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Income Slab Income Tax Rates
Upto Rs 1,00,000 NIL
Rs 1,00,000 - Rs 1,50,000 No Surcharge
10% of the amount exceeding
Rs 1,00,000
Rs 1,50,000 - Rs 2,50,000 No Surcharge
Rs 5,000 + 20% of the amount exceeding
Rs 1,50,000
Above Rs 2,50,000 10% Surcharge
Rs 25,000 + 30% of the amount
exceeding Rs 2,50,000/-
OptionsMaximum amount
Tax Saving Lock-in Period Returns Tax on Returns
Option under section 80CCCLIC Jeevan Suraksha Rs 10,000 10% to 33% Term of the policy 5 to 6% Applicable rateOptions under section 88Equity Linked Saving Scheme (ELSS)
Rs 10,0003 Years > 10% 10%
Mutual Fund Pension Plan Rs 70,000 Till the age of 58 yrs > 8% 10%Infrastructure Bonds Rs 1,00,000 3 Years 6.75 % to 7% Applicable rate
Public Provident Fund (PPF)
Rs 70,0006 years minimum
8 % compunded yearly Tax Free
National Saving Certificate (NSC)
Rs 70,0006 years minimum
8% compounded half yearly Applicable rate
ULIP of UTI Rs 70,000 10 or 15 years > 6 % Applicable rateLIC premiums Rs 70,000 Term of the policy > 6 % Tax FreeReturn of Principal of Housing Loan
Rs 20,000N/A N/A N/A
Maximum amount eligible for tax relief under section 88 and 80CCC.
Rs 1,10,000
15% or 20%
COMPARISON BETWEEN VARIOUS TAX SAVING OPTIONS
Section 88
100,000/=
Rs. 30,000/=Infrastructure bond
LIC, PPF, CPF, and pension plan..etc-40K
40,000/=ELSS-10K
Repayment of Housing loan principal-20K
Other Deductions
Section 80 CCC: Jeevan Suraksha upto Rs. 10,000/=
Section 80 D : Upto Rs. 10,000/= towards mediclaim
Section DD: Handicapped dependant expensesupto Rs. 40000/=
Section 80 DDB: Medical expenses towardschronic disease - upto Rs. 40,000/=
Section 24 (I) Upto Rs 1,50,000/- paid towardsinterest on housing loan is deductible from taxable income.
Recommendation
Make a house - don’t just live in it.
Myths:•Insurance is just another tax saving instrument.•I do not need an insurance now. May be later...•Why wait for 30 years? - let me take a policy for 15 years (or may be 10).
Insurance
The Facts:•Lower the age, lower the premium, - higher the age higher the premium.•As we get older - Health becomes a major impediment to getting high insurance cover.•Longer the duration of policy - lesser is the premium.
A THIEF CALLED INFLATION
2020 104
960
286
290
310
Items 1980 2001 TOOTHPASTE 4.05 19
LPG GAS 26.25 250
MASALA DOSA 1.5 15
PETROL 7.9 32
MOVIE TICKET 5 50
Inflation ….The silent killer!
• Present cost of living RS. 20,000 p.m
• 30 yrs from now Rs.3,83,887 p.m.
• Retire today Rs. 20 lacs @ 12%
• Retire 30 yrs from now Rs.3.83 crores
Value Of Re. 1 Invested In 1980
Apr-80 Oct-82 Apr-85 Oct-87 Apr-90 Oct-92 Apr-95 Oct-970
10
20
30
40
(Rs.)
Rs. 33.52
Rs. 4.81
Rs. 11.21
Stocks
Co. Deposits
Bank Deposits
Period - April 1980 to December 1997
Value Of Re. 1 After Taxes
(Rs.)
Rs. 13.80
Rs. 3.00
Rs. 5.44
Stocks
Co. Deposits
Bank Deposits
Apr-80 Oct-82 Apr-85 Oct-87 Apr-90 Oct-92 Apr-95 Oct-970
5
10
15Period - April 1980 to December 1997
(Rs.)
