12 months


Max: 120 months

Interest rate Flexible installments as applicable at the of


deposit flexible installments.
Core installments as applicable for the
period fore which the account is opened

Maturity There is no fixed maturity value it shall be


depends on the amount of core flexible
installments

Additional incentive There is no term deposit receipts


No need to make multiple term deposit
receipts option to invest amounts as and
when fund are available.

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Additional benefits Tax concession available under section 80
c of income tax rules.

2.1.3. Star shatabdi deposit

Minimum amount Rs. 5000


Maximum amount No ceiling
Tenure Min: 6 years

Max: 10 years
Rate of interest 6 years and above 7.5 % p.a.

Above 8 years 8% p.a.


Additional benefits Tax concession available under section 80
c of income tax rules.

2.1.4. Star retail floating rate deposit

A combination of fixed and floating rate of interest of term deposit

Minimum amount Rs. 1000


Maximum amount No ceiling amounts to be multiples of rs

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5000 over the minimum amount
Tenure Min: 36 months

Max: 120 months


Interest rate 0.25 over the bench mark of banks term
deposit for a like period with rest on
quarterly basis at the commencement of
next calendar quarter.
Maturity value There is no fixed maturity value it shall be
depends on the floating rate of interest.
Additional benefits Tax concession available under section 80 c
of income tax rules.

2.1.5. Star sunidhi tax- saving deposit

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Amount Min: 10000

Max: 100000
Tenure Min: 5 years

Max: 10 years
Rate of interest 9 % p.a.

Additional 0.5 % p.a. available to senior


citizens
Nomination Permitted
Additional benefits Tax concession available under section 80
c of income tax rules.

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2.2. ICICI BANK FIXED DEPOSIT

Introduction

ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion
(US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$ 648.8
million) for the nine months ended December 31, 2009. The Bank has a network of 1,663
branches and about 4,883 ATMs in India and presence in 18 countries. ICICI Bank offers
a wide range of banking products and financial services to corporate and retail customers
through a variety of delivery channels and through its specialized subsidiaries and
affiliates in the areas of investment banking, life and non-life insurance, venture capital
and asset management. The Bank currently has subsidiaries in the United Kingdom,
Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri
Lanka, Qatar and Dubai International Finance Centre and representative offices in United
Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our
UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE).

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The interest rate on term deposit is as under.

Domestic and NRO term deposit (general category)

Maturity period Interest rate

less than Rs.15 lakh


7 days to 14 days 3.75%
15 days to 29 days 4.00%
30 days to 45 days 4.00%
46 days to 60 days 4.25%
61 days to 90 days 6.25%
91 days to 180 days 6.25%
181 days to 269 days 8.00%
270 days to less than one year 8.25%
1 year to 389 days 8.25%
390 days 8.50%
391 days to 589 days 8.00%
590 days 8.75%
591 days and above up to 2 years 8.00%
More than 2 years Up to 3 years 8.00%
More than 3 years up to 4 years 8.00%
More than 4 years up to5 years 8.50%
Mora than 5 years up to 10 years 8.50%

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5 years (80 c FD ) 8.50%

According the interest rates on term deposits for senior citizens would be as under.

Domestic and NRO term (Senior citizens)

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Maturity period Interest rate

less than Rs.15 lakh


7 days to 14 days N.A
15 days to 29 days 4.25%
30 days to 45 days 4.50%
46 days to 60 days 4.50%
61 days to 90 days 4.75%
91 days to 180 days 6.75%
181 days to 269 days 6.75%
270 days to less than one year 6.75%
1 year to 389 days 8.50%
390 days 9.00%
391 days to 589 days 8.50%
590 days 9.25%
591 days and above up to 2 years 8.50%
More than 2 years Up to 3 years 8.50%
More than 3 years up to 4 years 8.50%
More than 4 years up to5 years 9.00%
Mora than 5 years up to 10 years 9.00%
5 years (80 c FD ) 8.sss50%

FIXED DEPOSIT OF ICICI BANK


The following service are provided to the customers

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• Wide range of tenures.
• Choice of investment plans.
• Partial withdrawal permitted.
• Safe custody of fixed deposit receipts.
• Auto renewal possible.
• Loan facility available.

Features
You can deposit any amount of money in our Fixed Deposit for as long as you
wish between 15 days to 10 years.

All fixed deposits come with a set choice of investment plans. Fixed Rate Deposit
accounts also provide Fixed Loans. Re-investment Fixed Deposit rates do not change but
work likes a Recurring Debit Account transaction. In other words, Re-investment Plans
are compounded over traditional deposits and hence are more lucrative over different
time periods.

Benefits

Fixed Deposits at ICICI Bank comes with nomination facility. We also offer
online access to your Fixed Deposits through our Internet Banking channel. Internet
Banking at ICICI Bank allows you to connect your Credit Card, Loan and your Fixed
Deposit with your savings account.
In re-investment deposits, the interest is compounded quarterly and reinvested with the
principal.
Traditional term deposits provide tax shelter and shield you from factors affecting
fixed deposits in India over longer periods of fixed time.

Who can invest?

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Resident Indian

Amount
Min: 10000

Max: No Limit

Tax benefit

Traditional term deposits provide tax shelter and shield you from factors affecting
fixed deposits in India over longer periods of fixed time. 5 years fixed deposit is 100%
tax free under the section 80c.

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CH – 3 SENIOR CITIZEN SAVINGS SCHEMES

Senior Citizens Savings Scheme (SCSS) is a Government of India Product. They


offered 9% interest to depositors. Since the product is offered by Govt. of India, this
product is one of the most Safest Investment Option. Premature closure of account is
possible after one year from the date of opening the account. (Charges applicable).

➢ Advantages
1. Large number of Branches.
2. In case the investor does not want to avail Direct Credit facility or ECS facility, 4
Post Dated Cheques will be sent to Investor every year.
3. Account Statement containing the details of Deposit Balance & transactions.
4. Phone Banking Facility (for Queries).

➢ Disadvantages

1. Long period investment


2. Low interest
3. Age limit

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➢ Features and benefit available in senior citizen saving schemes.

Tenure of schemes 5 years which can be extended by 3 years


Rate of interest 9% per annum
Frequently computing interest Quarterly
Tax facility Fully taxable
TDS Tax will be deducted at source

Person resident in india _ 10%

Other- 20%
Invested amount Multiples in 1000
Investment limit Max: 15 lakh

Min: 1000
Modes of holding Accounts can be held both in single and
joint holding modes. Joint holding is
allowed but only with spouse
Applicability to NRI, PIO and HUFs Non resident Indians, Persons of Indian
Origin and Hindu Undivided Family are
not eligible to open an account under the
scheme.
Max. eligible age for inv. 60 years

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CH-4 INSURANCE PREMIUM AS A LIFE


INSURANCE

 HISTORY OF LIFE INSURANCE IN INDIA


The story of insurance is probably as old as the story of mankind. The same
instinct that prompts modern businessmen today to secure themselves against loss and
disaster existed in primitive men also. They too sought to avert the evil consequences of
fire and flood and loss of life and were willing to make some sort of sacrifice in order to
achieve security. Though the concept of insurance is largely a development of the recent
past, particularly after the industrial era – past few centuries – yet its beginnings date
back almost 6000 years.
Life Insurance in its modern form came to India from England in the year 1818.
Oriental Life Insurance Company started by Europeans in Calcutta was the first life
insurance company on Indian Soil. All the insurance companies established during that
period were brought up with the purpose of looking after the needs of European
community and Indian natives were not being insured by these companies. But Indian
lives were being treated as sub-standard lives and heavy extra premiums were being
charged on them. Bombay Mutual Life Assurance Society heralded the birth of first
Indian life insurance company in the year 1870, and covered Indian lives at normal rates.
Starting as Indian enterprise with highly p

➢ DEFINITION AND MEANING OF LIFE INSURANCE

1. The act, system, or business of insuring property, life, one's person, etc., against loss or
harm arising in specified contingencies, as fire, accident, death, disablement, or the like,
in consideration of a payment proportionate to the risk involved.

