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7/31/2019 Debt Investments
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Topic:
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Tax system in India
Indian income tax laws have various rules andregulations and are amended from time to time
Hence, understanding these laws is complex
and one might ultimately end up paying moretax
There are various exemptions prescribed forcertain investment options in the tax lawsprevailing in India
To save money tax payers should know incometax laws thoroughly
One must also know the best availableinvestment o tions available & choose the one
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Present Income tax slabs
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Debt Investments covered:
Mutual funds
Saving Schemes ELSS
Post office Savings scheme Bonds
Company Fixed deposits
Fixed Deposits
Certificate of DepositSome Other Financial Instruments
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Mutual FundsCollects the money of a large number of investors
The money that is collected is then used by the fundmanager to buy securities like bonds and stocks
The securities that are purchased are called the
portfolio of the fundThe different kinds of mutual funds in India are
Closed- End Funds, Large Cap Funds, InternationalMutual Funds, Value Funds, and Tax Saving Funds
Offers several benefits to an investor such as: Potential return
Liquidity
Transparency
Income growth
Good post tax return &
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Tax Benefits
All dividends, declared by mutual funds are tax-free in hands of the investor
The mutual fund has to pay a dividend distributiontax of 12.5%
The amount invested in tax-saving is eligible fordeduction u/s 80C
The aggregate amount deductible under thissection CANNOT exceed Rs 100,000
Pension Schemes are allowed as deduction u/s 88of the Income Tax Act, 1961
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Saving Schemes
Various saving schemes are framed by CentralGovernment under: Government Savings Bank Act, 1873
Government Saving Certificates Act, 1959
Public Provident Fund Act, 1968
Risk Free Investment as Small Savings Schemesare fully secured by GOI
High rate of interest
Invest Rs. 5000/- or more in any SmallSavings Scheme to get Lucky Coupon and winprizes. Tax on these prizes will be paid by the StateGovt.
Nomination facility
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Following are the saving schemes in India
Equity Linked Savings Scheme
Post Office Saving Scheme
Bonds In India Company Fixed Deposits
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http://www.tax4india.com/saving-schemes-in-india/equity-linked-savings-scheme.htmlhttp://www.tax4india.com/saving-schemes-in-india/post-office-savings-schemes.htmlhttp://www.tax4india.com/saving-schemes-in-india/bonds-and-debentures.htmlhttp://www.tax4india.com/saving-schemes-in-india/company-fixed-deposits.htmlhttp://www.tax4india.com/saving-schemes-in-india/company-fixed-deposits.htmlhttp://www.tax4india.com/saving-schemes-in-india/company-fixed-deposits.htmlhttp://www.tax4india.com/saving-schemes-in-india/bonds-and-debentures.htmlhttp://www.tax4india.com/saving-schemes-in-india/bonds-and-debentures.htmlhttp://www.tax4india.com/saving-schemes-in-india/post-office-savings-schemes.htmlhttp://www.tax4india.com/saving-schemes-in-india/post-office-savings-schemes.htmlhttp://www.tax4india.com/saving-schemes-in-india/equity-linked-savings-scheme.html7/31/2019 Debt Investments
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Equity-Linked Savings Schemes (ELSS)
They have a lock-in period which is generally of
3 years
As a result of this, the manager of the fund is
concerned only about the long term goals
Are suitable for those investors who want toincrease their investments and also want tobenefit from the rebates in taxes
The dividends that are earned in Tax SavingFunds in India are tax free
Can invest a maximum amount of Rs. 10,000
per annum.
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Popular Tax Saving Funds (ELSS)
Franklin India Tax Shield
HDFC Tax Saver
Sundaram Tax Saver
HDFC Long Term AdvantagePrudential ICICI Tax Plan
Birla Equity Plan
UTI Equity Tax Savings
Tata Tax Saving Fund
Magnum Tax Gain10
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Post office saving scheme
Provide substantially higher rates of interest
Pose relatively lesser risks of suffering losses
There are numerous Post Office Saving
schemes like: Post Office Time Deposits
Deposit Scheme for Retiring Government Employees
Post Office Monthly Income Scheme
Post Office Recurring Deposits
Deposit Scheme for Retiring Employees of Public Sector
Companies
National Savings Scheme
National Savings Certificates
Postal Life Insurance
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Scheme Interest
Rates
Tenure Investment Tax Rebate
Post Office
SavingsAccount
3.5% Not fixed Min: Rs. 50 Max: 1
lakh
Interest is Tax
free
5-year post
office
recurring
deposit A/c
7.5%
compounded
Quarterly
5 years Min: Rs.10 pm or
multiples of Rs.5
Max: No Limit
No Tax Rebate
Post Office
Time Deposit
Account
6.25% 1 year Min: Rs. 200 & its
multiples thereoff
Max: No Limit
Investment
qualifies for
deduction.
