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
Minimum Maximum
Investment Avenue % Return Lock In Period Feature
Investment Investment

National Saving
8 100 No Limit 6 Years Interest is taxable
Certificate

Public Provident Fund 8 Rs500 Rs.70,000 15 Years Tax Free Return

5 Years (to avail

Time Deposit 6.25-7.5 Rs200 No Limit Interest is taxable
80C benefit)

Senior Citizen Saving 5 Years (to avail minimum age is 55 to

9 Rs1000 Rs15 lakh
Scheme 80C benefit) avail this option.

5 Years (to avail

Bank F.D. 9 - No Limit Interest is taxable
80C benefit)

market driven
Lowest lock in period
Equity Linked Saving but one can Rs.500 to
No Limit 3 Years with maximum possible
Scheme expect 15-17% Rs.5000
return.
return.

• 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?

OR

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 62.78

Value (Rs. 40
Lacs) 30
20 16.89
9.1
10
0
Investment Ram Shyam

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 12 Years
Birla Sun Life Tax Relief -96 Fund 14.46 23.21 27.22 30.85
Franklin India Taxshield Gr 20.13 26.37 NA NA
HDFC Long Term Advantage Fund - 21.48 31.76 NA NA
HDFC Taxsaver - Gr 24.19 30.33 NA NA
ICICI Prudential Tax Plan-Gr 18.78 28.4 NA NA
SBI Magnum Tax Gain Fund - Div 31.45 34.73 25.14 21.83
Bank F.D. 9
PPF 8 8 8 8

Market Index Performance

Index Name 5 Years 7 Years 10 Years 12 Years
BSE 200 13.23 20.42 12.34 10.66
BSE 30 (SENSEX) 14.79 18.11 13.28 9.91
BSE 500 NA NA NA NA
CNX Midcap 20.94 29.74 NA NA
NSE 50 13.13 16.39 13.4 10.12
NSE 500 12.79 19.68 14.71 11.45
Returns as on 31.10.08

ELSS Schemes have clearly outperformed not only traditional

options but also broader indices.
 Solid SIP Returns.

Schemewise SIP Return as on 31st Oct 2008 7 Years 10 Years 12 Years

Birla Sun Life Tax Relief -96 Fund 13.46 17.37 24.20
Franklin India Taxshield Gr 18.96 N.A. N.A.
HDFC Long Term Advantage Fund - Gr 21.19 N.A. N.A.
HDFC Taxsaver - Gr 23.28 N.A. N.A.
ICICI Prudential Tax Plan-Gr 19.51 N.A. N.A.
SBI Magnum Tax Gain Fund - Div 29.84 23.72 23.29
Sundaram BNP Paribas Tax Saver-Div 24.61 N.A. N.A.
SIP is assumed on 10th of every month.

ELSS funds have solid track record of consistence performance.

 ELSS : Effective way of saving taxes.

Your earning Tax without ELSS Tax with ELSS You save

200,000 5,150 0 5,150

300,000 15,450 5,150 10,300

500,000 56,650 36,050 20,600

750,000 123,600 92,700 30,900

1,000,000 211,150 180,250 30,900

Amount in Rs.
Based on Tax Slab for FY 08-09
Assuming an investment of Rs. 100,000 in ELSS in this Financial Year
 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.
UKD809_26817_7 FINAL.qxd:_ 11/14/08 3:15 PM Page 1

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Risk Factors: • Mutual funds, like securities investments, are subject to market risks and there is no guarantee against
loss in the schemes or that the schemes’ objectives will be achieved. • As with any investment in securities, the NAV of
the Units issued under the schemes can go up or down depending on various factors and forces affecting capital
markets. • Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the
Schemes. Please read the offer document/scheme information document/statement of additional information of
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