2. coverage by contract in which one party agrees to indemnify or reimburse another for
loss that occurs under the terms of the contract.

3. The contract itself, set forth in a written or printed agreement or policy.

4. The amount for which anything is insured.

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5. Any means of guaranteeing against loss or harm

➢ ADVANTAGES OF LIFE INSURANCE

1. Risk Cover

Life today is full of uncertainties; in this scenario Life Insurance ensures that your
loved ones continue to enjoy a good quality of life against any unforeseen event.

2. Planning for life stage needs

Life Insurance not only provides for financial support in the event of untimely death
but also acts as a long term investment. You can meet your goals, be it your children's
education, their marriage, building your dream home or planning a relaxed retired
life, according to your life stage and risk appetite. Traditional life insurance policies
i.e. traditional endowment plans, offer in-built guarantees and defined maturity
benefits through variety of product options such as Money Back, Guaranteed Cash
Values, Guaranteed Maturity Values.

3. Protection against rising health expenses


Life Insurers through riders or stand alone health insurance plans offer the benefits of
protection against critical diseases and hospitalization expenses. This benefit has
assumed critical importance given the increasing incidence of lifestyle diseases and
escalating medical costs.
4. Builds the habit of thrift
Life Insurance is a long-term contract where as policyholder; you have to pay a fixed
amount at a defined periodicity. This builds the habit of long-term savings. Regular
savings over a long period ensures that a decent corpus is built to meet financial
needs at various life stages.
5. Safe and profitable long-term investment
Life Insurance is a highly regulated sector. IRDA, the regulatory body, through
various rules and regulations ensures that the safety of the policyholder's money is the
primary responsibility of all stakeholders. Life Insurance being a long-term savings
instrument, also ensures that the life insurers focus on returns over a long-term and do
not take risky investment decisions for short term gains.

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6. Protection plus savings over a long term


Since traditional policies are viewed both by the distributors as well as the customers
as a long term commitment; these Policies help the policyholders meet the dual need
of protection and long term wealth creation efficiently.
7. Growth through dividends

Traditional policies offer an opportunity to participate in the economic growth


without taking the investment risk. The investment income is distributed among the
policyholders through annual announcement of dividends/bonus.

8. Facility of loans without affecting the policy benefits

Policyholders have the option of taking loan against the policy. This helps you meet
your unplanned life stage needs without adversely affecting the benefits of the policy
they have bought.

9. Growth through dividends


Traditional policies offer an opportunity to participate in the economic growth
without taking the investment risk. The investment income is distributed among the
policyholders through annual announcement
10. Tax Benefits
Insurance plans provide attractive tax-benefits for both at the time of entry and exit
under most of dividend bonus of the plans.
11. Mortgage Redemption
Insurance acts as an effective tool to cover mortgages and loans taken by the
policyholders so that, in case of any unforeseen event, the burden of repayment does
not fall on the bereaved family.

➢ DISADVANTAGES OF INSURANCE

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• High allocation charges
In insurance companies initial premium take the high charges. 10% to 30% of
allocation charge is deducted from initial premium. But, in recent change in the many
insurance company there is 100% allocated fund and nil charges.
Study of insurance companies I selected the following companies which is most
admire by the people.

1. LIC
2. Max New York life insurance company limited

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4.2. LIC - LIFE INSURANCE CORPORATION OF INDIA

➢ INTRODUCTION

The Life Insurance Corporation (LIC) of India founded in 1956 is the largest
life insurance company in India owned solely by the Government of India. Headquartered
in Mumbai, which is considered the financial capital of India, LIC presently has 7 Zonal
Offices and 100 Divisional Offices situated all around the country. In addition to an even
distribution of 2048 branches located in different towns and cities of India, LIC also has
a network of around one million agents who solicit life insurance policies to the public.
Existing as a towering insurance company for over 50 years, LIC has acquired
almost monopoly power in the solicitation and sale of life insurance policies in India. In
addition to the summary regarding the present stature provided at the beginning, LIC has
extended its activities in 12 countries other than India with the objective of catering to the
insurance needs of Non Resident Indians.
In life insurance corporation of India there is three types of plans.
1. Equity plans
2. insurance or traditional plans

These plans which I covered are most preferable by the people according to my
questionnaire as well as the past data of LIC.

1. EQUITY PLANS

• Jeevan sathi plus.

• Market plus 1.

• Money plus.

2. TRADTIONAL PLAN

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• Jeevan anand

• Money back policy – 20 years

• Jeevan mitra (tripal cover endowment plan )

 Tax treatment in Life Insurance Corporation of


India

Life Insurance and Tax Benefits:


Life insurance corporation of India’s insurance plans can be used for protection,
investment and tax planning. There are two kinds of income tax benefits available to
individuals:

1. Deductions
2. Exemptions

1. Tax Deductions
Sec 80C

Sec 80D

2. Exemption from the proceeds


(1) Commuted pension: 10(10A)
( 2) One-third of the Value on vesting date would be tax free

Life Insurance Proceeds: 10(10D)


• This includes any sum received from insurance policy as maturity proceeds,
death benefits

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• The single premium policies would be taxed as income in the year it is received
assuming that premium exceeds 20% of the sum assured.
• Please note that an insurance policy issued after 1st April, 2003 with respect to
which the premium payable for any of the years during the term of the policy
exceeds 20% of the actual capital sum assured, will not be eligible for Sec
10(10D) benefit. This won't be applicable for any sum received on the death of a
person.
 EQUITY PLANS

4.2.1. JEEVAN SATHI PLUS

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Payment of Annually , semi-annually , monthly , quarterly , single premium can be


premium paid
mode
Sum assured BaRegular
Gr
Fu
Bo
Se : 5 timesNo
Fu
Go of annualizedNo
Mpremium 40 Eq
Nil
15
30 Ob
Lo M
Hi
nd
cur
lan
ow nd
tvt. ton uit
% jec
w
we
edi
gh
na
fun
ed
ce
th all
sec
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mo y
to rtiv
um
ris
Locking me
d
fun
3 years oc
uri
ss
s ma
ore
re ma
50
70
80 es,
k,
to
kris
period of the d ate
tie
tha rke
tha rke
% lo,
kMe
hig
plan nsd nt t
not w
diu
hme
60
45
30
20 40 mo inc
m
diu
ret
Top up Can paid in multiple % of 1000 , %and only 25%
re of premium can om
ris
m
urnbe paid as
a top up tha ke
ret
n mo
urn
80 der
Withdrawal Single : 5000 after the 3 years or 10% of single % premium whichever ate is
higher inc
Regular: it depends on the market it is in the form fixed amount om or in the
form of fixed number of units. e

Increasing No increase of covers will be allowed under the plan.


or The reduced levels of cover will be available within the limits specified
decreasing in Para 3 above.
sum assured
option
Death Sum assured is paid to the nominee.
benefit
Maturity Surviving the date of maturity an amount equal to the Policyholder’s Fund
benefits Value is payable

Investment
of Fund

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Loan No loan available will be available in this plan

Allocation 20% of the premium


charges

Entry age Min: 18 years completed

Max: 55 years

Maturity 70 years
age

Tax Under section 80c when the premium is paid it is 100% tax rebate and at
benefit the and of the maturity under sec. 10 (10,D) maturity will be tax free.

4.3.2. MARKET PLUS PLAN

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Payment of Annually, semi-annually, monthly, quarterly, single premium can be paid.


premium
mode

Premium Single: 30,000


amount Regular: 5,000 p.a. for 20 yrs.
10,000 p.a. for 15 to 19 yrs.
15,000 p.a. for 10 to 14 yrs.

Sum Min 30,000


assured Regular mode : 20 times of annualized premium

Locking 3 years
period of
the plan

Top up Multiple in 1000, No limit but, if all premium have been paid under the policy.

