A Project Report On

"STUDY OF TAX SAVING MUTUAL FUNDS"

At

"Money Plant Consulting"

By " Ms.Apurva Sanjay Zulpe" Under the guidance of

"Prof.Bhagyashree Kanhere"

Submitted to "University of Pune" In partial fulfillment of the requirement for the award of the degree of Master of Business Administration (MBA) Through All India Shri Shivaji Memorial Society's Institute of Management (MBA) Pune 411001 Year 2012-13

Acknowledgment
First of all I would like to place on record my gratitude to all concerned respectable Director of Money Plant Consulting (CA Rishabh Parakh) for giving me this opportunity of internship which has been a pure learning experience and which have enlightened my knowledge and skills about the Finance industry. I would also like to express my gratitude toward All India Shri Shivaji Memorial
Society's Institute of Management for giving me the opportunity to undergo

summer internship at Money Plant Consulting. I am specially thankful to my mentors Sir and money plant consulting director CA Rishabh Parakh for guidance and cooperation during this internship and in fact without their navigational assistance life would have been very difficult as far as structuring the projects are concerned. I would always greateful to them for their help and support. Lastly but not the least I would like to thank MBA department for inducting the module of internship programme at Money Plant Consulting without which I shouldnt have ever learnt.

Place : Date :

Apurva Sanjay Zulpe Student

DECLARATION

I, the undersigned, hereby declare that the Project Report entitle Study of Tax Saving Mutual Funds in Money Plant Consulting, written and submitted by me to the University of Pune, in partial fulfillment of the requirement for the award of degree of Master of Business Administration under the project guidance of material collected by myself. Ms.Bhagyashree Kanhere in my original work and the conclusions drawn therein are based on the

INDEX
Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Chapters EXECUTIVE SUMMARY INTRODUCTION COMPANY PROFILE INDUSTRY PROFILE SCOPE AND OBJECTIVES RESEARCH METHODOLOGY THEROTICAL BACKGROUND FINDINGS DATA ANALYSIS & INTERPRETATION CONCLUSION SUGGESTIONS LIMITATION BIBLIOGRAPHY Page No. 5 6 7-10 11-14 15 16-17 18-31 32-68 69 70 71 72

1. EXECUTIVE SUMMARY

The topic given to me by Moneyplant Consulting was Study of Tax Saving Mutual Funds. It involved spending time on the field as well as the back office. As part of the project I had to lead a team of CAs and other MBA interns to various corporate organizations. My primary objective was collection of data for the analysis. Secondly, I also give advises of mutual funds regarding their correct investments,it included solving client queries related to tax saving mutual funds. I use to visit various companys like cognizant, TCS, SunGard, Syntel, etc and arrange desk at their company for investment purpose. I was taking into consideration of tax planning and help them to make proper tax planning and increase their wealth . . Once the field work was done, I had to co-ordinate with the other team

leads and collate the data for the aforementioned study. I had to prepare a consolidated report on my findings every fortnight and submit the same to the operations head. My project also led me to map the team and their respective schedules. This summer internship gave me hands on experience of the corporate working environment and a preview of a highly competitive financial services sector wherein continuous reinvention and customized financial product solutions is the name of the game.

2.

INTRODUCTION

Investment is saving money and engaging them with the expectation of earning profit in future. A mutual fund is a form of collective investment. It is a pool of money collected from various investors which is invested according to the stated investment objective Mutual fund is supposed to be a better avenue for the individual investor. Tax saving mutual funds is also known as Equity Linked Saving tax saving mutual funds which provides all the benefits along with tax exemption on their investment. These schemes offer tax rebates to the investors under specific provisions of the Indian Income This study is done in comparison of top 10 tax saving mutual fund in India , and analyze which is best among them. IMPORTANCE OF STUDY A Accesses is required to pay some portion of his income as tax to the government. This portion depends on the tax slab of the concerned financial years slabs which may change at the end of the financial year. To enhance the investment habits of the individuals government has given some areas of investment as tax free investment i.e .mutual fund by investing in these sections an accesses is barred from paying tax. That means he/she can save tax. But accesses were not aware of these tax saving investment avenues by investing in which can save the tax. This problem laid down the need of tax planner to guide the accesses about the various tax saving mutual funds. Hence above said problem laid down the importance of the study.

