BEST RETURNS ARE MADE IN BAD TIMES: Rs. 1lac invested on 21st Sept 2001(Tech. Bubble Burst) ELSS Scheme Name 3 Yrs Rs. 5 Yrs Rs. 7 Yrs Rs. % in lacs % in lacs % in lacs HDFC LTAF - Gr ICICI Pru.Tax Plan-Gr 68.33 4.74 59.05 10.16 40.56 10.54 57.1 3.86 60.21 10.48 39.06 10.02

ELSS OR TRADITIONAL PRODUCT: WHICH ONE TO CHOOSE? Mr. A and Mr. B both have been investing for Tax Saving purpose under Section 80 C since March 1996. Mr. A has chosen to invest in traditional product to earn secured return where as Mr. B has chosen to invest in ELSS. Both have done this exercise for 13 years from March 1996 to March 2008. So both have invested Rs.9,10,000 during this period under Section 80 C.
Comparison of ELSS Vs Traditional Instrument
9379288.4 9100000 8100000 7100000 6100000 5100000 4100000

Principal Tax Savings 49.71 3.35 48.62 7.10 35.66 8.17 Fund Sundaram BNP 46.69 3.11 49.91 7.34 37.03 9.05 Paribas Tax Saver-Div
All returns are on CAGR Basis


As it is seen from the table, if someone had invested in market correction after technology bubble of 2000, then he would have made return anywhere between 47% to 68% in three years after that.
1200000 1000000 800000 600000 400000 200000 0

Growth of Investment made in Bad Times

3100000 2100000 1100000 100000 910000 1710890.8


Traditional Instrument


(Note: Scheme taken is HDFC Tax saver for a period from 31st March 1996 to 31st Dec 2008)


3 Year

5 Year
ICICI Prudential Tax Plan-Gr

7 Year

HDFC Long Term Advantage Fund - Gr Principal Tax Savings Fund

Sundaram BNP Paribas Tax Saver - Div

Mr. A who has invested in traditional product has accumulated Rs.17 lacs against Rs. 93 lacs accumulated by Mr. B during the same period.
Disclaimer : The above figures/projections are for illustrative purpose only. The situations/results may or may not materialise in future. Please take proper professional advise before making any financial decisions based on above illustrations. For Tax provisions mentioned, please consult your Tax Advisor for details. Investments in Mutual Funds are subject to market risks. Past performance may or may not be repeated in future. Please read the Offer Document carefully before investing in any scheme.

As we can see, if someone had invested Rs. 1 lac in HDFC Long Term Advantage Fund on 21st Sept 2001 his investment value would have grown to Rs.4.74 lacs in a matter of 3 years and to staggering Rs.10.54 lacss in seven year period. PERFORMANCE OF ELSS SCHEMES OVER THE YEARS: Scheme wise Performance as on 3rd January 2009 Scheme Name HDFC Long Term Advantage Fund - Gr ICICI Prudential Tax Plan-Gr Principal Tax Savings Fund Sundaram BNP Paribas Tax Saver - Div 5 Years 7 Years 9 Years % % % 14.08 13.1 12.8 20.6 30.54 26.18 24.75 29.07 NA 11.99 NA 17.18

Save Your Hard Earned Money

(MF investments are subject to market risk. Please read the offer document carefully before investing. Past performance may or may not be sustained in future.)

Fundz Network Partner

Tax Saving Guide 2008-09
Saving Tax on your hard earned money is as challenging as making money. ‘Tax Evasion’ is illegitimate but ‘Tax Planning’ is intelligence. An individual’s Gross Total Income is calculated from total of five different heads like income from salary, income from house property, income from business or profession, income from capital gain and income from other sources. An individual has to pay tax after clubbing income under these heads but he/she can claim deductions under various sections. The most common of section for deduction is Section 80 C to reduce his/her Gross Total Income. This allows him/her to reduce his/her tax liability. Different individuals are taxed at different rates depending on his/her total income. We will try to understand how taxes are levied and options available under Section 80 C and which can be the best of the tax saving options in following pages. PERSONAL INCOME TAX RULES: PERSONAL INCOME TAX STRUCTURE Total Income Up to INR 150,000 (a) (b) INR 150,001 to INR 300,000 INR 300,001 to INR 500,000 INR 500,001 and above (c) Tax Rates NIL 10% 20% 30%