Withdrawal No partial withdrawal of units will be allowed under this plan.

Switching You can switch between any fund types during the policy term subject to
facilities switching charges, if any.

Increasing No increase of covers will be allowed under the plan.


or
decreasing The reduced levels of cover will be available within the limits specified in Para
sum 3 above.
assured
option

Maturity Surviving the date of maturity an amount equal to the Policyholder’s Fund
Value is payable

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Investment Fund Fund allocated Objectives


of Fund name
Govt. Money Equity
securities market market
Bond Not less Not more Nil Low risk
fund than 60% than 40%
Secured Not less Not more 15 to 55% Medium risk
fund than 45% than 40%
Balance Not less Not more 30 to 70% Growth medium
fund than 35% than 40% risk
Growth Not less Not more 40 to 80% Long term growth
fund than 20% than 40% fund – high risk

Loan No loan available will be available in this plan

Allocation 2.25%
charges

Entry age 0 to 60 years


Maturity Min: 18
age Max: 75

Tax benefit Under section 80c when the premium is paid it is 100% tax rebate and at the
and of the maturity under sec. 10 (10,D) maturity will be tax free.

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1.2.3.

4.2.3. MONEY PLUS –LIC

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P Annually , semi-annually , monthly , quarterly , single premium can be paid


payment
of
premium

Sum Min: 5 times of annualized premium.


assured Max: 30 times annualized premium up to 45 age.
20 times annualized premium if age is 46 to 60.
10 times of annualized premium if age is 60 and above
Locking 3 years
period of
the plan

Top up Not facilitate in this plan

Withdrawal After 3 years partial withdrawals may be in the form of the fixed amount or in
the form of units.

Increasing No increase of covers will be allowed under the plan.


or
decreasing The reduced levels of cover will be available within the limits specified in Para
sum 3 above.
assured
option

Death Higher of Sum Assured or the Policyholder’s Fund Value.


benefit

Maturity Surviving the date of maturity an amount equal to the Policyholder’s Fund
benefits Value is payable

Investment
Fu
Ob
of Fund
nd
jec
na
all
tiv
Govt.
M
Eq
me
oc
es
securi
on
uit
No
Lo
Nil
ate
ties
yey
Bo
Gr
td
w
ma
nd
No
15
Lo
ow
lee
mo
ris
rke
Se
Fu
to
w
tth
st
kre
cur
30
nd
55
Ba
to
lee
mo Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT
tha
ed
to
sGr
re
%
me
lan
nHi
40
Fu
70
ce
diu
ow
tha
60
40
to
gh
nd
%
d%
m
nth
80
ris
45
40
ris
30
Fu
20
k%
k%
nd
Study of the tax saving instruments 2009-2010

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4.4.4. JEEVAN ANAND - LIC

Premium mode Annually , semi-annually , monthly , quarterly , single


premium can be paid

Bonuses This is a with-profit plan and participates in the profits of


the Corporation’s life insurance business. It gets a share of
the profits in the form of bonuses. Simple Reversionary
Bonuses are declared per thousand Sum Assured annually at
the end of each financial year
.
Death benefit The Sum Assured along with the vested bonuses is payable
on death in a lump sum.

Accident benefit An additional Sum Assured (subject to a limit of Rs.5 lakh)


is payable in a lump sum on death due to accident up to age
70 of life assured.

Extra benefit These are the optional benefits that can be added to your
basic plan for extra protection/option. An additional
premium is required to be paid for these benefits.

Surrander value Buying a life insurance contract is a long-term commitment.


However, surrender values are available on the plan on
earlier termination of the contract.

Guranted surrender value The policy may be surrendered after it has been in force for
3 years or more. The guaranteed surrender value is 30% of
the basic premiums paid excluding the first year’s premium.
Any extra premium(s) paid and premium(s) towards
Accident Benefit are also excluded.

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4.4.5.MONEY BACK POLICY (20 YEARS)

Premium payment mode Annually , semi-annually , monthly ,


quarterly , single premium can be paid

Product summary These are Money Back type Assurance


plans that provides financial protection
against death throughout the term of plan
along with the periodic payments on
survival at specified durations during the
term.

Bonuses This is a with-profit plan and participates


in the profits of the Corporation’s life
insurance business. It gets a share of the
profits in the form of bonuses. Simple
Reversionary Bonuses are declared per
thousand Sum Assured annually at the end
of each financial year.

Death benefit The Sum Assured plus all bonuses to date


is payable to the customers

Accident benefit This benefit is not available in this plan

Surrender value Buying a life insurance contract is a long-


term commitment. However, surrender
values are available under the plan on
earlier termination of the contract.

Guaranteed benefit The guaranteed surrender value is 30% of


the basic premiums paid excluding the first
year’s premium and all survival benefits
paid earlier.

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4.4.6.JEEVAN MITRA –(Triple cover endowment plan )

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Product summary This is an Endowment Assurance plan that


provides greater financial protection against
death throughout the term of plan.

Premium mode Annually , semi-annually , monthly ,


quarterly , single premium can be paid

Bonuses This is a with-profit plan and participates in


the profits of the Corporation’s life insurance
business. It gets a share of the profits in the
form of bonuses. Simple Reversionary
Bonuses are declared per thousand Sum
Assured annually at the end of each financial
year.

Death benefit Thrice the Sum Assured plus all bonuses on


the basic sum assured to date is payable in a
lump sum upon the death of the life assured.

Accident benefit Not available

Surrender value Buying a life insurance contract is a long-term


commitment. However, surrender value will be
available under the plan on earlier termination
of the contract.

Guaranteed surrender value The policy may be surrendered after it has


been in force for 3 years or more. The
guaranteed surrender value is 30% of the basic
premiums paid excluding the first year’s
premium.

Maturity benefit The Sum Assured plus all bonuses declared up


to maturity date is payable in a lump sum on
survival to the end of the policy term.

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MAX NEW YORK LIFE COMPANY LIMITED (MNYL)

➢ INTRODUCTION

➢ MAX INDIA LIMITED

Founded in 1985, Max India Limited is a Public Limited company listed on the
NSE and BSE of India with over 30,000 shareholders. Max India Limited is a multi-
business corporate entity driven by the spirit of enterprise with a focus on people and
service oriented businesses.

Prominent shareholders of the company are Mr Analjit Singh and a leading private
equity firm, Warburg Pincus. The balance shareholding is held by the public and
Institutional Investors.

The company's vision is "to be one of India's most admired corporates for Service
Excellence." Towards this end, it has established businesses that are today recognized as
being at the fore front of service excellence, in each of the industry sectors where it
operates. Performance, Trust and Service Excellence are enshrined in Max India Group’s
Vision, Mission and Values.

• NEW YORK LIFE INSURANCE

New York Life Insurance Company a Fortune 100 company founded in 1845, is the
largest mutual life insurance company in the United States and one of the largest life
insurers in the world. Head quartered in New York City, New York Life’s family of
companies offer life insurance, annuities and long-term care insurance. New York Life
Investment Management LLC provides institutional asset management and retirement
plan services. Other New York Life affiliates provide an array of securities products and
services, as well as institutional and retail mutual funds.
The mission of New York Life is to maintain its superior 'financial strength', adhere to
the highest standards of 'integrity' and demonstrate 'humanity' by treating its customers,
agents and employees with compassion, consideration and respect.
As a leader in the insurance industry, New York Life continues to bring to its operations
new management concepts, advanced technologies, new distribution and training systems
and innovative insurance products. \

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• MAX NEW YORK LIFE COMPANY LIMITED

Max New York Life Insurance Company Ltd. is a joint venture between Max
India Limited, one of India's leading multi-business corporations and New York Life
International, the international arm of New York Life, a Fortune 100 company. The
company has positioned itself on the quality platform. In line with its vision to be the
most admired life insurance company in India, it has developed a strong corporate
governance model based on the core values of excellence, honesty, knowledge, caring,
integrity and teamwork.