3. COMPANY PROFILE
3.1) ABOUT MONEY PLANT CONSULTING Moneyplant Consulting Group facilitates outsourcing the non-core activities and provides knowledge-driven financial services. Moneyplant Consulting Group is a premier outsourcing & a financial services provider which aims to offer solutions for financial needs and queries of individuals. They are a leading wealth management, capital markets and advisory company with over 100 man years of consulting & investing experience. Moneyplant Consulting Group was promoted by Mr. Rishabh Parakh (Director). He holds a professional degree of CA from the Institute of Chartered Accountants of India. He started Money Plant Consulting with an aim to outsource the non-core activities of corporate clients and to offer personal income tax/ financial market related services to individual clients. Since its Inception they have been successful in providing seamless service and significant advantage for clients with their extremely competent team of qualified professionals comprising CA's and MBA's & in house Knowledge pool of financial markets, instruments and products. Their aim is to ensure that clients benefit from the professional expertise, technical knowledge and experience. They have been recognized for expertise in the financial arena by highly reputed institutions and clients. They strive to provide transparent, ethical and research-based investments and wealth management services.

3.2) Organization Hierarchy

The organization is headed by Rishabh Parakh who is the founder and director. The organization has 3 departmental heads vis--vis HR & Admin

Operations and Products & Services.

7

The Finance department is headed by the director himself. The organization is 60 employee strong Employees are from diverse backgrounds like CAs, MBAs and Software professionals

3. 3) CORE FUNCTIONS OF MONEY PLANT CONSULTING GROUP

a) Fund management 1. Loan syndication & project Appraisal 2. Deployment of surplus funds 3. Decision on short/long term investment planning b) Insurance:

The firm has experience in Life & General Insurance advisory, which covers following types of risks:
a. Online Health & Marine insurance b. Commercial & Liability insurance, etc c. Group gratuity & group term insurance

c) Taxation 1. Consultation on income tax & fringe benefit tax 2. Assessment and Appellate proceedings 3. Transfer pricing d) Loans

Home loans / Personal loans / Car loans / Credit cards

e) Employees Taxation and Investments

a. Conducting seminar, orientation and induction program for the

employees
b. Preparation & Submission of income tax returns for corporate employees c. Tax & Financial planning f) Investment Advisory services:

The firm has rich experience in advising clients in:1. 2. 3. g) Taxation

Mutual fund investments / Financial planning Deployment of surplus funds Decision on short/long term investments

1 Expert advice on tax planning and salary structuring 2. Assessment and appellate cases 3. Preparation & submission of Tax returns

h) Insurance (Life & General)

1. Health, travel & Car insurance 2. Term insurance / Traditional plans/ ULIP / Pension Plans

3.4) Some of the Corporate Clients with whom Money Plant Shares Professional Relationships with!!!

10

4. INDUSTRY PROFILE
4.1) INDUSTRY PROFILE: MUTUAL FUNDS:
Mutual funds go back to the times of the Egyptians and Phoenicians when they sold shares in caravans and vessels to spread the risk of these ventures. The foreign and colonial government Trust of London of 1868 is considered to be the fore-runner of the modern concept of mutual funds. The USA is, however, considered to be the Mecca of modern mutual funds. By the early - 1930s quite a large number of close - ended mutual funds were in operation in the U.S.A. Much latter in 1954, the committee on finance for the private sector recommended mobilization of savings of the middle class investors through unit trusts. Finally in July 1964, the concept took root in India when Unit Trust of India was set up.

4.2)INDIAN MUTUAL FUND INDUSTRY

The end of millennium marks 36 years of existence of mutual funds in this country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it. UTI commenced its operations from July 1964 .The impetus for establishing a formal institution came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came into existence during a period marked by great political and economic uncertainty in India. With war on the borders and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital market. The already existing companies found it difficult to raise fresh capital, as investors did not respond adequately to new issues. Earnest efforts were required to canalize savings of the community into productive uses in order to speed up the process of industrial growth. The then Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that would be "open to any person or institution to purchase the units offered by the trust. However, this institution as we see it, is intended to cater to the needs of individual investors, and even among them as far as possible, to those whose means are small." His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the twin objectives of mobilizing retail savings and investing those savings in the capital market and passing on the benefits so accrued to the small investors. UTI commenced its operations from July 1964 "with a view to encouraging savings and investment and participation in the income, profits and gains accruing to the Corporation
11

