Tax Saving Options

Agenda • • • • Options available for tax saving investment. Why ELSS scores over traditional options. Performance of ELSS schemes. Conclusion.

Section 80 C
• Section 88 was scrapped and 80 C was introduced in finance bill 2005. • Instead of offering tax rebates, investment under Section 80 C qualifies for deduction from gross total income. • Sectoral investment cap has been removed under Section 80 C as was the case under Section 88. • This allows investor to invest as per his/her risk profile.

Options Available under Section 80 C
Investment Avenue National Saving Certificate Public Provident Fund Time Deposit Senior Citizen Saving Scheme Bank F.D. % Return 8 8 6.25-7.5 9 Minimum Investment 100 Rs500 Rs200 Rs1000 Maximum Investment No Limit Rs.70,000 No Limit Rs15 lakh Lock In Period 6 Years 15 Years 5 Years (to avail 80C benefit) 5 Years (to avail 80C benefit) 5 Years (to avail 80C benefit) F eature Interest is taxable Tax Free Return Interest is taxable minimum age is 55 to avail this option. Interest is taxable Lowest lock in period with maximum possible return.

9 market driven but one can expect 15-17% return.


No Limit

Equity Linked Saving Scheme

Rs.500 to Rs.5000

No Limit

3 Years

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

Are You One of Those Who Still Go for Traditional Instruments like Bank F.D. and PPF?

Smart Enough to Take Dual Advantage of Low Valuations and Tax Benefit by Investing in ELSS.

Lets Take a Case Study to help you in Decision making.
• Mr. Ram prefers investing Rs.70000 in PPF to earn secured return. He has invested this amount of 31st March of every year since 1996. • Mr. Shyam has invested Rs.70000 every year on 31st March in ELSS scheme (Birla Sunlife Tax Relief 96) since 1996. • Both have invested Rs.9.1 lacs till 31st March 2008.

Who has taken Wise Decision? • Stock markets are down by 60% in 2008 from 21000 to 9000. • Mr. Ram feels proud on his decision of not investing in ELSS and choosing PPF. So you will also agree with Mr. Ram as PPF has given Him fixed return of 8% over the years. But Is It Really a Smart Decision?

Look Who Has Made More Profit?
ELSS v/s PPF 70 60 50 Value (Rs. 40 Lacs) 30 20 10 0 16.89 9.1 62.78




Returns as on 31.10.08

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

Performance Scorecard
Schemewise Performance as on 31st Oct 2008 Scheme Name 5 Years 7 Years 10 Years Birla Sun Life Tax Relief -96 Fund 14.46 23.21 27.22 Franklin India Taxshield Gr 20.13 26.37 NA HDFC Long Term Adv antage Fund 21.48 31.76 NA HDFC Taxsav - Gr er 24.19 30.33 NA ICICI Prudential Tax Plan-Gr 18.78 28.4 NA SBI Magnum Tax Gain Fund - Div 31.45 34.73 25.14 Bank F.D. 9 PPF 8 8 8 Market Index Performance 5 Years 7 Years 13.23 20.42 14.79 18.11 NA NA 20.94 29.74 13.13 16.39 12.79 19.68 12 Years 30.85 NA NA NA NA 21.83 8

Index Name BSE 200 BSE 30 (SENSEX) BSE 500 CNX Midcap NSE 50 NSE 500
Returns as on 31.10.08

10 Years 12.34 13.28 NA NA 13.4 14.71

12 Years 10.66 9.91 NA NA 10.12 11.45

ELSS Schemes have clearly outperformed not only traditional options but also broader indices.

Solid SIP Returns.
Schemewise SIP Return as on 31st Oct 2008 Birla Sun Life Tax Relief -96 Fund Franklin India Taxshield Gr HDFC Long Term Adv antage Fund - Gr HDFC Taxsav - Gr er ICICI Prudential Tax Plan-Gr SBI Magnum Tax Gain Fund - Div Sundaram BNP Paribas Tax Sav er-Div SIP is assumed on 10th of ev month. ery 7 Years
13.46 18.96 21.19 23.28 19.51 29.84 24.61

10 Years

12 Years

N.A. N.A. N.A. N.A.

N.A. N.A. N.A. N.A.



ELSS funds have solid track record of consistence performance.

ELSS : Effective way of saving taxes.
Your earning 200,000 300,000 500,000 750,000 1,000,000
Amount in Rs. Based on Tax Slab for FY 08-09 Assuming an investment of Rs. 100,000 in ELSS in this Financial Year

Tax without ELSS 5,150 15,450 56,650 123,600 211,150

Tax with ELSS 0 5,150 36,050 92,700 180,250

You save 5,150 10,300 20,600 30,900 30,900

Operational Efficiency.
• ELSS scores over other options as it comes with lowest lock in period of just three years. • Very easy to operate as it requires only PAN card on part of investor. • Investment can be get done just by signing an application form and cheque. • It is one of the most transparent of all the options available as portfolio of the scheme gets published on a monthly basis.

Conclusion. • It provides opportunity to create wealth in long term which allows investor to combine tax saving with wealth creation objective. • The only option that can beat inflation by wide margin in long term return.

So BE Wise by Taking Wise Decision of Choosing ELSS and make Tax Saving a Step Toward Wealth Creation.

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