Incorporated in 2000, Max New York Life started commercial operation in April
2001. In line with its values of financial responsibility, Max New York Life has adopted
prudent financial practices to ensure safety of policyholder's funds. The Company's paid
up capital as on 30th April, 2009 is Rs 1,782 crore.

• Tax treatment in max New York life Insurance Company limited

Life Insurance and Tax Benefits:


Max new York life insurance company limited ‘s insurance plans can be used for
protection, investment and tax planning. There are two kinds of income tax benefits
available to individuals:

1. Deductions
2. Exemptions

Tax Deductions
Sec 80C

Sec 80D

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Exemption from the proceeds
Commuted pension: 10(10A)
One-third of the Value on vesting date would be tax free

Life Insurance Proceeds: 10(10D)


• This includes any sum received from insurance policy as maturity proceeds,
death benefits
• The single premium policies would be taxed as income in the year it is received
assuming that premium exceeds 20% of the sum assured.
• Please note that an insurance policy issued after 1st April, 2003 with respect to
which the premium payable for any of the years during the term of the policy
exceeds 20% of the actual capital sum assured, will not be eligible for Sec
10(10D) benefit. This won't be applicable for any sum received on the death of
a person.

In Max New York life there are two types of the product:

• Equity
• Traditional
The top equity plan in Max New York life insurance and also most preferable plan by the
customers:
1. Equity plan

Life maker premium


Life maker platinum
Smart step
The top traditional plan of the Max New York life Co. Ltd
• Traditional plan

Whole life
Life gain endowment
• Endowment 20 years

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 EQUITY PLAN

4.3.1.LIFE MAKER PREMIUM- MNYL

Entry age Min: 90 days


Max: 65 years

Maturity age Min: 18 years


Max: 75 years

Policy term and 10 pay -20 years


premium 15 pay- 30 years

Sum assured Min: ATP* 5 or ATP*policy term/ 2


Max: ATP* policy term

Locking period of the 3 years


plan

Premium mode Annually , semi-annually , monthly , quarterly , single premium


can be paid

Top up Min – 5000


Max: 25% of the ATP

Withdrawal After 3 years any time you can withdrawal 20% 0f fund value
and deposit your money

Increasing or decreasing Only increasing sum assured is allowed


sum assured option

Maturity benefit MV= Fund value


Number of units in each fund multiplied by their respective NAV

Death benefit Sum assured or fund value whichever is higher

Tax benefit Under section 80c when the premium is paid it is 100% tax
rebate and at the

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End of the maturity under sec. 10 (10, D) maturity will be tax
free.

Investment of Fund Fund name Fund allocated


Govt. Money Equity market
securities market
Growth 20 20 60
fund
Super 15 15 70
growth
Dynamic 0-100 0 0-100
allocation
Secured Not more Up 40 15-50
fund than 45

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4.3.2. LIFE MAKER PLATINUM – MNYL

Entry age Min: 12 years


Max: 60 years

Maturity Max : age at 70 years


age

Policy term Equal to policy term

Annual Min : 10,000


target Max: no limit
premium

Sum Min: 50,000


assured Max: 5 crores

Increasing Increasing sum assured


or
decreasing
sum
assured
option

Premium Annually , semi-annually , monthly , quarterly , single premium can be paid


payment
mode

Death Increasing death benefit or sum assured or fund value whichever is higher
benefit

Top up 25% of the ATP

Withdrawal Leave only one annual target premium; you can withdrawal exceed fund value by one
premium.

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Maturity MV= Fund value


benefits Number of units in each fund multiplied by their respective NAV

Tax benefit Under section 80c when the premium is paid it is 100% tax rebate and at the end of the
maturity under sec. 10 (10, D) maturity will be tax free.

Investment Fund name Fund allocated


of Fund Govt. securities Money market Equity market
Bond fund Not less than 60% Not more than Nil
40%
Growth fund Not less than 40% Not more than % 30 to 70%

Secured fund Not less than 45% Not more than 15 to 55 %


40%
Balance fun Not less than 35% Not more than 40 to 80%
40%

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4.3.3. SMART STEP – MNYL

Entry age Min: 90 days


Max: 50 years

Maturity age Max: 60 years

Policy term Min: 10 y6ears


Max: 25 years

Annual target premium Min: 20,000


Max : no limit

Sum assured Min: 1,00,000


Max: equal to policy term* ATP

Increasing or decreasing sum assured option Not available

Premium payment mode Annually , semi-annually , monthly ,


quarterly , single premium can be paid

Death benefit 100% sum assured will be paid on death

Top up Min: 5000


One time in year 25% of the ATP

Withdrawal After 3 years 80 of the fund value

Maturity benefits The fund value shall be paid on maturity date


to policy holder

Tax benefit Under section 80c when the premium is paid


it is 100% tax rebate and at the
End of the maturity under sec. 10 (10, D)
maturity will be tax free.

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Investment Fu Fu
of Fund nd nd
Go Money market Eq
na
Bo all
vt.
No No uit
Nil
me
nd
Gr oc
sec
t
No t
No y30
fun
ow
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d
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stha n40
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tha n%
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n45 n40
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35 %
40
% %

 TRADITIONAL PLAN

4.3.4. WHOLE LIFE PARTICIPANT – MNYL

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Study of the tax saving instruments 2009-2010

Payment of premium Annually , semi-annually , monthly , quarterly , single premium


can be paid

Entry age 91 days to 70 years

Locking period of the 3 years of the policy.


plan

Sum assured Min : 1,00,000


x : 10 carore

Premium amount per Rs. 18.42


1,ooo

Rider allowed PAB , Term ,OPPB , Payor

Benefit Guaranteed cash value after 3 years

Loan As soon as the policy acquires a cash value

Bonus option Bonus is not declare for the first 3 years


There are three option to get the bonus :
1. Paid in cash
2. Premium off set
3. Used to purchase paid up addition

Under section 80c when the premium is paid it is 100% tax


Tax benefit rebate and at the
End of the maturity under sec. 10 (10, D) maturity will be tax
free.

4.4.5. LIFE GAIN ENDOWMENT – MNYL

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Study of the tax saving instruments 2009-2010

Payment of premium Annually , semi-annually , monthly , quarterly , single premium


can be paid
Entry age Life gain10: = 91 days to 65 years
Life gain15: = 91 days to 60 years
Life gain20: = 91 days to 55 years
Life gain25: = 91 days to 55 years
Life gain to age 60 : = 91 days to 50 years

Maturity age 75 years

Locking period of the 3 years of the policy


plan

Sum assured Min: 50,000


Max: No limit

Withdrawal After 3 years 40 % of the cash value you can withdrawal

Benefit Guaranteed cash value after 3 years

Loan As soon as the policy acquires a cash value

Riders WOP, PAB , Term , DD,

Bonus Bonus is not declare for the first 3 years


There are three option to get the bonus :
1. Paid in cash
2. Premium off set
3. Used to purchase paid up addition

Tax benefit Under section 80c when the premium is paid it is 100% tax
rebate and at the
End of the maturity under sec. 10 (10, D) maturity will be tax
free.

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4.6.6. MAX SURAKSHA

Payment of premium single premium only you can be paid

Entry age 18 to 45 years

Expiry Age 50 years

Benefit On death of life insured face amount on Maturity 100% of


premium

Locking period of the 3 years locking period


plan

Tenor 5 years

Withdrawal After 3 years of the policy

Sum assured Equal to 10 times the premium paid

Exclusion Suicide in first year

Bonus option Not applicable

Not forfeiture option Not applicable

Rider allowed None

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Study of the tax saving instruments 2009-2010

CH – 5 MUTUAL FUNDS

• INTRODUCTION OF MUTUAL FUND INDUSTRY


One of the important investment avenues in the financial market is the ‘Mutual
Fund’. Through out the world, Mutual Funds have played a significant role as far as an
investment is concerned. Mutual Funds play a pivotal role in transforming savings into
investments and thereby improving financial health of a country.

