CHAPTER – I INTRODUCTION

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1.1 OVERVIEW OF THE INSURANCE INDUSTRY
The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries. A brief history of the Insurance sector The insurance sector was opened up for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999. While permitting foreign participation in the ventures set up by the private sector, the government restricted participation of the foreign joint venture partner through the FDI route to 26 per cent of the paid-up equity of the insurance company. The objective of the liberalization was to expand the scope and ambit of Insurance both Life and General in India. Since opening up, the number of participants in the sector has gone up from six insurers (including the Life Insurance Corporation of India, four public sector general insurers and the General Insurance Corporation (GIC) as the national re-insurer) in the year 2000 to 37 insurers operating in the life, non-life and re-insurance segments as on December 2007. 26 insurance companies in the private sector have been granted registration in the country in collaboration with established foreign insurance companies from across the globe. As per industry estimates, out of 78 per cent Indian households that are aware about life insurance, only 24 per cent own a policy. A combined ICICI Prudential Life Insurance and IMRB survey, conducted in three metros— Delhi, Mumbai and Chennai—shows that households with income of Rs. 35000 on an average have two policies. Further, 79 per cent people prefer life insurance over other tax saving instruments like post office savings, EquityLinked Saving Schemes and fixed deposits. Since end of 2000 when insurance was privatized, Life Insurance Company and The distribution network expanded significantly. Until 2000, the general insurance sector had only four public sector players. The public enterprises – Oriental Insurance Company of India (OIC), National Insurance Company of India (NIC), and New India Assurance Company of India (NIA) and United Insurance 2

Company of India (UII) -- were located in Delhi, Kolkata, Mumbai and Chennai respectively. They primarily focused on their immediate regions and there was little competition, leading to a near monopolistic environment. On the whole, the sector achieved double-digit growth and this trend is expected to persist over the medium term. ABOUT IRDA (Insurance Regulatory and Development Authority Act) Insurance sector has been opened up for competition from Indian private insurance companies with the enactment of Insurance Regulatory and Development Authority Act, 1999 (IRDA Act).Insurance Regulatory and Development Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of insurance policy and to regulate, promote and ensure orderly growth of the insurance industry. IRDA Act 1999 paved the way for the entry of private players into the insurance market which was hitherto the exclusive privilege of public sector insurance companies/ corporations. Under the new dispensation Indian insurance companies in private sector were permitted to operate in India with the following conditions:
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Company is formed and registered under the Companies Act, 1956; The aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed 26%, paid up equity capital of such Indian insurance company;

The company's sole purpose is to carry on life insurance business or general insurance business or reinsurance business. The minimum paid up equity capital for life or general insurance business is Rs.100 crores. The minimum paid up equity capital for carrying on reinsurance business has been prescribed as Rs.200 crores.

The Authority has notified 27 Regulations on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of policy holders' interest etc. Applications were invited by the Authority with effect from 15th August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The Authority has its Head Quarter at Hyderabad. 3

b) Maintain its position as the premier housing finance institution in the country. HDFC’s main goals are to: a) Develop close relationships with individual households. Oman and Qatar. Standard Life was reincorporated as a mutual assurance company in 1925. HDFC has since emerged as the largest residential mortgage finance institution in the country. HDFC also has an international office in Dubai. Standard Life currently has assets exceeding over £125 billion under its management and has the distinction of being accorded "AAA" rating consequently for the past six years by Standard & Poor. Standard Life. HDFC was incorporated with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. c) Transform ideas into viable and creative solutions.E. 4 . is a modern company surviving quite a few changes since selling its first policy in 1825. which has been in the life insurance business for the past 182 years.1. e) To grow through diversification by leveraging off the existing client base. Standard Life is Europe's largest mutual life assurance company. U..A. STANDARD LIFE: The Standard Life Assurance Company ("Standard Life") was established in 1825 and the first Standard Life Assurance Company Act was passed by Parliament in 1832. India. with service associates in Kuwait.2 PROFILE OF THE COMPANY HOUSING DEVELOPMENT FINANCE CORPORATION: HDFC was started by Hasmukh Bhai Parekh in 1977 with the formation of Malhotra Committee. HDFC was promoted with an initial share capital of Rs. d) Provide consistently high returns to shareholders. 10 crores. HDFC operates through 75 locations throughout the country with its Corporate Headquarters in Mumbai.

Both the promoters are well known for their ethical dealings and financial strength and are thus committed to being a long-term player in the life insurance industry.: The company was incorporated on 14th August 2000 under the name of HDFC Standard Life Insurance Company Limited. 5 . It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd. LTD. India’s leading housing finance institution and one of the subsidiaries of Standard Life plc. HDFC and Standard Life have a long and close relationship built upon shared values and trust. leading providers of financial services in the United Kingdom.INCORPORATION OF HDFC STANDARD LIFE INSURANCE CO. Their ambition from the beginning was to be the first private company to re-enter the life insurance market in India.). this ambition was realized when HDFC Standard Life was the first life company to be granted a certificate of registration. The ambition of HDFC Standard Life is to mirror the success of the parent companies and be the yardstick by which all other insurance companies in India are measured. On the 23rd of October 2000. with 74%. HDFC are the main shareholders in HDFC Standard Life. this is the maximum investment allowed under current regulations. which offers a range of individual and group insurance solutions. is one of India’s leading private life insurance companies. HDFC Standard Life Insurance Company Ltd. while Standard Life owns 26%. Given Standard Life's existing investment in the HDFC Group.

MISSION: To be the top new life insurance company in the market. and set the standards in the industry'.VISION. the easiest to deal with. which means that we are the most trusted company. MISSION AND VALUES VISION: The most successful and admired life insurance company. This does not just mean being the largest or the most productive company in the market. offer the best value for money. • Value for money for customers • Professionalism in carrying out business • Innovative products to cater to different needs of different customers • Use of technology to improve service standards • Increasing market share. VALUES: Values that we observe while we work: • Integrity • Innovation • Customer centric • People Care “One for all and all for one” • Team work • Joy and Simplicity 6 . rather it is a combination of several things like – • Customer service of the highest order. 'The most obvious choice for all'.