Interest is Tax
free
6.5% 2 years
7.25% 3 years
7.5% 5 years
Post Office
Monthly
Income A/c
8% 6 years Min: Rs.1500 pm or
multiples of it. Max:
Rs. 4.5 lakhs
Interest is Tax
free
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Scheme Interest
Rates
Tenure Investment Tax Rebate
15year PPF
Account
8%
Compounded
15 years Min: Rs. 500 in 1 year
Max: 70000 in 1 year
Investment
qualifies for
deduction.
Interest is Tax
free
Kisan Vikas
Patra
8.4%
Compounded
Yearly
_ No Limits,
Denominations: Rs
100, Rs 500, Rs 1000Rs 5000, Rs 10000,
Rs 50000
No Tax Rebate
National
Savings
Certificates
8% p.a
Compounded
1/2yearly but
payable after
maturity
6 years Min: Rs. 100
Max: No Limit
Investment as
well as the
interest
deemed to be
re-invested
Senior
Citizens
Savings
Scheme
9% 5 years Min: Rs 1000
Max: Rs 1500000
Investment
qualifies for
deduction
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Bonds
A Bond is a loan given by the buyer to theissuer of the instrument
Bonds can be issued by companies,
financial institutions, or even the governmentTax-saving bonds are designed to partially
or fully release a bond holder from theburden of taxes
Bonds can be broadly classified into:
Tax-Saving Bonds
Regular Income Bonds14
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Tax-Saving Bonds Issued by RBI
The Reserve Bank of India offers a unique taxsaving bond named as the 6.5% SavingsBonds, 2003
Tenure is 5 years
The bond is endowed with the facility of interestpayment on a half yearly basis
The maximum limit of investment on the bond
has not been fixed6.5% Savings Bonds, 2003 are of 2 types:
6.5% Savings Bonds Cumulative bonds
6.5 % Savings Bonds Non-cumulative bonds15
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The other commercial as well as privatesector banks which provide the 6.5 %Savings Bonds, 2003 are:
Central Bank of India UTI Bank Ltd.
Dena bank
HDFC
Punjab National Bank
ICICI
Bank of Maharashtra
IDBI
Indian Overseas Bank
Canara Bank
Bank of Baroda
Indian Bank
Union Bank
Syndicate Bank
Allahabad Bank
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Bonds issued by Commercial &
Private sector banks
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Commercial & private sector banks offer 8%Savings Bonds, 2003
The term of the 8% Savings Bonds, 2003 is 6
yearsThe amount of interest on the 8% Savings
Bonds is paid off on a half-yearly basis
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Company Fixed deposits
Company Deposits are simply nothing but fixeddeposits in companies
Earns a fixed rate of return over a period of time
If the interest income is less than Rs.5000 inone financial year, then NO TDS
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Fixed Deposits
Fixed Deposit for 5 years in banks is allowed asa tax saving scheme by the government
The maximum amount eligible under a tax
saver fixed deposit is Rs. 100,000 for a financialyear
Other fixed deposits have no tax rebate and theincome has to be added as other sources of
incomesBut assesse has the option to pay the tax on a
yearly basis or together after maturity19
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Top 5 Tax Savings Fixed
DepositsFollowing are the top 5 Tax Savings Fixed
Deposits
The rates are as on February 2011
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Certificate of Deposit
CDs are not glamorous investments but are
stable ones
Investing money for a fixed period of time while
receiving interest
Tax Benefits
Deducting InterestDelayed Tax
Tax-deferred 21
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Other Financial Instruments
Life insurance policy or Unit-Linked InsurancePlan (ULIP)
Retirement benefit plan which is offered by
mutual funds
Approved superannuation fundPension policies provided by insurance
companies
Bank fixed deposits
A Provident Fund Public Provident Fund (PPF)
Employee Provident Fund (EPF) 22
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CreditsPreksha Shah 49
Jigar Jain 24
Harsh Thariani 57Juhi Bulchandani 9
Dhaval Manek 31
Anushri Jain 20
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Bibliographywww.tax4india.com
http:/business.mapsofindia.comwww.thinkplaninvest.com
www.rupeetimes.com
www.valueresearch.com
http://www.tax4india.com/http://www.business.mapsofindia.com/http://www.thinkplaninvest.com/http://www.rupeetimes.com/http://www.valueresearch.com/http://www.valueresearch.com/http://www.rupeetimes.com/http://www.thinkplaninvest.com/http://www.business.mapsofindia.com/http://www.tax4india.com/