Tax Saving Options

Agenda

• Options available for Tax Saving Investments

• ELSS schemes

• Tax Saving Bonds

– Upto Rs. 1.50 Lac of investment u/s 80 C is deductible from your taxable income

– Options u/s 80 C

• PRINCIPAL on Home Loan

• FD for 5 years

• Insurance Premium

• PPF

• Investment in ELSS schemes

Section 80 C

Are You One of Those Who Still Go for Traditional

Instruments like Bank F.D. and PPF?

OR

Smart Enough to Take Dual Advantage of Better

Returns and Tax Benefit by Investing in ELSS.

Does PPF Sound a better Idea with

Revised interest rates @ 8.60% ??

PPF Investment is for 15 Years

Lets have a look at

ELSS and PPF

performance for 15 years

Look Who Has Made More Profit?

Returns as on 31.12.11

ELSS investments have delivered 3 times more returns than PPF even in the most challenging times

PPF Average of ELSS

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

ELSS v PPF

Value of Rs. 10.50 Lac

Rs. Lacs

Product Value of Rs. 10.50 LacPPF 21.50Average of ELSS 78.98

Investment of Rs. 70,000 made in PPF and bouquet of ELSS schemes every year from 1997 to 2011 on 1 Jan every year

Current Valuation

ELSS Performance Scorecard

Scheme Name 3 Years 5 Years 7 Years 10 Years 12 Years 15 YearsBirla Sun Life Tax Plan - Div 15.71 0.47 11.40 23.62 10.91 N.ABirla Sun Life Tax Relief 96 Fund - Div 17.08 1.05 10.44 19.67 13.12 28.73BNP Paribas Tax Advantage Plan - Gr 18.48 -2.19 N.A N.A N.A N.AFidelity Tax Advantage Fund - Gr 23.59 8.45 N.A N.A N.A N.AReliance Tax Saver Fund - Gr 19.11 2.76 N.A N.A N.A N.ASBI Magnum Tax Gain Fund - Div 16.81 2.27 16.87 27.50 9.70 20.68Sundaram Tax Saver - Div 12.03 3.98 14.41 24.28 16.02 N.A

Returns as on 31st December, 2011

Multiple Tax benefits under ELSS Investments

• Income Tax Exemption

• Investment upto Rs. 1.50 Lac is deductible from Taxable Income

• Capital Gains Tax

• Long Term Capital Gains are tax exempt

• Dividend Distribution Tax

• Dividends declared by ELSS schemes are Tax Free. Enjoy Tax fee dividends

But Equity Markets have

Not delivered any returns for

Past 4 years!!!

Best time to invest in Equities is NOW!!!

- Markets are down ~25% from Jan 2008This represents a large price correction and a long time correction of 4 years

- Marekts have been impacted by- High fiscal deficits / high interest rates- European crisis- Corruption cases / slow pace of reforms

- Weak FII flows

- PE's based on March 2013 earnings are ~12x This effectively means markets are currently available at half valuations from 2008 peak

- Markets seem to be discounting most negatives

How to Earn More from Equities

- Equity prices and returns are volatile in short to medium periods - In the long term, however, returns from equities are surprisingly predicatable

Equity Returns = Earnings Growth + Dividends

- Whenever past performance from Equities is less than earnings growth, future returns should be more and vice versa

- Given the low returns of last 5 years and the Low PE multiples, returns over next 5 years should be a combination of Earnings growth and PE expansion

* In 1992 PE's were ~over 40 times and inspite -ve 5 year returns, PE's in 1997 were still around 25 times. Currently PE are 12 times based on March 2013 Earnings

How to Earn More from Equities

Good investments are made in bad times

Risk to your returns from NOT INVESTING in Equity is much higher than risk to your returns by Investing into Equity

Tax Saving through Infrastructure Bonds

• Rs. 20,000 investment in Infrastructure Bonds deductible from taxable income u/s 80 CCF

• Bonds have a Lock in period of 5 years and are avaiable for 10 and 15 year duration

• Bonds can be issued in Demat or Physical Mode

• Tax Saving upto Rs. 6,180 in Infrastructure Bonds

• The interest from the Bonds is Taxable

Infrastructure Bonds

Your Total Tax Saving with ELSS and Infra Bonds

Your earning

Tax without ELSS & Infra

Bonds

Tax with ELSS & Infra Bonds

You save

250,000 7,210 0 7,210

400,000 22,660 10,300 12,360

500,000 32,960 20,600 12,360

800,000 94,760 70,040 24,720

1,500,000 3,11,060 2,73,980 37,080

Amount in Rs.

Based on Tax Slab for FY 11-12

Assuming an investment of Rs. 100,000 in ELSS and Rs. 20,000 in Infrastructure Bonds in this Financial Year for male below 60 year age

• IDFC Ltd (AAA Rated)

• L & T Finance Ltd (AA+ rated)

• Power Finance Corporation (AAA rated)Tranche - 2 of L&T Bonds closing on 11 Feb and

Tranche - 2 IDFC Bonds closing on 25 Feb

Bond Issuers

Ratings by ICRA

Take Wise decision

Save Taxes by Investing

In ELSS & Infra Bonds