The products of the company are categorized into various sections which are as follows: A. HDFC Loan Cover Term Assurance Plan. HDFC Unit Linked Young Star. HDFC Unit Linked Endowment Plus. 5. HDFC Children's Plan. Customer can choose from a range of products to suit his life-stage and needs.PRODUCTS OF HDFC STANDARD LIFE INSURANCE: HDFC Standard Life offers a bouquet of insurance solutions to meet every need. HDFC Unit Linked Endowment. 9. 8. investment. as a trainee was dealing with products and plans under this category are: Individual Products: 1. HDFC Money Back Plan. 6. In this project I. These affordable plans apart from providing long term value to the employees help in enhancing goodwill of the company. pension and savings plans that assist and nurture dreams apart from providing protection. 4. HDFC Standard Life has a range of protection. 3. 7. 7 Individual Products. 12. For Organizations. The various . 2. 10. 11. HDFC Term Assurance Plan. HDFC Unit Linked Pension. GROUP PRODUCTS For Individuals. HDFC Unit Linked Pension Plus. HDFC Single Premium Whole Of Life Plan. Gratuity. Leave Encashment and Superannuation Products. INDIVIDUAL PRODUCTS B. HDFC Endowment Assurance Plan. HDFC Standard Life has a host of customized solutions that range from Group Term Insurance. HDFC Personal Pension Plan.

Superannuation Group Unit Linked Plan . Savings Plans: HDFC Standard Life Savings Plans offer flexible options to build savings for future needs such as buying a dream home or fulfilling children’s immediate and future needs. Investment Plans: HDFC Standard Life Single Premium Whole of Life plan is well suited to meet long term investment needs.13. Group Unit Linked Plan. 3. Group Variable Term Insurance. 8 . 2. Pension range includes Personal Pension Plan. HDFC Unit Linked Young Star Plus At HDFC Standard Life realize that not everyone has the same kind of needs. 5. Protection Plans: Customer can protect his family against the loss of his income or the burden of a loan in the event of his unfortunate demise. Gratuity Group Unit Linked Plan. These plans offer valuable peace of mind at a small price. HDFC Standard Life provides with attractive long term returns through regular bonuses. Unit Linked Pension. and Unit Linked Pension Plus Savings Plans. These will help secure customer future as well as the future of family. 4. Keeping this in mind. varied range of products that customer can choose from to suit all needs. disability or sickness. Pension Plans: HDFC Standard Life Pension Plans help secure financial independence even after retirement. Group Term Insurance. HDFC Standard Life Protection range includes Term Assurance Plan & Loan Cover Term Assurance Plan. Group Products: 1.

we have drawn up the basic life stages and help you analyze various insurance needs accordingly. Start saving early. 9 . New dreams and new opportunities also bring in additional responsibilities. NEEDS:  Planning for home / securing your home loan liability. Your insurance need will change as your life goes. While both of you look forward to a happy and secure life. LIFE STAGES & NEEDS IN THE DIFFERENT STAGES STAGE 1: YOUNG & SINGLE An important stage where one lays down the foundation of a successful life ahead. it is equally important to ensure that eventualities don’t come in the way of shaping your dreams. In this section.  Save for vacation.6. Each one of these stages may pose a different insurance need/cover for you. Take advantage of the time and power of compounding to ensure that you build up your dreams. from starting to work to enjoying your golden years and all the stages in between. NEEDS:  Save for Home & Wedding  Tax Planning  Save for Golden Years STAGE 2: JUST MARRIED Marriage brings about a significant change. Leave Encashment PRODUCT PORTFOLIO HDFC offers products as per the life stages of the customers and their respective needs.

You will want life to go on for your loved ones. 10 . Ensure your protection umbrella takes into account the future cost of securing your child’s dream. independent and comfortable life style in your retirement years. it is important for you to take time and plan for your life after retirement. Having an early start for retirement planning can make a significant difference to your savings. The key is to think ahead and plan well using your time and money. STAGE 3: PROUD PARENTS Once you have children. your need for life insurance is even more. You need to protect your family from an untoward incident. Think about your golden years even before you have reached them. Save for your first child. NEEDS –  Provide for regular income post retirement  Immediate Tax benefits  Lead a secure. and having enough life insurance is a way to help ensure that. NEEDS:  Provide for children's education  Safeguarding family against loan liabilities  Savings for post-retirement STAGE 4: PLANNING FOR RETIREMENT While you are busy climbing the ladder of success today.

11 . India’s Rated by ‘Business world’ as ‘India’s Most Respected Private Life Insurance Has the highest brand recall. standing commitment to community development.840 crores.000 houses since its incorporation in 1977. 7. The depositor Rated ‘AAA’ by CRISIL and ICRA for the 10th consecutive year Awarded The Economic Times Corporate Citizen of the year Award for its longPresented the ‘Dream Home’ award for the best housing finance provider in 2004 at HDFC Standard Life Insurance is the first private life insurance company to be Rated as the "Best New Insurer . As at March 31.MILESTONES IN THE HISTORY • • • • • • • • • • 2005) • Has one of the widest branch networks with offices in over 100 cities servicing over 440 towns HDFC is India’s leading housing finance institution and has helped build more than In Financial Year 2003-04 its assets under management crossed Rs. outstanding deposits stood at Rs. April 23.36. the third Annual Outlook Money Awards granted a license by IRDA number 1 personal finance magazine Company’ in 2004.2003" by Outlook Money magazine. close to 80% (Source: AC Neilson ORG MARG. 2004. 000Cr. 00. base now stands at around 1 million depositors.