from the acquisition, holding, management and disposal of securities." Different provisions of the UTI Act laid down the structure of management, scope of business, powers and functions of the Trust as well as accounting, disclosures and regulatory requirements for the Trust. One thing is certain the fund industry is here to stay. The industry was one-entity show till 1986 when the UTI monopoly was broken when SBI and Can bank mutual fund entered the arena. This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public sector banks. Starting with an asset base of Rs. 25 crore in 1964 the industry has grown at a compounded average growth rate of 27% to its current size of Rs.90000 crore.
The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs). From one player in 1985 the number increased to 8 in 1993. The party did not last long. When the private sector made its debut in 1993-94, the stock market was booming. The openings up of asset management business to private sector in 1993 saw international players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros and Capital International along with the host of domestic players join the party. But for the equity funds, the period of 1994-96 was one of the worst in the history of Indian Mutual Funds.

1999YEAR OF THE FUNDS

Mutual funds have been around for a long period of time to be precise for 36 yrs but the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MFs. This time around all the participants are involved in the revival of the funds ----- the AMCs, the unit holders, the other related parties. However the sole factor that gave lifer to the revival of the funds was the Union Budget. The budget brought about a large number of changes in one stroke. An insight of the Union Budget on mutual funds taxation benefits is provided later.

It provided centre stage to the mutual funds, made them more attractive and provides acceptability among the investors. The Union Budget exempted mutual fund dividend given out by equity-oriented schemes from tax, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds they wanted to talk business which would mean to increase asset base, and to get asset base and investor base they had to be fully armed with a whole lot of schemes for every investor .So new schemes for new IPOs were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves
12

and were all out on winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI) One can say that the industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly and openly discussing difficulties opportunities and compulsions.
First Phase 1964-87:

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds):

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990 At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds):

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust
13

of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003 In February 2003:

Following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

14

5. SCOPE OF STUDY
The study was carried out for a period of 60 days, in which the main focus was to study the performance of the top 10 tax saver mutual fund . For this the data collected for the period of approximately NAV values of 5 years, risk and 10 years returns of the schemes performance and tax savings .This study is conducted as internship training at Money Plant Consulting, a leading Chartered Accounting Firm in Pune from June 2012 to July 2012

5.1) OBJECTIVES
To study the tax savings scheme on mutual funds, and its performance in the market. To know which tax saver fund is best among them.

15

6. RESEARCH METHODOLOGY

Research Methodology refers to search of knowledge .one can also define research methodology as a scientific and systematic search for required information on a specific topic. The word research methodology comes from the word advance learner s dictionary meaning of research as a careful investigation or inquiry especially through research for new facts in my branch of knowledge for example some author have define research methodology as systematized effort to gain new knowledge.

6.1)Data Collection
Once the research objective and design are through, the next and most important step is collection. Data are facts, figure and other parameters from both past and present which serves as a basis for study and analysis Data is classified as follows6.2) Primary Data Primary data is that data is collected for a specific purpose. It is customized according to the needs of the researcher and focuses exclusively on the current problem. It requires a great deal of resources and skill sets in collection of primary data. In this particular research problem, it was a paramount importance to garner primary data as there was very little available by way of previous of Secondary data.

16

6.3) Secondary Data: The data required for the study may be collected either from primary sources or from secondary sources. A major portion of the data in this study has been collected through secondary sources of data.

Secondary data sources include: Published material and annual reports of mutual fund companies Other published material of mutual funds. Research based online portals. Unpublished sources also.

Sample Profile: The sample required for the study has been selected through top 10 available list of mutual fund tax saving schemes in the market.

17

7.Therotical Background
7.1) Mutual fund: An Introduction
DEFINITION The securities and Exchange Board of India (Mutual Funds) Regulation, 1993 defines a mutual fund a fund established in the form of a trust by a sponsor, to raise monies by the trustees through the sale of units to the, public, under one or more schemes, for investing in securities in accordance with these regulations According to Weston J. Fred and Brigham, Eugene, F, Unit trusts are corporations which accept dollars from savers and then use these dollars to buy stock, long term bonds, short term debt instruments issued by business or government units; these corporations pool funds and thus reduce risk by diversification. A mutual fund is a form of collective investment. It is a pool of money collected from various investors which is invested according to the stated investment objective. The fund manager is the person who invests the money in different types of securities according to the predetermined objectives. The portfolio of a mutual fund is decided taking into consideration this investment objective. Mutual fund investors are like shareholders and they own the fund. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. The value of the investments can go up or down, changing the value of the investors holding. Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in.