Rs. 3.16
Re. 0.68
Rs. 1.24
Stocks
Co. Deposits
Bank Deposits
Apr-80 Oct-82 Apr-85 Oct-87 Apr-90 Oct-92 Apr-95 Oct-970
2
4
Period - April 1980 to December 1997
Value Of Re. 1 After Taxes & Inflation
Equities are the best long term bet
Investment avenues
9.19%7.62%
9.74%
14.47%
20.16%
Inflation Gold Bank FD Co. FD Equities
• Carry out extensive research and identify the right share/company.
• Identify a reliable broker.
• Track your investment regularly.
How do we invest in equities or Company Fixed Deposits?
Time …is money
MUTUAL FUND
AS AN ENTITY - IT IS A TRUST
AS A CONCEPT - IT IS A SERVICE
AS A FUNCTION - IT IS INVESTMENT MANAGEMENT
What Is A Mutual Fund?
It is an investment company through
which an investor can pool his
money with other investors who
have a similar objective.
Mutual Funds: A Packaged Product
Diversification
Liquidity
Professional Management
Convenience
Tax Benefits
Mutual Funds & Tax Benefits
INCOME TAX BENEFITS
CAPITAL GAINS BENEFITS
Section 112
Section 88
Section 88 (2)
Bank F.D. Vs.Mutual Funds Section 112
P T R -R s .7 0 00
T a x @ 3 0%
R e turn s - R s .1 00 00
B a nk F ixe d D e po s its
P T R -R s .9 0 00
T a x @ 1 0%
P T R -R s .9 4 00
R s .3 00 0 @ 2 0%
In de xa tion @ 7%
R e turn s - R s .1 00 00
M utu a l F un ds
A m ou nt inv e ste d R s .1 0 00 00
Mutual Fund - The Top Scorer
FDs FI Bonds Open-ended
Mutual FundsAccessibility Low Low High
Tenor Fixed (Medium) Fixed (Long) No Lock-in
Min. Investment Rs. 1000 Rs. 5000 Rs. 500
Tax Benefits None 80L 80L , 112
Liquidity Low Very Low Very High
Convenience Medium Tedious Very High
Transparency None None Very High
What Is Wrong With The Way We Save?
Over 50% of our household savings are invested in assets that arepoor inflation fightersnot tax efficient.
Our saving habits are not disciplined and systematic in approach
We face the possibility of outliving our savings.
5% 10% 15% 20% 25%
EFFECT OF COMPOUNDING(Re. 1 invested for 30 years)
Rs. 4 Rs. 17Rs. 67
Rs. 234
Rs. 808
SB
LICPPFNSCBk FD
COMFD
BUSINESSOR EQUITY
Invest Early
Anu starts investing at 25 year’s age
Invests Rs. 5000 monthly for 10 years
Total Investment : Rs. 6 lakhs
Prakash starts investing at 35 year’s age
Invests Rs. 5000 monthly for 25 years
Total Investment : Rs. 15 lakhs
Who has more money at the age of 60?
BOTH ARE OF SAME AGE
Invest Early
It costs Prakash Rs. 3.1 crores to wait 10 years
Anu has Rs. 4.6 crores Prakash has Rs. 1.5 crores
At the age of 60….
Assumed 15% p.a. compounded annually
START EARLY; SAVE REGULARLYEvery Year Counts
* Return of 15% p.a.
7,643,653
330,000
10,133,456
350,000
Saves from age 25 to 60 Saves from age 27 to 60 Saves from age 30 to 60
Savings Returns *
300,000
4,999,569
Rs. 10000/= p.a. or Rs.833.33 p.m.
• Identify Objectives
• Harness the power of compounding– Start early– Focus long-term - Stay invested
• Be aware of the effects of inflation & taxes
• Diversify
Strategy To Smart Investing
SUMMARY
• Banks effectively destroy purchasing power.• Manage salary pro-actively and get that raise in
salary.• Insure adequately - 5 times annual gross.• Have liquidity in Income Funds.• Use all products - judiciously and maximize your
wealth.• Be disciplined.
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