ORGANIZATION CHART: CHAIRMAN M.D. ZONAL MANAGER REGIONAL MANAGER Retail Marketing Territory Manager Alternative Channel Territory Manager Operation Channel Team Manager Human Resource HR Executive Branch Manager Assistant Branch Manager Business Development Manager Branch Manager Channel Executive Operation Manager Sales Development Manager 12 .

Under the guidance of Anil Dhirubhi Ambani Group.3 COMPETITOR INFORMATION As we know that this time insurance sector is on boom. Although this journey started five decades ago. Reason is that it gives more profit not only to the company but also to the investor. reliance insurance company has secured the position of the top insurers in India. Kotak Mahindra Bank Limited (KMBL) is the flagship venture of Kotak Mahindra Group. The group is a full-services financial group providing a wide array of services and products to institutions. corporates and individuals.a leading global financial services provider. we are still conscious of the fact that. banks. while insurance may be a business for us. and bank deposits. Reliance General Life Insurance Company Reliance General Life Insurance Company is a Reliance Capital Ltd. being part of millions of lives every day for the past 50 years has been a process called TRUST. In the market there are lots of insurance companies which are trying to capture more and more market share. Kotak Mahindra Insurance Company Limited Kotak Mahindra Insurance Company or Om Kotak Mahindra Life Insurance is a 74:26 joint venture between Kotak Mahindra Bank Limited India and Old Mutual PLC. product. The information regarding competitors of HDFC Standard Life Insurance are:Life Insurance Corporation of India Every day the company wake up to the fact that more than 220 million lives are part of our family called LIC. We are humbled by the magnitude of the responsibility we carry and realize that the lives that are associated with us are very valuable indeed.1. Reliance General Insurance is one of the first non-life 13 . Today company invest money not only in government securities and bonds but also in the equity which gives more return than the government securities and bonds.

.Pallonji and Co. Ltd is a 26:74 joint venture between Sun Life Financial Services Canada and Aditya Birla Group. SBI Life Insurance offers Insurance Benefits and pension services based on the case and the portfolio of the clients. Metlife Insurance Company Limited MetLife India Insurance Company Private Limited was incorporated in April 2001 as a joint venture between MetLife International Holdings. In 2002. Bharti AXA Life Insurance company Ltd. These four companies were renotified independent business activities in November 2000 after the implementation of IRDA(Insurance Regulatory and development Authority) Act. United India Insurance Company Ltd. The Jammu and Kashmir Bank. marine. 14 . Metlife India insurance company is a subsidiary of US based metropolitan life insurance company. Private Limited and other private investors. SBI Life Insurance SBI Life Insurance offers Personal Insurance and related services in order to enable us plan our life for contingencies and unforeseen events. Birla sun life insurance Birla Sun Life Insurance Co. The risks covered under general insurance include property. the General Insurance Corporation of India ownership was ceased and the holding was vested to the Government of India. SBI Life Insurance is a product of the collaboration of the State Bank of India and the French Insurance company. M. casualty and liability. Inc. Wide ranges of products are available at Reliance Standard Insurance for both group and individual customers. Oriental Insurance Company Ltd. the Cardiff SA.New India Assurance Company Ltd. All the general insurance companies were merged into four main subsidiaries of GIC namely: National Insurance Company. General Insurance Corporation of India General Insurance Corporation of India or GIC of India was incorporated in 1972 to supervise and control the general insurance business in India.companies to get the license from the IRDA.

Another stakeholder in the JV is GMR Group.Royal Sundaram began their official operations on 12th march'2001 with their head office in Chennai.ING Insurance and one of the largest private sector banks in India .Vysya Bank. a subsidiary of Reliance Capital Limited under Anil Dhirubhi Ambani acquired AMP Life Assurance Co. and Prudential PLC based in UK.the second largest private sector bank in India and Lombard Canada Ltd. . ICICI Prudential Life Insurance Company ICICI Insurance has two faces-ICICI Prudential Life Insurance Company and ICICI Lombard General Insurance Company Limited. Today they have four regional offices in Chennai.a world leader in financial protection and wealth management services. AMP Sanmar Life Insurance Company Limited AMP Sanmar Life Insurance Company Limited was a 26:74 joint venture between AMP Australia and Sanmar Group. ICICI Lombard General Insurance Company Limited is a 74:26 JV between ICICI Bank India ltd. Reliance Life Insurance Company Limited. Ltd. Bharti AXA was established in end 2006 with head office at Mumbai.one of India's leading Multi-business groups and AXA . ICICI Prudential Life Insurance is a 74:26 joint venture between ICICI Bank India Ltd.Bharti AXA Life Insurance Company Limited is a 74:26 joint venture between Bharti Group . Gurgaon and Kolkata along with 35 branch offices. Mumbai. Royal Sundaram Alliance Insurance Co Ltd was the first foreign joint venture to obtain a license for operating non-life insurance businesses in India.ING Vysya Life Insurance Co Ltd is the result of a joint venture between the world's second largest life insurance company . – a 15 . Royal Sundaram Insurance Royal Sundaram Alliance Insurance Company Limited is the outcome of a 74:26 joint venture between Sundaram Finance Ltd India and Royal & Sun Alliance PLC London. ING Vysya Life Insurance Company Limited ING Vysya Life Insurance Company Limited established its foothold in the private life insurance industry in India in September 2001. this made Reliance Life Insurance the very first private sector life insurance company to start business in India without any foreign collaborator. In 2005. Established in 2000.

Today LIC Insurance product likes "JIVAN ANAND". Reliance life Insurance product like "Alternate Investment plan and investment and medic lame plan" and HDFC Standard life Product like "Young Star Plan and pension Plus Plan" is running in the market and helping to the industry to capture more market share. and advertisement so that it can get the potential market share. l private general insurance company. 16 . These companies are giving tough competition to each other in acquiring market share and adopting new marketing strategy for it. The main competitor of HDFCSL is LIC. and ICICI Prudential. In this stuff market HDFCSL need to adopt new marketing strategy. It is also the first general insurance company to be awarded ISO 9001:2000 certification. It is India's No. new innovative policy.Fairfax Financial Holdings Ltd group company that is a 26 billion USD Company. ICICI Lombard started their general insurance businesses in August 2001. Reliance life insurance ltd. and new idea of policy.