18

The investment in securities through mutual funds is spread across wide range of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction at the same time. Various fund houses issue units to the investors in accordance with the quantum of money invested by them. Investors of mutual funds are known as unit holders. In India a mutual fund is required to be registered with Securities Exchange Board of India [SEBI] which regulates the securities market.

19

7.2) ADVANTAGES OF INVESTING IN MUTUAL FUNDS:

There are several that can be attributed to the growing popularities and suitability of mutual funds as an investment vehicle especially for retail investors.

Professional management:
Mutual funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analysis the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification:
Mutual funds invest in a number of companies across a broad cross- section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the sane time and in the same proportion. You achieve this diversification through a mutual fund with far less money than you can do on your own.

20

Convenient administration:
Investing in a mutual fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payment and follow up with brokers and companies. Mutual funds save your time and make investing easy and convenient.

Return potential:
Over a medium to long term, mutual funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

Low costs:
Mutual funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Liquidity:
In open ended schemes, the investors get the money back promptly at net asset value related prices from the mutual fund. In closed end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by mutual fund.

Transparency:
You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook.

Flexibility:
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
21

Affordability:
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investmentstrategy.

Choice of schemes:
Mutual funds offer a family of schemes to suit your varying needs over a lifetime.

7.3) Importance of Mutual Fund:

Small investors face a lot of problems in the share market, limited resources, lack of professional advice, lack of information etc. Mutual funds have come as a much needed help to these investors. It is a special type of institutional device or an investment vehicle through which the investors pool their savings which are to be invested under the guidance of a team of experts in wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on investment. It forms an important part of the capital market, providing the benefits of a diversified portfolio and expert fund management to a large number, particularly small investors. Now days, mutual fund is gaining its popularity due to the following reasons.

22

With the emphasis on increase in domestic savings and improvement in deployment of investment through markets, the need and scope for mutual fund operation has increased tremendously. The basic purpose of reforms in the financial sector was to enhance the generation of domestic (Tripathy, Mutual Fund in India: A Financial Service in Capital . . . 87) resources by reducing the dependence on outside funds. This calls for a market based institution which can tap the vast potential of domestic savings and chanalise them for profitable investments. Mutual funds are not only best suited for the purpose but also capable of meeting this challenge. An ordinary investor who applies for share in a public issue of any company is not assured of any firm allotment. But mutual funds who subscribe to the capital issue made by companies get firm allotment of shares. Mutual fund latter sell these shares in the same market and to the Promoters of the company at a much higher price. Hence, mutual fund creates the investors confidence. The psycho of the typical Indian investor has been summed up by Mr. S. A. Dave, Chairman of UTI, in three words; Yield, Liquidity and Security. The mutual funds, being set up in the public sector, have given the impression of being as safe a conduit for investment as bank deposits. Besides, the assured returns promised by them have investors had great appeal for the typical Indian investor. As mutual funds are managed by professionals, they are considered to have a better knowledge of market behaviors. Besides, they bring a certain competence to their job. They also maximize gains by proper selection and timing of investment. Another important thing is that the dividends and capital gains are reinvested automatically in mutual funds and hence are not fritted away. The automatic reinvestment

23

feature of a mutual fund is a form of forced saving and can make a big difference in the long run. The mutual fund operation provides a reasonable protection to investors. Besides, presently all Schemes of mutual funds provide tax relief under Section 80 L of the Income Tax Act and in addition, some schemes provide tax relief under Section 88 of the Income Tax Act lead to the growth of importance of mutual fund in the minds of the investors. As mutual funds creates awareness among urban and rural middle class people about the benefits of investment in capital market, through profitable and safe avenues, mutual fund could be able to make up a large amount of the surplus funds available with these people. The mutual funds attracts foreign capital flow in the country and secure profitable investment avenues abroad for domestic savings through the opening of off shore funds in various foreign investors. Lastly another notable thing is that mutual funds are controlled and regulated by S E B I and hence are considered safe. Due to all these benefits the importance of mutual fund has been increasing.