A Mutual Fund is a pool of money, collected from investors, and is invested


according to certain investment objectives. A Mutual Fund is created when investors put
their money together. It is, therefore, a pool of investors’ funds. The most important
characteristic of a mutual fund is that the contributors and the beneficiaries of the fund
are the same class of people, namely the investors. The term Mutual means that investors
contribute to the pool, and also benefit from the pool. There are no other claimants to the
funds. The pool of funds held mutually by investors is the mutual fund.

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different type of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned by
these instruments and the capital appreciation realized by the scheme are shared by its
unit holders in proportion to the number of units owned by them (pro rata). Thus a mutual
fund is the most suitable investment for the common man as it offers an opportunity to
invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody
with an invisible surplus of as little as a few thousand rupees can invest in Mutual Funds.
Each Mutual Fund Scheme has a defined investment objective and strategy.

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• Types of mutual fund

Mutual Funds can broadly be classified into three categories:

Equity Funds
Debt Funds
Hybrid Fund

1) Equity Funds
Equity Funds can further be classified into following categories:

(a) Aggressive growth funds

Objective of this fund is to earn very high return for the investors with the target of
maximum capital appreciation. These invest in less researched or speculative shares and
may adopt speculative investment strategies. They have high volatility and risk as
compared to other funds.

(b) Growth Funds

Objective of these funds is capital appreciation over long time, 7-10 years span. These
funds invest in companies whose earnings are expected to rise at an above average rate.
These companies will be considered to have growth potential but not entirely unproven
and speculative. These are less volatile than aggressive growth funds.

(c) Specialty funds


The systematic funds which have a theme of investments. These have narrow portfolio
orientation and invest only in companies that meet specified criteria. Here diversification
is limited to one particular type of investment. These
Are more volatile than diversified funds. These are further sub-categorized on the basis
of their investments.

(d) Diversified Equity Funds

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These funds invest only in equities except for a very small portion in liquid money
market securities. These funds reduce the sector or the stock specific risk through
diversification. These have lower risk than growth

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2) Hybrid Funds

These funds can be classified as follows:

(a) Growth and Income Fund

Strike a balance between capital appreciation and income for the investors. In these funds
portfolio is a mix between companies with good dividend paying record and those with
potential capital appreciation. These funds are less risky than growth funds bit more than
income funds.

(b) Asset allocation funds

These funds follow variable asset allocation policy. These move in and out of an asset
class (equity, debt, money market or even non-financial assets). Asset allocation funds
are those, which follow more stable allocation policies like balanced funds. Those, which
follow more flexible allocation policies, are like aggressive growth or speculative funds.

3) Debt Funds
Debt funds can further be classified as follows:

(a) Diversified debt funds

These invest in all available type of debt securities, issued by entities all industries and
sectors. These derive benefit of risk reduction through risk diversification.

(b) Focused debt funds

These have a narrow focus with less diversification in its investments. These include
sector, specialized and offshore debt funds. These have a higher risk as compared to
diversified debt funds.

(c) High yield funds

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These invest in debt instruments, which are not backed by tangible assets and considered
“below investment grade”. They may earn higher returns though at the cost of higher
risk.

(d) Assured return funds

Assured return funds or Guaranteed Monthly Income Plans (MIP) are essentially
debt/income funds. Returns are indicated in advance for all the future years of the closed-
end funds. Any shortfall is borne by the sponsors or mangers. Market regulator, SEBI is
discouraging fund managers from offering assured return schemes. If offered explicit
guarantee is required from a guarantor whose name is specified in advance in the offer
documents of the scheme.

 Who Can Invest In Mutual Fund In India

First of all, distributors need to be aware of who can buy mutual fund units or shares.
Mutual fund in India is open to investment by

(A) Residents including

Resident Indian Individuals


Indian Companies
Indian Trusts / Charitable Institutions
Banks
Non – Banking Finance Companies
Insurance Companies
Provident Funds

(B) Non-Residents including

Non- Resident Indians


Overseas Corporate Bodies (OCBs)

(C) Foreign entities, viz Foreign Institutional Investors (FIIs) registered with SEBI

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 Advantages of mutual fund

1. Portfolio Diversification

Mutual Funds normally invest in a well-diversified portfolio or securities. Each investor


in a fund is a part owner of all the fund’s assets. This enables him to hold a diversified
investment portfolio even with a small amount of investment that would otherwise
require big capital.

2. Professional Management

Mutual funds are managed by highly skilled managers with sound knowledge of the
market and wide experience in investment. Mutual fund provide service of experienced
and skilled professionals backed by dedicated investment research team that analyses
the performance and prospects of companies and selects suitable investment to achieve
the objective of the scheme. Also cost to the investor is less since it is proportionate to
investment.

3. Low Transaction Cost

When an investor invests in a fund, he gets the benefit of economics of scale. In other
words, the fund pays lesser costs because of large volumes. This benefit is passed on to
its investors.

4. Reduction in Risk

Mutual Funds invest in a portfolio of securities. This means that all funds are not invested
in the same investment avenue. It is well known that risk and returns of various
investment options do not move uniformly or in sympathy with one another. If a

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Study of the tax saving instruments 2009-2010
pharmacy company hare is going down, an InfoTech company’s share would be moving
up; if the equity market is moving down, the debt markets may be moving up. Therefore,
holding a portfolio that is diversified across investment avenues is a wise way to manage
risk. When such a portfolio is liquid and marked to market, it enables investors to
continuously evaluate the portfolio and manage their risks more efficiently.

5. Low-cost Diversification

Individual investors face company-related risks and market-related risks. Higher level of
risk can be reduced through diversification of portfolios which requires certain minimum
funds. An individual may not have these funds and so by investing in mutual funds, his
portfolio automatically gets diversified. And thus the cost gets reduced.

6. Liquidity

Listed mutual fund schemes can be sold in the stock markets, whereas unlisted open-
ended schemes can be sold back to the mutual funds. Thus mutual fund offers enough
liquidity.

7. Convenience

Mutual fund management companies offer many investor services that a direct market
investor cannot get. Investors can easily transfer their holdings from one scheme to other
get updated market information etc. Also record-keeping is Simplified in mutual funds.
Mutual funds save your time and make investing easy and convenient.

8. Flexibility

Mutual funds give flexibility as never before. Investment in mutual fund is so liquid and
flexible that switch over at any time is possible. The Investment depends on risk appetite
and horizon of investment. Mutual funds offer investment for few days to a number of
years.

9. Return Potential

Over a medium to long term, mutual funds have the potential to provide a higher return
as they invest in a diversified basket of selected securities.

10. Tax Shelter

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Study of the tax saving instruments 2009-2010
Depending on the scheme of mutual funds, tax shelter is also available. As per the Union
Budget – 99, income earned through dividends from mutual funds is 100% tax free.

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Study of the tax saving instruments 2009-2010

 Disadvantages of mutual fund

1. No control over costs

The funds are managed in huge volume and so the control on expenses cannot be
exercised, as there is lot of formalities and administrative expenses attached. Though the
limit of incurring expenses is predetermined but still it cannot be kept in control.

2. No tailor made portfolio

There is no tailor made portfolio available to any individual. The products and scheme
that is designed by the fund managers is on their philosophy and is floated in the market
with a common goal. No individual can have their own portfolio maintained separately
from the other investors.

3. Delay in redemption

The redemption of the funds though have liquidity in 24-hours to 3 days takes formal
application of redemption as well as needs time for redemption. This becomes
cumbersome for the investors.

• Non-availability of loans

Mutual funds are not accepted as security against loan. The investor cannot deposit the
mutual funds against taking any kind of bank loans though they may be his assets

• Managing a portfolio of funds

To manage the portfolio of funds and to keep track records of the investment is very
tedious work. The fund managers have to constantly keep the track of markets and their
investments.