WEAKNESSES: 1. Domestic image of HDFC supported by Prudential’s international image is strength of the company.4 SWOT ANALYSIS STRENGTHS: 1. 6. Poor retention percentage of tied up agents. Huge basket of product range which are suitable to all age and income groups.1. The company also provides innovative products to cater to different needs of different customers. Large pool of technically skilled manpower with in depth knowledge and understanding of the market. Low customer confidence on the private players. The company provides customer service of the highest order. 3. Strong capital and reserve base. 2. Vertical hierarchical reporting structure with many designations and cadres leading to power politics at all levels without any exception. 5. 3. Heavy management expenses and administrative costs. 17 . Strong and well spread network of qualified intermediaries and sales person. 4. 4. 7. 2.

Oriental Insurance Limited. People trust them more. remain uninsured. 4. Other private insurance companies also trying to capture the same uninsured population. 18 .OPPORTUNITIES: 1. National Insurance Company Limited. Further the burden of educating consumers will also be shared among many players. 2. This suggests more than 300m people. International companies will help in building world class expertise in local market by introducing the best global practices. 2. There will be inflow of managerial and financial expertise from the world’s leading insurance markets. Most of the people don’t understand the need or are not willing to take insurance policies in general. THREATS: 1. Poaching of customer base by other companies. Big public sector insurance companies like Life Insurance Corporation of India (LIC). which represents around 30% of the insurable population. Insurable population –According to IRDA only 10% of the population is insured. with the potential to buy insurance. 3. New India Assurance Company Limited and United India Insurance Company Limited. 3.

CHAPTER – II RESEARCH METHODOLOGY 19 .

To know for how much time investors generally invest their money so that they can earn good returns. To gain an insight about the Financial Instruments available for investment in the market. 2. 3.1 OBJECTIVES OF THE STUDY 1. It is necessary for the researcher to know not only the research methods/ techniques but also the methodology. 20 . Under it I study the various steps that are generally adopted by a researcher in studying the research problem along with the logic behind them. To know which is the better investment option which can generate good returns for the investor and will give the benefit of Tax Saving.MEANING: Research methodology is a way to systematically solve the research problem. 2. To know what are the objectives which are kept in mind by the investors before investing in Financial Instruments. 4. I may be understood as a science of how research is done scientifically.

2. This study is useful to company in understanding the investors’ perception to devise the suitable product/marketing strategies in order to attract them. different age level or which instrument is mostly like by the investors for investment. 3. 2. 3. having different income level. 4.2 SCOPE OF THE STUDY 1. 21 . Financial planner get advantage to make portfolio according to response given by respondents/investors. This study has been done to see the perception of investors about the various factors which should be keep in mind at the time of investment. This study has been carried out to know for what purpose the investors invest their money in the financial instruments. This study is helpful in understanding about the various investment opportunities available in the market. 2.3 MANAGERIAL USEFULLNESS OF THE STUDY 1. This study helps the investors whom to consult before making any investment. This study is carried out in Delhi that covers the investors who use to invest their money in the financial instruments for tax saving purposes.2. which belong to different occupations.

I have prepared a Questionnaire. In this method.2. In this project. the investigator uses the data that is already available. I have collected the data with the help of websites. which is given in the annexure section.4 METHODOLODY In this project the Primary method of data collection used is • Questionnaire Method In this method. 22 . a large geographical area can be easily covered and the informant also can fill up the questionnaire according to his convenience. SAMPLE SIZE: Sample size used in this project is 50 respondents of Delhi. In this project the Secondary method of data collection used are • • Websites Books In this method of data collection. In this Project. and this Questionnaire is filled by investors living in the Delhi. the investigator prepares a Questionnaire and sends it to the informants by post with the request that the Questionnaires may be filled up and sent back by a specified date. search engines and books.

5 LIMITATIONS  The project was constrained by time limit of two months. income etc.  People mind set about the survey was an obstacle in acquiring complete information & positive interaction. So it was very time taken in every Questionnaire response by them. 23 .  Respondents were very busy in their schedule. gender.  Mindset of people may vary depending upon their age. they never use to take interest in giving correct information.2.  Sometimes due to negativity in their mind regarding insurance.

CHAPTER – III CONCEPTUAL DISCUSSIONS 24 .

Instead of keeping the savings idle he/she may like to use savings in order to get return on it in the future. Investment is ‘the act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit. Types of Investments / Various Financial instruments There are many ways to invest money. retirement planning.It needs depth study where to invest so that their investment could be safe along with the growth of money. how to plan their investment portfolio and to whom to consult for taking that all decisions. which tendency they have to prefer at the time of investment. • Fixed Deposits • Public Provident Fund • National Savings Certificate and Government Bonds • Mutual Funds and ELSS • Retirement Plans • Equity Market 25 .’ There are ample Financial Instruments available in the market for investment. In present scenario everyone wants to invest his money but having their own different objectives. The investors always mess with these objectives which creates confusion of where to invest. It includes what they think at the time of investment. what are the various factors they keep in mind at investment or affects their decisions regarding investment. he/she needs to know their characteristics and why they may be suitable for a particular investing objective. tax minimization. This is called Investment. safety etc. It may be growth of capital.The money an individual earn is partly spent and the rest is saved for meeting future expenses. each instrument has its own features. to balance out inflation rate. which factors influence their investment decisions. So this study is based on investor’s perception regarding their investment. In order to decide which investment vehicle is suitable for investor. To invest money in financial instruments is not so easy.