HOW INCOME TAX EATS INTO YOUR EARNINGS? Mr. Ram who is of 45 years age is earning Rs.6 lacs per annum. As per above table he will fall in highest tax bracket and will be charged 30% tax on his income. Here is how he will get affected due to income tax levy: Income First Rs.1,50,000 Next Rs. 1,50,000 Next Rs. 2,00,000 Last Rs. 1,00,000 Total on Rs. 6,00,000 Tax Rate 0% 10.30% 20.60% 30.90% Tax Amount Nil 15,450 41,200 30,900 87,550

Investment Avenue National Saving Certificate Public Provident Fund Time Deposit

% Return 8

Min. Invest. 100

Max Invest.

Lock in Period

Feature Interest is taxable

No Limit 6 Years


Rs. 500

Rs. Tax Free 70,000 15 Years Return Interest is taxable

5 Years 6.25 - 7.5 Rs. 200 No Limit (to avail 80C benefit) Rs. 15 Lac

A male individual earning Rs.6 lakh per annum ends up paying Rs. 87,550 as income tax. HOW MR. RAM CAN REDUCE THIS TAX BURDEN? Section 80 C: Any individual taxpayer in India can save tax by making investment in specific tax saving instrument defined under Section 80 C of Income Tax Act. Using benefit of this section, an individual investor can save tax as investment made under this section gets deducted from taxable income and hence reduces tax liability. Income (Rs.) 6,00,000 Tax without Tax after taking taking advantage advantage of of ELSS (RS.) 80 C (RS.) 87,550 56,650 Saving in Tax (RS.) 30,900

Senior Citizen Saving Scheme Equity Linked Saving Scheme


Rs. 1000

5 Years Min. age (to avail is 55 to 80C avail this benefit) option. Lowest lock in period

Market Driven

Rs. 500 No Limit 3 Years to Rs. 5000

Apart from these options, Principal component of housing loan installment can also be claimed as tax deduction under Section 80 C up to Rs.1 lac. Insurance premiums are also eligible for deduction under section 80 C. WHY ELSS SCORES OVER OTHER INVESTMENT OPTIONS: Section 80 C Product Lock Returns In Period Taxability Other Feature Best possible return among all options

HOW TAX SAVING CAN BE USEFUL: Income 200000 300000 500000 750000 1000000 Tax without ELSS 5150 15450 56650 133900 211150 Tax with ELSS 0 5150 36050 103000 180250 Your Saving in Tax 5150 10300 20600 30900 30900

(a) In the case of a resident woman below the age of 65 years, the basic exemption limit is Rs 180,000. (b) In the case of a resident individual of the age of 65 years or above, the basic exemption limit is Rs 225,000. (c) Surcharge is applicable at 10 per cent only where total income exceeds Rs. 10,00,000 (Rs. 1 million) per year. (d) Education cess is applicable at 3 per cent on income tax (inclusive of surcharge, if any).


3 Years Market Driven

Tax Free Dividend/No Tax on Long Term Capital Gains

An individual earning Rs.5 lacs per annum can save Rs. 20,600 per annum by investing under Section 80 C. This amount can be as high as Rs. 30,900 for someone earning Rs.7.5 lacs per annum. TAX SAVING OPTIONS UNDER SECTION 80 C: There are various options available under Section 80 C to avail tax benefit. An individual can invest in any of the options available to avail Section 80 C benefit.

Traditiona Product

There are three slabs under which an assessee can fall. Basic exemption limit is upto Rs.1.50 lakh and highest slab is for annual income above Rs.5 lakhs where an individual is taxed at 30% rate.

Varies from 5 years to 15 years

Sure returns varies from 6% to 8%

Interest income is taxable only exception being PPF

Return hardly beats inflation in long term

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