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Study of the tax saving instruments 2009-2010

For the study of the mutual fund I selected the following two companies.

• Kotak mutual fund


• Reliance mutual fund

5.1.KOTAK MUTUAL FUND

Kotak Mahindra Mutual Fund is sponsored by Kotak Mahindra Bank Limited,


which is part of the Kotak Mahindra Group. Kotak Mahindra is one of India's leading
financial institutions offering complete financial solutions ranging from commercial
banking, to stock broking, to mutual funds, to life insurance, to investment banking.
Kotak Mahindra Mutual Funds are managed by Kotak Mahindra Asset Management Co.
Ltd., a wholly owned subsidiary of the bank.

KOTAK - TAX SAVER SCHEMES

• Equity
• Liquid
• Tax saver

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Study of the tax saving instruments 2009-2010

5.1.1. KOTAK EQUITY


Name of the schemes An open ended equity fund schemes
Nature of the schemes To generate long term capital appreciation
from a port folio
Asset allocation pattern Equity : 90% to 100%

Govt. securities 0% to 10%


Risk profile Mutual fund investment are subject to market
risk
Minimum application Initial purchase : Rs. 5,000

Additional purchase: Rs. 1,000 and above

Redemption: Rs. 1,000 or 100 units


Entry load Nil
Exit load Nil
Compounded annualized return 1 year : 16.01

3 year : 29.34

5 Year : 40.80

5.2.2.KOTAK LIQUID

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Study of the tax saving instruments 2009-2010
Name of the schemes An open ended debt schemes

Nature of the schemes Regular


Asset allocation pattern Debt money market 100%
Risk profile Mutual fund investment are subject to
market risk
Option Growth , dividend Re-invest
Charges Entry load : Nil

Exit Load: Nil


Compounded annualized return 1 year: 6.74%

3 year: 5.34

5 year : 10.34
Minimum application Initial : 1,00,00,000

Additional: Rs.1,000

Redemption : Rs. 1,000 or 100 units

5.2.3. KOTAK TAX SAVER

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Study of the tax saving instruments 2009-2010

Name of the schemes An open ended Equity linked saving


schemes
Nature of the schemes Long term capital appreciation
Asset allocation pattern Equity : 80% to100%

Debt market : 0% to 10 %
Risk profile Mutual fund investment are subject to
market risk
Minimum application Initial: 500 and in multiple of 500 Rs.

Additional : Rs. 500 and in multiple of Rs.


500

Redemption : Rs. 1000 or all units if the


amount is less than Rs. 1000

Charges Entry load : Nil

Exit Load : Nil


Compounded annualized Return 1 Year : 17.99%

2 Year : 12%

5 Year : 27.77%

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Study of the tax saving instruments 2009-2010

5.2. RELIANCE MUTUAL FUND

Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 1,15,753 Crores and an
investor count of over 75 Lakh folios. (AAUM and investor count as of February
2010)

Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani


Group, is one of the fastest growing mutual funds in the country. RMF offers
investors a well-rounded portfolio of products to meet varying investor requirements
and has presence in 159 cities across the country. Reliance Mutual Fund constantly
endeavors to launch innovative products and customer service initiatives to increase
value to investors. "Reliance Mutual Fund schemes are managed by Reliance Capital
Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds
93.37% of the paid-up capital of RCAM, the balance paid up capital being held by
minority shareholders."

Reliance Capital Ltd. is one of India’s leading and fastest growing private
sector financial services companies, and ranks among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital
Ltd. has interests in asset management, life and general insurance, private equity and
proprietary investments, stock broking and other financial services.

There are some schemes which is preferable by the customers which gave the
highest return as well as tax – benefit.

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5.2.1 RELIANCE NATURAL RESOURCES FUND

Name of the schemes An open ended Equity linked saving


schemes
Nature of the schemes Long term capital appreciation

Asset allocation pattern Equity : 65%

Index : 35%
Risk profile Mutual fund investment are subject to
market risk
Minimum application Additional : Rs. 1000 and in multiple of
Rs. 1000

Redemption : Rs. 5000 or all units if the


amount is less than Rs. 1000

Charges Entry load : Nil

Exit Load : Nil


Compounded annualized Return 1 Year : 14.99%

2 Year : 16%

5 Year : 35.77%

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Study of the tax saving instruments 2009-2010

Name of the schemes An open ended debt schemes

Nature of the schemes Regular


Asset allocation pattern 25% in debt market and 75% in equity
derivatives market.
Risk profile Mutual fund investment are subject to
market risk
Option Growth , dividend Re-invest
Charges Entry load : Nil

Exit Load: Nil


Compounded annualized return 1 year: 6.74%

3 year: 5.34

5 year : 10.34
Minimum application Min: 5000

Max: 5 crore

Additional: Rs.1,000

Redemption : Rs. 1,000 or 100 units

5.2.2. RELIANCE EQUITY ADVANTAGE FUND

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

5.2.3. RELIANCE EQUITY TAX SAVER SCHEMES

Name of the schemes An open ended Equity linked saving


schemes
Nature of the schemes Long term capital appreciation
Asset allocation pattern Equity : 80% to100%

Debt market : 0% to 20 %
Dividend Option Pay out Dividend pay out option & dividend re
investment option

Risk profile Mutual fund investment are subject to


market risk
Minimum application Initial: 500 and in multiple of 500 Rs.

Max: No limit

Additional : Rs. 500 and in multiple of Rs.


500

Redemption : Rs. 1000 or all units if the


amount is less than Rs. 1000

Charges Entry load : Nil

Exit Load : Nil


Compounded annualized Return 1 Year : 17.99%

2 Year : 12%

5 Year : 27.77%

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

 RESEARCH METHODOLOGY

➢ Scope of the study

Study of mutual funds, insurance, post office schemes understanding the basic
fundaments of mutual funds, the concept of open ended, close ended mutual fund
schemes and various other types of mutual funds with the tax rules.

In insurance the basic fundamental is the traditional plan, Equity plan, and the tax
treatment in government insurance industry and the private players.

In post office, schemes of NSC, PPF, Which is tax deductible? Collecting the
data base of the Potential customers by interviewing the business class mainly focus the
textile industry and the professionals including the Doctors, Engineers, Architects,
Advocates, etc., and luring the investors bye advising them professionally.

The main part of my project is which is the best alternative is given highest tax
benefit to investors according to their objective

➢ Objectives

• To know the most popular tax saving instruments & why


• To study awareness about tax-saving instruments among investors.
• To identify the potential investors who are having excess money lying idle in their
bank accounts, and advising them to invest their money in different schemes in
insurance.

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Study of the tax saving instruments 2009-2010

➢ Management Dilemma
Knowing weather the investors are aware about the tax saving instruments or not and
how to increase the investments by identifying potential investors and advising them
professionally.

➢ Data collection

• The data collection was done by designing a questionnaire and personal


interviews of different investors to collect some details of the investors and
understanding their views.
• In total more than 150 people were interviewed mainly business class focusing
the textile industry and the professionals including the Doctors, Engineers,
Architects, Advocates, etc., and learning the field work with investors to advising
them professionally.
• Thus I tried to create awareness about tax saving instrument as an insurance
avenue and about Different t schemes available with tax benefit.
• From this I reduced some facts about the mindsets of the individual investors

➢ Learning

The study and research carried out will be beneficial to the organization to
understand the general behavior of the investors for tax saving purpose. During this
project awareness is created among the investors about the Mutual funds, insurance, post
office and banking sector; hence it will be beneficial for expanding the investor base.

As a Management student Got an opportunity to work in professional and organizational


environment.

Able to know about different investment avenues available for tax saving. Able to gather
knowledge about Indian financial market.

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Study of the tax saving instruments 2009-2010
I Got opportunity to meet different kind of individual investor’s .The research is very
useful in understanding the views of different individual investors.