Fixed Deposits A Fixed Deposit also known as a Term Deposit is an account which allows us to deposit money for a fixed time period. society or credit union for a fixed term at a fixed rate of interest which remains unchanged during the period of the deposit.g. Any investment portfolio should comprise the right mix of safe.• Insurance and ULIP 1. Depositors may have to accept an interest penalty if they break the deposit.e.5%. those with a “AAA” rating even if their rates seem modest vis-à-vis those offered by company deposits. 2. Few points which FD investors must consider at the time of investment. Tenure Short tenured fixed deposits continue to be your best bet. With interest rates on the ascent. assured returns is the key factor which attracts investors towards deposits. moderate and risky investments. Safety FDs have conventionally been the premier choice for investors with a low risk appetite. The fixed deposit interest rates can be as high as 9. Money may be placed with a bank. building. are considered safe investments. 3. a further hike in rates offered by fixed deposits cannot be ruled out. Locking your investments in longer tenured instruments may lead to an opportunity loss. 26 . government bonds etc. Stick to FDs of the highest credit rating i. While mutual funds and stocks are the favorite contenders for moderate and risky investments. When the deposit period elapses. Select a fixed deposit scheme which scores favourably on such parameters. the depositors get interest on the amount deposited. ie ask to take the money out before the agreed period has expired. e. they can be used as collateral against which loans can be raised. Additional benefits Fixed deposits from reputed entities offer additional benefits. fixed deposits. 1. merchant bank. Fixed deposits have been particularly popular among a large section of investors in India as a safe investment option for a long period.

Tax-savingFDs Tax-saving is no longer the guarded domain of Public Provident Fund (PPF) and National Savings Certificate (NSC). 27 . The banks provide interest rates depending on this loan amount and the tenure of deposit. Presently.50% per annum. the returns on tax-saving FDs vary between 7. a person can invest an amount for a fixed duration.000 respectively. The deposits are subject to a 5-Yr lock-in period. The minimum and maximum investment amounts (per annum) have been pegged at Rs 100 and Rs 100. Introduction of tax-saving FDs offers risk-averse investors the opportunity to diversify across instruments while conducting the tax-planning exercise. 4.With fixed deposits or FDs as they are popularly known. Tax-saving FDs offered by banks are also eligible for deduction under Section 80C.50%-8.

It is not necessary to make a deposit in every month of the year. • • • • • The PPF scheme is operated through Post Office and Nationalized banks.50/.500/. 28 . The rate of interest is 8% compounded annually. Public Provident fund • • • • • The Public Provident Fund Scheme is a statutory scheme of the Central GOI. One deposit with a minimum amount of Rs. The interest on deposits is totally tax free.is mandatory in each financial year.000/-. • • • Pre-mature closure of a PPF Account is not permissible except in case of death. 70. The grand father/mother cannot open a PPF behalf of their minor grand son/daughter.2. The account holder can retain the account after maturity for any period without making any further deposits.with default fee of Rs. Deposits in PPF qualify for rebate under section 80-C of Income Tax Act.70.in a financial year. not more than 12 Installments in a year or two installments in a month subject to total deposit of Rs. Thereafter one withdrawal in every year is permissible in such account. • • • Account can be opened by an individual or a minor through the guardian. The account holder has an option to extend the PPF account for any period in a block of 5 years on each time. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed. The minimum deposit is 500/. The discontinued account can be activated by payment of minimum deposit of Rs. Nominee/legal heir of PPF Account holder on death of the account holder can not continue the account.for each defaulted year. Deposits are exempt from wealth tax.000/. The amount of deposit can be varied to suit the convenience of the account holders. The deposit can be in lump sum or in installments. The facility of first withdrawal in the 7th year of the account subject to a limit of 50% of the amount at credit preceding three year balance.and maximum is Rs.500/. but account had to be closed. The account in which deposits are not made for any reasons is treated as discontinued account and such account can not be closed before maturity. The Scheme is for 15 years.

Certificates are transferable from one person to another person before maturity.• Nomination facility available.Rebate admissible under section 80 C of Income Tax Act. mutilated or defaced certificate.in six years. Nomination facility available. Tax Saving instrument . Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.No maximum limit. 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. destroyed. Duplicate Certificate can be issued for lost. Deposits are exempt from Wealth tax. • • • • No pre-mature encashment. Trusts. Institutions. Individuals. Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years. 1601/. Best for long term investment. Societies and any other Institutions not eligible to purchase. • • • • • • • • • • 29 . Certificate can be pledged as security against a loan to banks/ Govt. 500/. 1000/. Rs. Facility of encashment of certificates through banks. Two adults. Interest income is taxable but no TDS. Rate of interest 8% compounded half yearly.1 National Savings Certificate • Minimum investment Rs.grow to Rs. Certificates are transferable from one Post office to any Post office. stolen. 3.Companies.Non-resident Indian/HUF can not purchase. and minor through guardian can purchase. Facility of reinvestment on maturity.

In underwriting.2 Government Bonds A government bond is a bond issued by a national government denominated in the country's own currency. in which the authorized issuer owes the holders a debt and. the holder is the lender (creditor). which should protect investors against inflation risk. in the US. Bonds provide the borrower with external funds to finance long-term investments. in that the principal repaid at maturity will have less purchasing power than anticipated if the inflation outturn is higher than expected. Government bonds are usually referred to as risk-free bonds. forming a syndicate. A bond is a debt security. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. companies and supranational institutions in the primary markets. in the case of government bonds. However government bonds are instead typically auctioned. However. termed maturity. such as Russia in 1998. though this is very rare.3. other risks still exist. depending on the terms of the bond. The security firm takes the risk of being unable to sell on the issue to end investors. Bonds are issued by public authorities. The most common process of issuing bonds is through underwriting. or. buy an entire issue of bonds from an issuer and re-sell them to investors. to finance current expenditure. Treasury securities are denominated in US dollars. As an example. the term "risk-free" means free of credit risk. 30 . one or more securities firms or banks. Bonds must be repaid at fixed intervals over a period of time. is obliged to pay interest (the coupon) and/or to repay the principal at a later date. Some counter examples do exist where a government has defaulted on its domestic currency debt. such as currency risk for foreign investors. Many governments issue inflation-indexed bonds. credit institutions. and the coupon is the interest. A bond is a formal contract to repay borrowed money with interest at fixed intervals. because the government can raise taxes to redeem the bond at maturity. there is inflation risk. In this instance. Thus a bond is like a loan: the issuer is the borrower (debtor). Secondly.

