debt investments

7/31/2019 Debt Investments

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Topic:


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Tax system in India

Indian income tax laws have various rules andregulations and are amended from time to time

Hence, understanding these laws is complex

and one might ultimately end up paying moretax

There are various exemptions prescribed forcertain investment options in the tax lawsprevailing in India

To save money tax payers should know incometax laws thoroughly

One must also know the best availableinvestment o tions available & choose the one

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Present Income tax slabs

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Debt Investments covered:

Mutual funds

Saving Schemes ELSS

Post office Savings scheme Bonds

Company Fixed deposits

Fixed Deposits

Certificate of DepositSome Other Financial Instruments

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Mutual FundsCollects the money of a large number of investors

The money that is collected is then used by the fundmanager to buy securities like bonds and stocks

The securities that are purchased are called the

portfolio of the fundThe different kinds of mutual funds in India are

Closed- End Funds, Large Cap Funds, InternationalMutual Funds, Value Funds, and Tax Saving Funds

Offers several benefits to an investor such as: Potential return

Liquidity

Transparency

Income growth

Good post tax return &

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Tax Benefits

All dividends, declared by mutual funds are tax-free in hands of the investor

The mutual fund has to pay a dividend distributiontax of 12.5%

The amount invested in tax-saving is eligible fordeduction u/s 80C

The aggregate amount deductible under thissection CANNOT exceed Rs 100,000

Pension Schemes are allowed as deduction u/s 88of the Income Tax Act, 1961

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Saving Schemes

Various saving schemes are framed by CentralGovernment under: Government Savings Bank Act, 1873

Government Saving Certificates Act, 1959

Public Provident Fund Act, 1968

Risk Free Investment as Small Savings Schemesare fully secured by GOI

High rate of interest

Invest Rs. 5000/- or more in any SmallSavings Scheme to get Lucky Coupon and winprizes. Tax on these prizes will be paid by the StateGovt.

Nomination facility

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Following are the saving schemes in India

Equity Linked Savings Scheme

Post Office Saving Scheme

Bonds In India Company Fixed Deposits

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http://www.tax4india.com/saving-schemes-in-india/equity-linked-savings-scheme.htmlhttp://www.tax4india.com/saving-schemes-in-india/post-office-savings-schemes.htmlhttp://www.tax4india.com/saving-schemes-in-india/bonds-and-debentures.htmlhttp://www.tax4india.com/saving-schemes-in-india/company-fixed-deposits.htmlhttp://www.tax4india.com/saving-schemes-in-india/company-fixed-deposits.htmlhttp://www.tax4india.com/saving-schemes-in-india/company-fixed-deposits.htmlhttp://www.tax4india.com/saving-schemes-in-india/bonds-and-debentures.htmlhttp://www.tax4india.com/saving-schemes-in-india/bonds-and-debentures.htmlhttp://www.tax4india.com/saving-schemes-in-india/post-office-savings-schemes.htmlhttp://www.tax4india.com/saving-schemes-in-india/post-office-savings-schemes.htmlhttp://www.tax4india.com/saving-schemes-in-india/equity-linked-savings-scheme.html


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Equity-Linked Savings Schemes (ELSS)

They have a lock-in period which is generally of

3 years

As a result of this, the manager of the fund is

concerned only about the long term goals

Are suitable for those investors who want toincrease their investments and also want tobenefit from the rebates in taxes

The dividends that are earned in Tax SavingFunds in India are tax free

Can invest a maximum amount of Rs. 10,000

per annum.

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Popular Tax Saving Funds (ELSS)

Franklin India Tax Shield

HDFC Tax Saver

Sundaram Tax Saver

HDFC Long Term AdvantagePrudential ICICI Tax Plan

Birla Equity Plan

UTI Equity Tax Savings

Tata Tax Saving Fund

Magnum Tax Gain10


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Post office saving scheme

Provide substantially higher rates of interest

Pose relatively lesser risks of suffering losses

There are numerous Post Office Saving

schemes like: Post Office Time Deposits

Deposit Scheme for Retiring Government Employees

Post Office Monthly Income Scheme

Post Office Recurring Deposits

Deposit Scheme for Retiring Employees of Public Sector

Companies

National Savings Scheme

National Savings Certificates

Postal Life Insurance

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Scheme Interest

Rates

Tenure Investment Tax Rebate

Post Office

SavingsAccount

3.5% Not fixed Min: Rs. 50 Max: 1

lakh

Interest is Tax

free

5-year post

office

recurring

deposit A/c

7.5%

compounded

Quarterly

5 years Min: Rs.10 pm or

multiples of Rs.5

Max: No Limit

No Tax Rebate

Post Office

Time Deposit

Account

6.25% 1 year Min: Rs. 200 & its

multiples thereoff

Max: No Limit

Investment

qualifies for

deduction.