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Study of the tax saving instruments 2009-2010

➢ Research question

To identify the potential customers who are having excess money lying idle in
their bank accounts. Which instrument is more useful by the customers?

➢ To insurance

• The study will be useful to understand the awareness about insurance instrument
as a tax saving tool

• The database of more than 50 people collected during the training period, will be
useful for providing leads to the marketing people in future for converting the
prospective investors into clients.

• The investments brought during the training period have increased the number of
investors and will help in future also to expand the investor base.

➢ To mutual fund

• The study will be useful to understand the awareness about mutual Funds as a tool
of investment among the investors for the tax saving.

• The database of more than 50 people collected during the training period, will be
useful for providing leads to the marketing people in future for converting the
prospective investors into clients.

• The investments brought during the training period have increased the number of
investors and will help in future also to expand the investor base.

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


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➢ To banking sector and post office

• The study will useful the understand different rules in bank in different savings
account

• How to save tax through the bank deposits

• The study will useful to understand the low risk with the tax benefit

• The database of 50 people collect during training period will be useful for
marketing.

➢ Limitation of the study

The project was carried out in general basis on the public of SURAT. Following
are the limitations of the study:

• The project was time bound so the research was limited.

• The target population was people from textile business, some from other business
and professionals, so the conclusions cannot be generalized

• Very less cooperation for giving answers from the respondents.

• There is High level of illiteracy in textile business, hence, very poor response from
them.

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 Analysis

INVESTOR CLASS YES NO TOTAL

BUSINESS 60 0 60
PROFESSIONAL 38 2 40
JOB 19 6 25
RETIRED PERSON 18 7 25
TOTAL 135 15 150

 Awareness about the tax saving instruments

The above graph depicts the awareness of the investors about the
tax saving instruments this graph shows that out of the total business class population
which is 90%. Only 10% of the investors are not aware about the exact information about
the tax saving instruments

 Purpose of investment
Purpose of investors No of investors

Tax saving 62

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Future securities 33

Growth capital 14

High profit 13

Saving habit 28

From the information collected from the investors, it is observed that investors invest
their money for the following purposes: Future security, Tax savings, Growth of capital,
High profit, Retired life, Saving habit and investment of Extra funds.

From the above graph we can analyze that tax saving is the core purpose behind the
investments, which is preferred by 62 no. of the investors contacted. The other important
reason for the investment is the future security from the investments.

If the investment is made under avenues like Post office Schemes, Public Provident Fund,
RBI Bonds Life insurance and medi-claim and in other government Securities there is a
tax exemption provision as a result of which many people would like to go in for this
kind of investment.

Though in India we consider savings as a main purpose of investment, only 18% of


people invest for that reason, which is very less as compared to the other purposes.

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 Which tax saving is most preferred by the customers?

Investment instruments No of investors


Insurance 31 19
Mutual fund 46 4
Banking sector & post office 34 16

Above graph shows, which tax saving instrument is most preferred by the
customers?

According to above graph maximum investors proffered the most use full tax
saving instrument as insurance. These reason may be could be seen the highest return that
long term investment fetch compare to compare to short term investment. As well as the
risk cover of life.

 Tenure of investments

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Tenure of investors No of investors

Short term 16

Long term 70

Both long term and short term 40

Not fixed 24

From the graph it is clear that maximum investment that takes place is for the
long term of the total investors. The reason for this could be seen in the higher returns
that long term investments fetch compared to the short-term investments. The other major
reason behind this investment is the future security. Hence only 16 investors prefer to go
in for short-term investments, which provide them with the required liquidity.

The people who want both the benefits, that of liquidity and a secure future,
invest their money for both short term and long term is preferred by the 40 investors.

While there are still others who invest their money in investment avenues like
some of the schemes.

 Satisfaction of investors from their investment


No of investors
Yes 119
No 31

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Above graph shows the satisfaction level among the investors from their present
investments.
79 % of the investors are satisfied with the returns they receive from their investments.
This mainly includes investors from business class. The reasons cited were that they were
satisfied with the higher returns they receive from their business and also they did not
want to take further risk. The others who were satisfied were the retired people who do
not have a regular income and hence they do not want to entertain any further risk taking
on whatever income they presently get.

 Expectation of investors from their investment


Higher return Lower return
Business 58 2
Professional 22 18
Job 6 8
Retired person 17 7

The above graph shows investors class risk bearing. Almost Many investors want to
higher return. Business man who take higher risk with higher return. There are 58
investor’s wants to higher return. Retired person does not take higher risk So, who wants
to Lower return and happy with the take lower risk with lower return is senior citizen,
they does not preferred higher risk.

 RESPONSE
My brief interaction with the common investor and the comments received during one to
one discussion allow me to derive very few conclusions regarding the general tax saving

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instrument. The investor can be grouped into the following main groups: the service
class, business class, professionals and retired people.

Service class

The service class has general tendency to invest in bank fixed deposits, post office
schemes and other government investment avenues.

The reasons behind this sort of approach are:


Lack of awareness about the capital market.
They do not want to take high risk because it is their hard earned money and lifetime
savings that make most of the investor’s conservative in their approach. Security and
average returns is what most of them expected.

Since, the mutual fund industry has attempted to heed to the service class needs, the
investor has been given a spur and favorable conditions to invest in the capital market.

Professionals

Professionals including doctors, architects, interior designers, builders and consultants,


generally invest in bank fixed deposits, insurance, mutual fund, PPF, NSC as they receive
many other benefits as loans and subsequent tax benefits. Though mutual funds provide
loans against investments there are too

many procedural complications so people don’t invest in the mutual funds.


Lady professional do not take independent investment decisions.
Most of the professionals invest only at the advice of their tax consultants C.A. or
dedicated portfolio managers.
And last but not the least professionals prefer investing in their own line of work. For
example builders prefer to invest only in real estate and doctors need the funds for
expansions or new machinery.

The volatile share market has been a reason for people loosing lot of money and thereby
reducing investor confidence.

Business class

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

The business class does not see any extra benefits that attract them to invest in any
investment avenues. Most of the business class is not aware of the fundamentals of
mutual fund industry and are also indifferent to understanding it.
The general consensus in the business class is to plough back profit into the business,
expand the business or diversify the business wherein they get excellent returns. Most
businessmen don’t have time to handle such investment related issues even if they have
idle money. In most cases it has been observed that they do this through tax consultants
or experts in the capital market called portfolio managers.
Business class invests in public provident funds, tax savings bonds, post office schemes
and life insurance as well as medical insurance for the sole purpose of tax savings. And
the most common problem with the Indian economy is the black money that people have.
The business class also has lot of black money that they do not want to expose and
thereby avoid any transactions through cheques.

And last but not the least the problem of investor confidence due to the volatile market
that exist in the Indian economy.
Since, proprietors do not have sufficient time to take enough care about their idle money,
they are not ready to take decisions for investments avenues other than business.

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

 Recommendations
Many investors are not aware about the insurance as an option for investments; Many
insurance companies should organize some seminar and make the potential investors,
understand about insurance.
Insurance should come up with lot of programs in educating investor’s community as
well as their agents, so that the agents can provide right kind of investment solution.
The organization should systematically follow telemarketing or mailing to prospective
class or segment of individual investors.
They should focus more on the service class, because they are the people who look for
some good investment option providing higher returns on their small investments done
out of their limited income.
Some more efforts to be put in for educating the common investors giving presentations
at some common places like textile association,
Besides distribution through brokers and agents they should also go for distributing
directly, especially in areas like textile market and also the diamond business where
awareness is very low and investment potential is so high.
Generally professionals take investment decision after consulting their chartered
accountants or tax consultants; the company should directly approach the Chartered
Accountants and consultants and provide them detailed information about all the products
and different facilities available, so that they can advise their clients.
Though it is difficult they can enter into the semi urban or rural market where the
potential of investment lies.
They should try to remove misconceptions regarding insurance through media. And also
try to overcome some myths that generally people have about insurance. They should try
to put benchmark in quality of service to compete with other government companies LIC
who have captured very large segment of potential investors.