It is just like other tax saving instruments like National Savings Certificate and Public Provident Fund. professionally managed basket of securities at a relatively low cost. Mutual Funds A mutual fund is a body corporate registered with SEBI that pools money from the Individuals/corporate investors and invests the same in a variety of different financial Instruments or securities such as Equity Shares. Debentures. Mutual fund units are issued and redeemed by the Asset Management Company (AMC) based on the fund’s net asset value (NAV). Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. etc. which is determined at the end of each trading session.4. Bonds. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Figure: Below describes broadly the working of a mutual fund:- Equity Linked Saving Scheme Equity linked saving schemes are a kind of mutual funds like diversified equity funds with Tax benefits. Government Securities. Main advantage with ELSS is lock-in period is only 3 years while for NSC it 31 . Mutual funds are considered to be the best investments as on one hand it provides good returns and on the other hand it gives us safety in comparison to other investments avenues.

00. Since it is an equity linked scheme earning potential is very high. Main advantage of ELSS is its short lock-in period. Diversified Equity Schemes and ELSS Both Equity linked saving scheme and diversified equity scheme operates in same way.00. But last year financial budget removed this restriction and now any individual can invest in ELSS irrespective of their income level.00.000 in ELSS then your taxable income will become Rs 2. For example if your total annual income is Rs 3. 3. Some ELSS schemes also offer personal accident death cover insurance 6. Advantages of ELSS 1. Both are high return and high risk schemes. As per Income Tax act 80C investment up to Rs 1.00. Premature withdrawal is not allowed but it is allowed in other instruments in some specific conditions.000.00.000 are eligible for deduction from the gross total income hence reducing the total taxable income. At the same time risk factor is high in ELSS. Provides 30 to 40% returns compared to 8% in NSC and PPF Disadvantages of ELSS 1.00.000 and you invest Rs 1. Investor can opt for Systematic Investment Plan 5. But there is a 3 year lock in period of ELSS and it 32 . Investor can opt for dividend option and get some gains during the lock-in period 4. Risk factor is high compared to NSC and PPF 2. Maturity period of NSC is 6 years and PPF is 15 years. Previously there was an upper limit for investing in tax saving instruments like ELSS of 5.000 annual income are allowed to invest in tax saving instruments.is 6 years and for PPF it is 15 years. 2.000. Only individuals with less than 5.

A retirement plan provides you with a steady income every month.provides tax benefits too. even when you are no longer working. parents have realized the need to provide for themselves during their retirement years. So investor will get more units when the market is down and get less units when the market is up. 5. Skyrocketing costs throw even a well-salaried person off balance. you can imagine how high they will be when you are ready to retire. Retirement Plans A retirement plan is an assurance that you will continue to earn a satisfying income and enjoy a comfortable lifestyle. The person should start planning for retirement at a very young age because of many reasons: 33 . to arm you in the face of rising costs. The key to retirement planning success is to start early and gain the benefit of the power of compounding. An increasing number of individuals have already started planning for their retirement so that they can live their life happily even after getting retired. With rates rising everyday. Also most of the Asset Management Companies (AMC) charges less entry load for SIP compared to normal purchase. For eg if you are investing Rs 1000 every month and you will get 100 units for when Net Asset Value (NAV) is 10 and will get 50 units when NAV is 20. With SIP you can invest a small amount every month for a specific time period. So investing a fixed sum regularly helps to cover the market fluctuations by rupee costs averaging. With SIP investor can take advantage of fluctuations in the stock market. Independence is the new way of life: An increasing number of young Indian professionals are moving away from the traditional joint family structure. Systematic Investment Plan Best way to invest in ELSS is through Systematic Investment Plan(SIP). Since support no longer comes easily.

the government of India does not provide such benefits. Hence people have to develop a corpus to last them through their retirement without any help from family. come medical expenditure which may make a huge dent in your income post retirement. 5.1. 2. So again you are on your own and planning for retirement will play a major role. the culture of joint family is changing. Job hopping: With youngsters hopping jobs regularly they do not get benefit of plans like super annuity and gratuity. With health problems. 4. 3. Nuclear families: Gone are the days when people use to have an entire cricket team making a family. Result: You will have to fend for more number of years post retirement. They prefer independence and stay away from their family. 34 . With advancement in technology life expectancy is likely to increase. With westernisation coming in. Both these require certain number of working years spent in the service of a particular employer. Today's youth prefer not more than two children. No government sponsored pension plan: Unlike the US and UK where they have IRA and state pension respectively as social security benefit during retirement. Life expectancy: As of 2007 the life expectancy at birth for males is 67 years and 71 years for females. Failure here could lead you to liquidate (sell) your assets in order to meet such expenses. Medical emergencies: With age come health problems. Remember mediclaims do not always suffice.

You also need to diversify your equity portfolio i.. how do you even get close to taking a call? Here comes the need of a financial 35 . Stock markets have always been a draw for investors for their ability to generate wealth over the long-term. The good thing about the Indian market. which affect the performance of equities ad studying and understanding all of them on an ongoing basis. You need to keep in mind the risk associated with the stocks. other stocks/industries should help you shore up your portfolio. The bad part is the CHOICE! Of the listed 4. stock market related research that can help you make the right investment decision. riding on the back of an economy that has grown by over 7% in the last few years. so even if something were to go wrong with a stock in your portfolio. The first one – research on stocks is the most critical input that investors need to identify before they begin investing in stock markets. can be challenging for most. include more stocks. This helps you diversify your investment risk. This is because even while you may have the risk appetite for equities. However equity-oriented investments are also capable of exposing investors to the highest degree of volatility and risk. Fear.e. greed and a short-term investment approach act as hurdles that frustrate the investor from achieving his/her investment goals.Equity Equities are often regarded as the best performing asset class vis-à-vis its peers over longer time frames. Two important resources that are critical to investing directly in stock markets are quality stock research and a reliable and inexpensive stock broker. is that you can’t miss being part of growth if you invest in the stock markets carefully.6.758 stocks on BSE and the NSE. There are a number of factors. you still need credible.