7.4) TYPES OF MUTUAL FUND SCHEMES

BY STRUCTURE: OPEN ENDED SCHEME CLOSED ENDED SCHEME INTERVAL SCHEME

24

BY INVESTMENT OBJECTIVE: GROWTH SCHEME INCOME SCHEME MONEY MARKET SCHEME

OTHER SCHEMES: TAX SAVING SCHEME SPECIAL SCHEME INDEX SCHEME

Mutual Fund broadly classified into TWO categories: 1. Open Ended Scheme funds 2. Closed Ended Scheme funds Now discuss details regarding above funds OPEN - ENDED SCHEME FUND: The concept of these funds is that the investors are free to enter or exit the scheme at any point of time during the fund period. The investors can purchase/ sale units of mutual fund through mutual fund trust. The prices at which the units are purchased/ sold depend on the NAV of the fund. At that point of time as specified by the funds. The NAV of fund is the current market value of their investments. Besides the Net Asset Value, certain funds take an additional charge from the investors in the form of Entry load or Exit load. CLOSED ENDED SCHEME FUND: In the care of close ended fund, the investors have to look their funds with the trust for particular periods of time as a specified y the terms of the offer. The main problem for the investor is that they cannot move in out of the fund freely. In the case of
25

Closed Ended schemes the prices of the units are calculated in the same manner as in the case of Open Ended schemes. However these schemes do not charge an Entry/ Exit load as in the case of open ended scheme. INTERVAL SCHEME FUND: The concept of these funds is that the investors are free to Enter/ Exit the scheme at any point of time during the fund period and the investors have to lock their funds with the trust for a particular periods of time as a specified by the terms of the offer. GROWTH FUND: It is primarily look for growth of capital such funds invests in shorter with potential for growth and capital appreciation. They invest in well established companies where the company it self and the industry in which it operates are thought to have well long term growth potential and hence growth fund provide low current income. Growth potential generally incurred higher risks than Income Fund, in an effort to secure more pronounced growth. Some growth funds concentrate on one or more industry sectors and also invest in a Broad range of industries. Growth funds are suitable for investors who can offer to assume the risk of potential loss in value their investment in the short term in the hope of achieving substantial and risings gains. Eventually they are not suitable for investors who must conserve their principal or who must maximize current income.

GROWTH AND INCOME FUND: Growth and Income funds seek long term growth of capital as well as current income. The investment strategies used to reach there goals very among funds. Some invest in a dual portfolio consisting of growth stock and income stocks, or a combination of growth stocks paying high dividends preferred stock, convertible

26

securities or fixed income securities such as corporate bonds and money market instruments. Growth and Income funds have low to moderate stability of principal and moderate potential for current income and growth they are suitable for investors who can assume some risk to achieve growth of capital but who also want to maintain a moderate level of current income. MONEY MARKET SCHEME: It is invested only in high liquidity; short- term top rated money market instruments. Money market funds are suitable for investors who want high stability of principal and current income with immediate liquidity.

TAX SAVING SCHEME:

These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds. Section 80c has come as a boon to investors who have an appetite for risk . In the current year; an individual assessee now has the flexibility to invest the Rs 100000 that is allowed uncer section 80/c in any proportion that he wishes (only in PPF is there an upper limit of Rs 70000 pa) in specified instruments. Naturally, those with a risk appetite should be looking at increase their exposure to tax-saving funds. But now Tax Benefit will get up to Rs 1,00,000 . Tax saving funds are simply equity funds that have mandatory lock-in of three years. The lock-in is one of the key strengths of such funds; it allows the fund manager to invest for the longterm and also saves him from the pressures of managing

27

fund inflows and outflows on a day-to-day basis. In case of tax-savings funds, the fund outflows are known relatively well in advance and therefore can be planned for.

