save tax and create wealth
TRANSCRIPT
Save Tax and Create WealthSave Tax and Create Wealth
December 2015December 2015
Ventura Securities LimitedVentura Securities Limited
Common investor problems
What is my What is my Tax Tax
Liability?Liability?
Where Where should I should I Invest?Invest?Liability?Liability? Invest?Invest?
How do I How do I Save Tax?Save Tax?
How much How much should I should I Invest?Invest?
In order to encourage savings, the government gives
tax breaks on certain financial products under Section
80C of the Income Tax Act. Investments made under
such schemes are referred to as 80C investments.
Save tax with 80C instruments
such schemes are referred to as 80C investments.
Under this section, you can save a tax of Rs 46,350 by
investing a maximum amount of Rs l.5 lakhs, if you are
in the highest tax bracket of 30%.
80C instruments
1. Provident Fund & Voluntary Provident Fund
2. Public Provident Fund
3. National Savings Certificate
4. Equity-Linked Savings Scheme
5. Life Insurance Premiums
6. Home Loan Principal Repayment
7. Stamp Duty and Registration Charges For Home
8. Five-Year Bank fixed deposits
9. Children's education expenses can also be claimed as
deductions.
How much tax you can save?
Amount in Rs.
10% Tax Bracket 20% Tax Bracket 30% Tax Bracket
If you optimize the available investment limit of Rs. 1.5 lakhs, tax
saved is as follows:
10% Tax Bracket 20% Tax Bracket 30% Tax Bracket
TAX
SAVED 15,450 30,900 46,350
Income estimates for an individual of less than 60 years of age. As per the present tax
laws, eligible investors (individual/ HUF) are entitled to a deduction from their gross total
income.
How you save tax with 80C?
Individual in 30% tax bracket
Without
investments
under 80C
With
investments
under 80C
Gross Income 1,500,000 1,500,000
Investment in ELSS under Section 80C 0 150,000
Net Taxable Income 1,500,000 1,350,000
Net Tax Liability 275,000 230,000
Plus Educational Cess @ 3% 8,250 6,900
Total Tax Liability 283,250 236,900
Tax Saved 46,350
Performance of Asset Classes
Equities – the
most attractive
asset class19% 18%
14%15%
15%
20%
25%
Avg. Returns as on Nov 2015
Average Long Term Inflation for last 25 yrs ~ 7.3%
8%
12%14%
6%
-7%
9% 9% 9% 9%10%
9% 9% 9%
-10%
-5%
0%
5%
10%
15%
15 Yrs 10 Yrs 5 Yrs 3 Yrs
Equity (Sensex) Gold Bank FD PPF
Popular tax saving instruments
� Public Provident Fund : An account can be opened with a nationalized bank or Post office. The current rate of interest is 8.7%, which is tax-free and the maturity period is 15 years. The minimum amount of contribution is Rs 500 and the maximum is Rs 100,000.
� Life Insurance Premiums : Any amount that you pay towards life insurance premium for yourself, your spouse or your children can insurance premium for yourself, your spouse or your children can be included in section 80C deduction. If you are paying premium for more than one insurance policy, all the premiums can be included. Besides this, investments in unit-linked insurance plans (ULIPs) that offer life insurance with benefits of equity investments are also eligible for deduction under Section 80C.
� Equity-Linked Savings Scheme: Mutual funds offer you specially-created tax saving funds called ELSS. These schemes invest your money in equities and it is locked for a period of three years.
Comparison with other Tax Saving instruments
Public
Provident Fund
(PPF)
Bank Deposit-
5 Years Life Insurance
Equity linked
Savings Scheme
(ELSS)
Pre- Tax
Returns 8.70% 8.50% 5 to 7% 11.93%*
Tenure in years 15 5 approx. 15 - 20 10
Tax applicable Nil 2.63%^ Nil NilTax applicable Nil 2.63%^ Nil Nil
Inflation 8.00%
Real Returns 0.70% -2.13% -3.00% to -1.00% 3.93%
Liquidity
Lock in for 15
years (Partial
withdrawal
from 6th year
onwards
Lockin for 5
years
Withdrawal
allowed but with
stringent penalties Lockin for 3 years
Risk Lowest Lower Lower
High due to equity
market volatility
*Average returns of last 10 years for ELSS category as on 04 Dec 2015. ^Tax rate of 30.9%
ELSS is the only wealth creator among
other tax saving instruments.
What is ELSS?
� ELSS is a diversified equity mutual fund scheme that is not restricted to any sector or market cap.
� Eligible under section 80C of Income Tax Act. Investment deductions upto Rs.1.50 Lacs.
� It has a 3-year lock in period.
Advantages of ELSS
� Tax Benefit (Under I.T. Sec 80C)
� Tax – Free Dividends
� No Long Term Capital Gains Tax
� Lowest Lock-in Period (3Yrs)� Lowest Lock-in Period (3Yrs)
� Potential for higher Returns
� Investments Amount:
Min: Rs.500
Max: Unutilised component of 80C
PPF v/s ELSS
How investment of Rs. 1 Lakh would have grown annually
PPF
Year Interest (p.a.)Value (@ end of
the year)
Jan-06 8,700 108,700
ELSS
YearGain / loss
(Yearly)Value (@ end of the year)
Jan-06 35,629 135,629Jan-06 8,700 108,700
Jan-07 9,457 118,157
Jan-08 10,280 128,437
Jan-09 11,174 139,611
Jan-10 12,146 151,757
Jan-11 13,203 164,959
Jan-12 14,351 179,311
Jan-13 15,600 194,911
Jan-14 16,957 211,868
Jan-15 18,433 230,301
Jan-06 35,629 135,629
Jan-07 87,965 223,594
Jan-08 -8,173 215,420
Jan-09 81,055 296,475
Jan-10 128,024 424,499
Jan-11 76,035 500,535
Jan-12 125,210 625,744
Jan-13 134,822 760,567
Jan-14 267,439 1,028,005
Jan-15 255,751 1,283,756
CAGR – 8.70% CAGR – 29.08%
Performing ELSS Funds
SIP returns on monthly investment of Rs. 10,000/-
Time period 3 Years 5 Years
Total Amount Invested (Rs.) 360,000 600,000
Scheme NamePresent
value(Rs)XIRR(%)
Present
value(Rs)XIRR(%)Scheme Name
value(Rs)XIRR(%)
value(Rs)XIRR(%)
Axis LT Equity Fund 517,393 26.46 1,082,785 24.59
Birla SL Tax Relief '96 506,426 24.80 997,183 21.08
Franklin India Taxshield 487,151 21.84 960,173 19.47
ICICI Pru LT Equity Fund (Tax Saving) 481,845 21.01 953,573 19.18
IDFC Tax Advt(ELSS) Fund 471,128 19.31 940,699 18.61
Benchmark Index
NIFTY 50 396,579 6.75 742,350 8.72
S&P BSE SENSEX 391,505 5.84 734,255 8.27
Thank you!Email: [email protected]
Contact us at 6754 7046 /6622 7153
Time is ticking and every second counts….START
INVESTING NOW….ITS NEVER TOO LATE !!
Contact us at 6754 7046 /6622 7153