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

 Limitation of the study

The project was carried out in general basis on the public of SURAT. Following are the
limitations of the study:
The project was time bound so the research was limited.
The target population was people from textile business, some from other business and
professionals, so the conclusions cannot be generalized.
Very less cooperation for giving answers from the respondents.
There is High level of illiteracy in textile business, hence, very poor response from them.

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

 CONCLUSION
From the during training period of two months at Mutual Funds, insurance Bank and I
can conclude that the investment market of insurance have lots of opportunities lying.
But it is threatened by Bank Deposits, PPF, Mutual fund, Post office schemes etc. The
main reasons behind it are about the security of their money and life after retirement and
receiving assured returns at fixed rate. People are more concerned.

Through the life insurance investors can protect their life through sum assured and also
get the maturity period. In other word insurance gives live benefit as well as the Death
Benefit.

The misconception that prevails among most of the investors is regarding the funds in
insurance being invested in capital market, it seems very much difficult to convince
common investor to investors to invest their money in insurance. The security is the most
important aspect to be considered

Very small number of investors is aware of insurance and is its concept. So, the success
lies in creating awareness among them. Out of the total population only 32% of the
people are aware about the insurance.

Maximum investment that takes place is for the long term and this forms about 46% of
the total population. The reason for this could be seen in the higher returns that long-term
investments fetch compared to the short-term investments and the assured returns. The
other major reason behind this investment is the future security.Though in India we
consider savings as a main purpose of investment, only 8% of people invest for that
reason, which is very less as compared to the other purposes. Only 29% of the investors
are satisfied with the returns they receive from their investments. Insurance can provide
them a better option to invest their money earning very good returns.

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

 ANNEXURE
This survey is conducting through the existing mutual fund, insurance and bank
and post office customers.

INSURANCE CUSTOMERS’S QUESTIONNAIRE

Name: _________________________

Address: ________________________________

Tel no: ________________

Occupation: _______________

Education: _________________

Marital status:

Q-1 Do you believe in money planning?

Yes No

Q-2 what is your primary objective for your investment?

Tax saving Future securities

Growth capital High profit

Saving habit Conservative growth

Q-2 How do you do your money planning for tax saving purpose?

Mutual Fund Insurance

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010
post office schemes 5 years Bank deposit

NSC PPF

Q-3 Do you know what is insurance?

Yes No

Q-4 Do you know the insurance is also working as a tax saving instruments?

Yes No

Q-5 The length time that you plan to hold your investments?

within 3 years In 3 to 5 years

In 5 to 10 years In 10 to 15 years

Q-6 (a) Do you have a money plan for your retirement?

yes No

(b) If, yes what would you do to protect your income after retirement?

Monthly income schemes Fixed deposit PPF

Stocks & debenture Bank Post office

Insurance NSC Don‘t know

Q-7 How would arrange for cash if you had critical situation/ emergency?

Medical insurance Friends Relatives

Q-8 In insurance which plan is preferred by you?

Equity plan (Base on the Share markets)

Traditional plan (Base Govt. Securities and money market)

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Study of the tax saving instruments 2009-2010
Q-9 In Equity plans which of the following best describes your style , attitude or
preference towards investments ? Which of the following are you likely to invest in?

Investment with 20 years average annual return 6 % infrequent and slight downwards

Investment with 20 years average annual return 14% mostly positive return

Investment with 20 years average annual return 20% several period of positive return

Investment with 20 years average annual return 20% many period of substantially
positive and negative return

Q-10(a) which company is preferred By you for insurance?

LIC Max New York Life

Kotak Mahindra ICICI potential

(b) If any, do you have the policy of that company?

Yes No

(c) Which policy is taken by you?

──────────

Q-11 Now in which company or in which plan do you want to invest?

_____________________________________________

Q-12 How much rupees do you want save through insurance ?

1, 50,000 to 2, 00,000 2, 00,000 to 5, 00,000

More than 5, 00,000

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

MUTUAL FUND’S CUSTOMERS QUESTIONNAIRE

Name: _________________________

Address: ________________________________

Tel no: ________________

Occupation: _______________

Education: _________________

Marital status:

Q-1 Do you believe in money planning?

Yes No

Q-2 what is your primary objective for your investment?

Tax saving Future securities

Growth capital High profit

saving habit Conservative growth

Q-2 How do you do your money planning for tax saving purpose?

Mutual Fund Insurance

post office schemes 5 years Bank deposit

NSC PPF

Q-3 Do you know what is Mutual fund?

Yes No

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010
Q-4 Do you know the mutual fund is also working as a tax saving instruments?

Yes No

Q-5 The length time that you plan to hold your investments?

within 3 years In 3 to 5 years

In 5 to 10 years In 10 to 15 years

Q-6 (a) Do you have a money plan for your retirement?

yes No

(b) If, yes what would you do to protect your income after retirement?

Monthly income schemes Fixed deposit PPF

Stocks & debenture Bank Post office

Insurance NSC Don‘t know

Q-7 In plans which of the following best describes your style, attitude or preference
towards investments? Which of the following are you likely to invest in?

Investment with 20 years average annual return 6 % infrequent and slight downwards

Investment with 20 years average annual return 14% mostly positive return

Investment with 20 years average annual return 20% several period of positive return

Investment with 20 years average annual return 20% many period of substantially
positive and negative return

Q-8 (a) which company is preferred By you for Mutual Fund?

Reliance Birla sun life SBI mutual fund

Kotak Mutual fund ICICI mutual fund

(b) If any, do you have the policy of that company?

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010
Yes No

(c) Which policy is taken by you?

──────────

Q-9 Now in which company or in which plan do you want to invest?

_____________________________________________

Q-10 in which types of mutual fund do you invests your fund?

open-ended schemes Close ended schemes

Growth equity schemes Debt oriented schemes

Tax saver plans

Q-11 How much rupees do you want save tax through mutual fund ?

1, 50,000 to 2, 00,000 2, 00,000 to 5, 00,000

More than 5, 00,000

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

BANK AND POST OFFICE’S CUSTOMERS QUESTIONNAIRE

Name: _________________________

Address: ________________________________

Tel no: ________________

Occupation: _______________

Education: _________________

Marital status:

Q-1 Do you believe in money planning?

Yes No

Q-2 what is your primary objective for your investment?

Tax saving Future securities

Growth capital High profit

saving habit Conservative growth

Q-2 How do you do your money planning for tax saving purpose?

Mutual Fund Insurance

post office schemes 5 years Bank deposit

NSC PPF

Q-3 Which is your opinion to invest your fund post office and bank?

Government recognize through safe investment

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Study of the tax saving instruments 2009-2010
Satisfied with the low return

Not interest to invest in any other investment avenues

Q-4 Do you know the Bank fixed deposit and in post office many of the schemes is tax
deductible?

Yes No

Q-5 The length time that you plan to hold your investments?

within 3 years In 3 to 5 years

In 5 to 10 years In 10 to 15 years

Q-6 (a) Do you have a money plan for your retirement?

yes No

(b) If, yes what would you do to protect your income after retirement?

Monthly income schemes Fixed deposit PPF

Stocks & debenture Bank Post office

Insurance NSC Don‘t know

Q-6 Do you satisfied with the interest rate of post office and Bank?

Yes No

Q-7 (a)Do you invest in bank and post office ?

Yes No

Q-8 (a) Do you have a money plan for your retirement?

yes No

(b) If, yes what would you do to protect your income after retirement?

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010
Monthly income schemes Fixed deposit PPF

Stocks & debenture Bank Post office

Insurance NSC Don‘t know

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT


Study of the tax saving instruments 2009-2010

Patel Dhruti -48 NAV NIRMAN INSTITUTE OF MANAGEMENT