7.5) SELECTION OF A FUND

Objective of the fund: The Fund whether income oriented or growth oriented. Consistency of performance: a mutual fund is always intended to give steady long term returns; hence the investors should measure the performance of a fund over a period of at least three years. Historical background: The success of any fund depends upon the competence of the management, its integrity, periodicity and experience. Cost of Operation: Mutual funds seek to do a better job of the investible funds at a lower cost the he investible fund at lower cost. The investors compare with their funds with others. Capacity of innovation: Some companies introduced innovation schemes to meet the diverse needs of investors. Investors will look for funds which are capable of introducing innovation in the financial market. Investor servicing: The most important factor is prompt and efficient servicing. Service like quick response to investors queries, prompt dispatch of unit certificates, quick transfer of units etc.,

7.6) DISADVANTAGES OF MUTUAL FUNDS:

Professional Management- Did you notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate over whether or not the so-called professionals are any better than you or I at picking stocks.
28

Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut. Costs - Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject. Dilution - It's possible to have too much diversification because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. Taxes - When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

7.7) RISKS ASSOCIATED WITH MUTUAL FUNDS

Investing in mutual funds, as with any security, does not come without risk. One of the most basic economic principles is that risk and reward are directly correlated. In other

29

words, the greater the potential risk the greater the potential return. The types of risk commonly associated with mutual funds are: Market risk: Market risk relates to the market value of a security in the future. Market prices fluctuate and are susceptible to economic and financial trends, supply and demand, and many other factors that cannot be precisely predicted or controlled. Political risk: Changes in the tax laws, trade regulations, administrated prices, etc are some of the many political factors that create market risk. Although collectively, as citizens, we have indirect control through the power of our vote individually, as investors, we have virtually no control. Inflation risk: Interest rate risk relates to futures changes in interest rates. For instance, if an investor invests in a long term debt mutual fund scheme and interest rates increase, the NAV of the scheme will fall because the scheme will be end up holding debt offering lower interest rates. Business risk: Business risk is the uncertainty concerning the future existence, stability, and profitability of the issuer of the security. Business risk is inherent in all business ventures. The future financial stability of a company cannot be predicted or guaranteed, nor can the price of its securities. Adverse changes in business circumstances will reduce the market price of the companys equity resulting in proportionate fall in the NAV of the mutual fund scheme, which has invested in the equity of such a company. Economic risk:

30

Economic risk involves uncertainty in the economy, which, in turn, can have an adverse effect on a companys business. For instance, if monsoons fail in a year, equity stocks of agriculture based companies will fall and NAVs of mutual funds, which have invested in such stocks, will fall proportionately.

7.8) PERFORMANCE MEASURE OF MUTUAL FUNDS:

Net Asset Value (NAV):

31

The question is ,however, is whether the performance of open end mutual fund companies of managed funds in terms of performance is better than the performance of investments made by an individual because of portfolios are equally important whether they are invested by managed trust or by an individual. Mutual fund invest the money collected from the investors in securities markets .Market value of securities change every day. This is the reason that NAV also varies from day-to-day. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular day.

Costs in Mutual Fund Investments:

Mutual fund have different kind of expenses in order to run the business enterprise. These costs are called Operating cost. These costs are administrative cost ,consultation fees, given to trustees and expenses on brokerage ,they are also called as Expense Ratio. The operating cost are deducted from the closing NAV assets. This cost is spread out on the unit holders as they receive a reduced NAV to cover the costs of the Mutual Fund.

Return From Mutual Fund:

A Mutual Fund investment provides a return in a form of annual dividends and distribution of capital gains. Returns are calculated by taking into consideration dividends, capital gains, NAV in the beginning of the period and NAV in the end of the period.

Sharpes Ratio:
The Sharpes performance measures makes a measurement of the risk premium of portfolios. This measures adjust the performance of the risk While a high and positive Sharpe ratio shows a superior risk adjusted performance of a fund, a low and negative Sharpe ratio is an indication of unfavorable performance.

Standard Deviation
32

Standard Deviation measures the fluctuations of a fund`s returns around a mean level. Standard Deviation is the best measure of risk

Beta Coefficient :
Beta relates a fund`s return with a market index and measures the sensitivity of the fund`s returns to change in market index. A beta of 1 means the fund moves with market. A beta of less than one means the fund will less volatile than the market.

ExMarks or a number known as R-Squared:

How much of a fund`s fluctuations is attributable to movements in the overall market from 0 to 100 percent.An index fund will have ExMarks of nearly 100%. Non Diversified funds will have lower ExMarks.

Alpha:
Risk adjusted performance calculation is called Alpha. Alpha of a fund compares the fund`s actual results with what would have been expected given the fund`s beta and the market index performance.