The major insurable risks are as follows:  ife L 36 . purchase of various household items. financial advisors will play a crucial role in helping individuals create. It helps individuals in providing them with the twin benefits of insuring themselves while at the same time acting as a compulsory savings instrument to take care of their future needs. since some plans also double up as a savings instrument. Clearly. While it is important for individuals to have life cover. Traditionally. protect and manage wealth. Insurance and ULIP Life insurance has traditionally been looked upon pre-dominantly as an avenue that offers tax benefits while also doubling up as a saving instrument. Life insurance can aid your family on a rainy day. This note explains the role of life insurance in an individual’s tax planning exercise while also evaluating the various options available at one’s disposal. The purpose of life insurance is to indemnify the nominees in case of an eventuality to the insured. life insurance is intended to secure the financial future of the nominees in the absence of the person insured. at a time when help from every quarter is welcome and of course. Life is full of dangers. gold purchases or as seed capital for starting a business. In other words.advisor who can make your investment decisions and monitor your funds. save more and accumulate more. The purpose of buying a life insurance is to protect your dependants from any financial difficulties in your absence. as Indians earn more. 7. It’s easier to walk the tightrope if you know there is a safety net. You should try and take cover for all insurable risks. buying life insurance has always formed an integral part of an individual’s annual tax planning exercise. but with insurance. they assist you in planning for such future needs like children’s marriage. If you are aware of the major risks and buy the right products. it is equally important that they buy insurance keeping both their long-term financial goals and their tax planning in mind. you can at least ensure that you and your dependents don’t suffer. you can cover quite a few bases.

37 .Health Income Professional Hazards Assets Outliving Wealth Debt Repayment.

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CHAPTER – IV DATA ANALYSIS

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Ques1.NOTE: All the information related to Questionnaire is given in Chapter III Conceptual Discussions. Do you invest your money in any kind of Financial Instruments? Yes No 85% 15% INTERPRETATION 42 .

Govt.. There are 15% people who do not invest their money in financial instruments due to many reasons like they do not believe in saving money for investment and in some cases. PPF Insurance and ULIP Equity Trading Retirement Plans Mutual Funds 23% 30% 26% 9% 12% 43 . Which one you prefer the most and why? F. Bonds. they like to save but their high expenses and financial commitments do not permit them to invest. it is interpreted that 85% people invest their money in financial instruments to get good returns and with the purpose of tax saving too. Ques2.According to this graph.D.

it has been analyzed that most of the people i.e.26% of the people prefer to invest in Equity because they want to earn higher returns. bonds because they prefer safety of the principal and tax saving/benefits.Ds and investments in govt. Ques3.INTERPRETATION According to this figure.23% of the people still prefer F. 30% prefer ULIP and Insurance as an investment tool because ULIP combines the benefit of Insurance and Investment both and Insurance save human life against death and avail tax benefit too. What is the main objective of your investment? Protection (Life Insurance) Returns Safety Retirement Planning To reduce tax liability / tax saving Beating Inflation 23% 32% 13% 9% 15% 8% 44 . Secondly.

Ques4. Serviceman generally gives preference to safety and retirement benefits. The people who are business man are generally seen returns/growth and tax benefits at the time of investment. It is also seen that 23% of the investors prefer to secure their life against death. Inflation has only been given 8% which reflects that people are still not giving much consideration to inflation even due to a sharp rise in the inflation rate. Which Tendency do you prefer the most? 45 .INTERPRETATION It is found that growth of capital/returns is the most important objective which investors consider while investing. Safety of their capital is also considered to be important.

The investor with low income level generally prefer moderate risk or low risk to invest in insurance. 46 . as they believe unless and until we would not take risk how can we earn or get return more. Government bonds.High risk. That tendency is generally prefer by business and servicemen whose income level is more than 5 lac. moderate return Low risk. bank savings. The age level also influence the tendency. high return Moderate risk. low return 39% 35% 26% INTERPRETATION It is found that 39% people like the tendency high risk high return. Debt etc. the age level between 18 –30 likes to take risks but above 45 they prefer low risk low return.

ULIPs are the best products for Long-Term Investors. it has been analyzed that most of the people take the time horizon of less than 10 years which is followed by 35% of the investors investing for 10-15 years. For what term do you generally invest? Less than10years 10-15 years More than 15 years 60% 35% 5% INTERPRETATION By looking at this graph. 47 .Ques5. Investors investing for more than 15 years go for insurance. retirement plans etc. Investors investing for 10-15 years in order to earn better returns because most of the times long term investment generate good returns over the investments.

These investors use to invest mostly in Equity shares. LifeInsurance etc. Mutual Funds (ELSS)etc. The investors’ perception investing to achieve future goals is different from the investors investing to meet day to day expenses. 56% 44% INTERPRETATION It is found that 56% of the investor invest their money to meet day to day expenses and like to invest for a short period of time. There are 44% of the investors who invest their money to achieve future goals and invest for long period of time like in ULIP. 48 . Retirement Plans.Ques6. Why do you save and invest? To meet day to day expenses To achieve future goals.

At what time you prefer to invest in the financial instruments? At the beginning/middle of the financial year At the end of the financial year 55% 45% INTERPRETATION 49 .Ques7.

