Elss

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 Investment Avenue

% Return

Minimum Investment

Maximum Investment

Lock In Period

Feature

National Saving Certificate

8

100

No Limit

6 Years

Interest is taxable

Public Provident Fund

8

Rs500

Rs.70,000

15 Years

Tax Free Return

Time Deposit

6.25-7.5

Rs200

No Limit

5 Years (to avail 80C benefit)

Interest is taxable

Senior Citizen Saving Scheme

9

Rs1000

Rs15 lakh

5 Years (to avail 80C benefit)

minimum age is 55 to avail this option.

Bank F.D.

9

-

No Limit

5 Years (to avail 80C benefit)

Interest is taxable

Equity Linked Saving Scheme

market driven but one can expect 15-17% return.

Rs.500 to Rs.5000

3 Years

Lowest lock in period with maximum possible return.

No Limit

• 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 62.78

50 Value (Rs. 40 Lacs) 30 16.89

20 10

9.1

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

Index Name BSE 200 BSE 30 (SENSEX) BSE 500 CNX Midcap NSE 50 NSE 500

Market Index Performance 5 Years 7 Years 13.23 20.42 14.79 18.11 NA NA 20.94 29.74 13.13 16.39 12.79 19.68

10 Years 12.34 13.28 NA NA 13.4 14.71

12 Years 30.85 NA NA NA NA 21.83 8

12 Years 10.66 9.91 NA NA 10.12 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 Birla Sun Life Tax Relief -96 Fund Franklin India Taxshield Gr HDFC Long Term Advantage Fund - Gr HDFC Taxsaver - Gr ICICI Prudential Tax Plan-Gr SBI Magnum Tax Gain Fund - Div Sundaram BNP Paribas Tax Saver-Div

7 Years

10 Years

12 Years

13.46 18.96 21.19 23.28 19.51 29.84

17.37

24.20

N.A. N.A. N.A. N.A.

N.A. N.A. N.A. N.A.

23.72

23.29

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.

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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 respective schemes before investing.