Interest is Tax

free

6.5% 2 years

7.25% 3 years

7.5% 5 years

Post Office

Monthly

Income A/c

8% 6 years Min: Rs.1500 pm or

multiples of it. Max:

Rs. 4.5 lakhs

Interest is Tax

free


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Scheme Interest

Rates

Tenure Investment Tax Rebate

15year PPF

Account

8%

Compounded

15 years Min: Rs. 500 in 1 year

Max: 70000 in 1 year

Investment

qualifies for

deduction.

Interest is Tax

free

Kisan Vikas

Patra

8.4%

Compounded

Yearly

_ No Limits,

Denominations: Rs

100, Rs 500, Rs 1000Rs 5000, Rs 10000,

Rs 50000

No Tax Rebate

National

Savings

Certificates

8% p.a

Compounded

1/2yearly but

payable after

maturity

6 years Min: Rs. 100

Max: No Limit

Investment as

well as the

interest

deemed to be

re-invested

Senior

Citizens

Savings

Scheme

9% 5 years Min: Rs 1000

Max: Rs 1500000

Investment

qualifies for

deduction


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Bonds

A Bond is a loan given by the buyer to theissuer of the instrument

Bonds can be issued by companies,

financial institutions, or even the governmentTax-saving bonds are designed to partially

or fully release a bond holder from theburden of taxes

Bonds can be broadly classified into:

Tax-Saving Bonds

Regular Income Bonds14


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Tax-Saving Bonds Issued by RBI

The Reserve Bank of India offers a unique taxsaving bond named as the 6.5% SavingsBonds, 2003

Tenure is 5 years

The bond is endowed with the facility of interestpayment on a half yearly basis

The maximum limit of investment on the bond

has not been fixed6.5% Savings Bonds, 2003 are of 2 types:

6.5% Savings Bonds Cumulative bonds

6.5 % Savings Bonds Non-cumulative bonds15


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The other commercial as well as privatesector banks which provide the 6.5 %Savings Bonds, 2003 are:

Central Bank of India UTI Bank Ltd.

Dena bank

HDFC

Punjab National Bank

ICICI

Bank of Maharashtra

IDBI

Indian Overseas Bank

Canara Bank

Bank of Baroda

Indian Bank

Union Bank

Syndicate Bank

Allahabad Bank


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Bonds issued by Commercial &

Private sector banks

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Commercial & private sector banks offer 8%Savings Bonds, 2003

The term of the 8% Savings Bonds, 2003 is 6

yearsThe amount of interest on the 8% Savings

Bonds is paid off on a half-yearly basis


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Company Fixed deposits

Company Deposits are simply nothing but fixeddeposits in companies

Earns a fixed rate of return over a period of time

If the interest income is less than Rs.5000 inone financial year, then NO TDS

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Fixed Deposits

Fixed Deposit for 5 years in banks is allowed asa tax saving scheme by the government

The maximum amount eligible under a tax

saver fixed deposit is Rs. 100,000 for a financialyear

Other fixed deposits have no tax rebate and theincome has to be added as other sources of

incomesBut assesse has the option to pay the tax on a

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Top 5 Tax Savings Fixed

DepositsFollowing are the top 5 Tax Savings Fixed

Deposits

The rates are as on February 2011

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Certificate of Deposit

CDs are not glamorous investments but are

stable ones

Investing money for a fixed period of time while

receiving interest

Tax Benefits

Deducting InterestDelayed Tax

Tax-deferred 21


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Other Financial Instruments

Life insurance policy or Unit-Linked InsurancePlan (ULIP)

Retirement benefit plan which is offered by

mutual funds

Approved superannuation fundPension policies provided by insurance

companies

Bank fixed deposits

A Provident Fund Public Provident Fund (PPF)

Employee Provident Fund (EPF) 22


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CreditsPreksha Shah 49

Jigar Jain 24

Harsh Thariani 57Juhi Bulchandani 9

Dhaval Manek 31

Anushri Jain 20

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Bibliographywww.tax4india.com

http:/business.mapsofindia.comwww.thinkplaninvest.com

www.rupeetimes.com

www.valueresearch.com
http://www.tax4india.com/http://www.business.mapsofindia.com/http://www.thinkplaninvest.com/http://www.rupeetimes.com/http://www.valueresearch.com/http://www.valueresearch.com/http://www.rupeetimes.com/http://www.thinkplaninvest.com/http://www.business.mapsofindia.com/http://www.tax4india.com/

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