It is found that 55% of the investors go for investment in financial instruments at the beginning and middle of the financial year because they want peace of mind and they think that they will be able to save small amount of money till the end of year and will not be able to save and invest more. While Independently Tax Consultants/CAs Advise from friends/Relatives Financial Consultants. Whom do you consult before going for any kind of tax saving investment? 50 . Ques8. 40% 35% 7% 18% 45% of the investors invest at the end of the year in order to save tax or to take advantage of tax benefits and use to take financial decisions from CAs /Tax Consultants.

INTERPRETATION It is found that 40% of the respondents take their financial decisions independently which depicts they are not taking any advisory services from financial experts and they feel that they can handle their portfolio on their own and hence make their own decisions regarding investments. This opens up the door for various financial advisors who can target these investors and can give advisory services. 51 . while 35% of the respondents make investment decisions from Tax Consultants and CAs so that they can save their huge amount of tax by investing their money and 18% of the investors take their investment decisions by consulting financial consultants.

CHAPTER – V FINDINGS FINDINGS On the basis of Data Analysis of the project titled “Study of various financial instruments as tax saving options”. The following findings have been observed: 52 .

e. 32% look for how quickly they will be able to increase their wealth i. 53 .e. 40% invest their money into insurance with the main objective of availing Tax Benefits.e.e.e. Before choosing an investment option. • 45% of the respondents go for investment in financial instruments at the end of the financial year to avail tax benefits and use to take financial decisions from CAs /Tax Consultants.e. most of the respondents i. 56% of the investor invests their money to meet day to day expenses and like to invest for a short period of time. Most of the respondents i. • • • It has been observed that most of the people i. • • • Most of the respondents i. 30% invest in ULIP because it is a combination of Insurance and Investment. 10 – 15 years. they spend whatever amount of money they earn.• 85% of the people invest their money in financial instruments and 15% of the people do not invest their money because they are not able to save for investment i. 39% people like the tendency high risk high return because they prefer to earn higher returns. returns and a large proportion of respondents look for both the safety of principal and tax benefits. 35% invest their money with a long term view i.e.

CHAPTER – VI CONCLUSIONS AND SUGGESTIONS CONCLUSION On the basis of Data Analysis of the project titled “Study of various financial instruments as tax saving options”. I can conclude that: 54 .

• The age of the investor also affects the investment decision. SUGGESTIONS After doing a survey on “Study of various financial instruments as tax saving options”. Retirement plans and PPF people invests with the main objective of taking the Tax Benefit the government offers while in Mutual Funds and equity shares people invests with the main objective of the appreciation of capital. The younger investors like to take risk and generally invest in more in equity than the people who are between 45–60.The following suggestions can be made: 55 . • Most of the people prefer ULIP as an investment option because ULIPs offer the benefits of both Insurance and Investment. take a long term view for investment in order to grow their money. • While investing into ULIPs. • People generally invest for the period of 10–15 years. Insurance.• Investment in various financial instruments is affected by the perception of the people and their tendency towards risk and return.

• Somewhere ULIPs are criticized for charging heavy charges in the initial 2 – 3 years. 56 . • People are insured but there is still high uninsured population so the insurance companies should tap the highly uninsured area in order to increase their market share. • Mutual Funds are not so popular because there are lot of charges deducted every year for example Fund Management charge. So these charges must be reduced in order to attract more customers. • Investors investing with the main purpose of tax saving should consult their consultants to know where to invest so that investment leads to higher returns as well as tax saving too. Investors who prefer equity investment should also include debt in their portfolio because share market is totally unpredictable and can lead to heavy losses in bear situation. • • It is suggested that if the investor is investing in ULIPs then invest for long period of time to earn high returns. for example policy administration charges. Tax consultants if they are investing with the main purpose of tax saving. HDFC SLIC has to do a lot in order to build a trust in the customers. HDFC SLIC being the private player. entry load. exit load in case of premature withdrawls etc. So. So these entry and exit loads must be abolished by the mutual fund companies. must use aggressive marketing strategies to capture the more market because LIC is a public company and people have more trust on it.• Many of the investors take their investment decisions independently but they should consult CAs. Investors should not put all the eggs into one basket but should diversify its portfolio to minimize the risk. premium allocation charge.

APPENDICES QUESTIONNAIRE Personal Information Name Telephone No Age Group 57 : __________________________________________________ : __________________________________________________ .

Do you invest your money in any kind of Financial Instruments? • • Yes No Ques2.• • 18-25 years 25-35 years 35-45 years 45-60 years Above 60 years • • • Income Group (per annum): • • • <3 lacs 3-5lacs >5 lacs Ques1. Which one you prefer the most and why? • Fixed Deposit. Post Office Savings. Government Bonds Retirement Plans Equity Trading Insurance and ULIP Bank Savings PPF Mutual Funds • • • • • • Ques3. 58 . What is the main objective of your investment? • • • • • • • Protection (Life Insurance) Returns Safety Retirement Planning To reduce tax liability / tax saving Beating Inflation Others (please specify).

. • Your overall experience regarding investment in various financial Instruments…………. Why do you save and invest? • • To meet day to day expenses To achieve future goals. high return Ques5. At what time you prefer to invest in the financial instruments? • • At the beginning of the financial year At the end of the financial year Ques8. low return Moderate risk. Which Tendency do you prefer the most? • • • Low risk. moderate return High risk. For what term do you generally invest? • • • Less than 10years 10-15 years More than 15 years Ques6. Ques7. Whom do you consult before going for any kind of tax saving investment? • • • Independently Tax Consultants/CAs Advise from friends/Relatives Financial Consultants.. ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… ……………………………………………………………………………………………… 59 .Ques4.

Published by WISHWA PRAKASHAN 1990. WEBSITES • • www. and Jain P. Tata McGraw Hill. Pandey I.M. Research Methodology: Methods and Techniques.K (2001).BIBLIOGRAPHY BOOKS • • • Khan M. Edition-2005.hdfcinsurance.google..com 60 .in www. (2003).Y. Financial Management. Tata McGraw Hill. Kothari C. Financial Management.co.R.

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