33

8. Data Analysis

8.1) Birla Sun Life Tax Relief 1996 Funds Objective And Strategy:
The scheme seeks long-term capital growth and will invest approximately 80 per cent of its assets in equity, while the balance would be a invested in debt and money market instrument. It was converted to an open-ended scheme with effect from July 1999.
34

AMC: Birla Sun Life Asset Management Company Ltd Register: Computer Age Management Services Ltd. Benchmark: BSE 200 Min Investment (Rs.):500 Net Assets: Rs. 1349.4 crore Entry Load and Exit Load: Nil Fund Manager: Ajay Garg. For Dividend:NAV Rs/Units: 71.77 Inception Date: Mar 29, 1996 AMC Asset (Rs in Cr): 67,205.95 For Growth:NAV Rs/Units: 10.40 Inception Date: Mar 06, 2008 AMC Asset (Rs in Cr): 67,205.95 Portfolio Characteristics: Total Stock: 58 Average Market Capitalization (Rs in Cr): 25554 Portfolio P/ B Ratio: 4.27 Portfolio P/E ratio : 23.50 Asset Allocation Percentage (%): Asset Allocation
Equity Others Debt Mutual Funds Money Market

Percentage held
97.73 0 0 0 0 35

Cash/Call

2.29

Top 10 Sector Weights (%):

Top holdings:
Company
Tata Consultancy Services Reliance Industries ICICI Bank

Sector
Technology Energy Financial
36

P/E Rs.
22.10 13.60 16.10

Year Returns
13.93 12.87 39.60

% Assets
5.22 5.03 4.66

HDFC Bank Financial 25.60 39.64 4.37 HDFC Financial 25.70 11.32 3.97 ING Vysya Bank Financial 11.60 28.94 3.46 Larsen & Toubro Diversified 19.20 42.82 3.27 Axis Bank Financial 10.20 33.42 3.13 ICRA Financial 21.10 45.28 2.83 Honeywell Automation Engineering 28.80 47.08 2.60 ITC FMCG 32.10 31.72 2.41 Bosch Automobile 23.60 28.16 2.39 Grasim Industries Diversified 24.50 20.89 2.32 Bayer CropScience Diversified 21.60 37.05 2.21 Hindustan Unilever FMCG 32.40 27.23 2.20 Yes Bank Financial 12.00 44.55 2.02 Cummins India Engineering 21.50 31.47 1.98 MRF Automobile 5.70 53.20 1.89 Sun Pharmaceutical Inds. Healthcare 38.50 33.92 1.80 Tata Motors Automobile 63.50 37.89 1.79 Century Textiles & Inds. Diversified 41.16 1.71 Zee Entertainment Ent. Services 26.00 40.91 1.63 Infosys Technology 16.60 -11.56 1.49 Jet Airways India Services 122.96 1.44 Shopper's Stop Services 57.00 34.13 1.42 In the Tata Consultancy Service and Reliance Industry more percentage of assets are invested but year to date return is less. Jet Airways India is giving more return than the invested percentage of assets and that return is more than the company which hold major role in the portfolio of investment wheres HDFC gives less return and the Infosys is giving loss in investment . Technology section gives less return than the invested percentage of assets where as Service and automobile section gives more return. Healthcare, Service and FMCG sector gives more P/E ratio up to year to date Tata motors P/E ratio is more than other companys. Where the percentage of assets is less gives more return than the assets having more percentage are invested.

8.2) Canara Robeco Equity Tax Saver Funds Objective And Strategy:
The scheme, earlier known as Canpep '93 seeks capital appreciation by investingaround 85-95 per cent of the corpus in equity and debt instruments. Exposure to money market

37

instruments would be upto 15 per cent of the corpus. The scheme has been converted in to an openended plan from May 1999 AMC: Canara Robeco Asset Management Company Ltd Register: Karvy Computershare Pvt Ltd.. Benchmark: BSE 100 Min Investment (Rs.):500 Net Assets: Rs. 420.1 crore Entry Load and Exit Load: Nil Fund Manager: Soumendra Nath Lahiri Inception Date: Mar 31, 1993 For Dividend:NAV Rs/Units: 17.67 AMC Asset (Rs in Cr): 7,579.91 For Growth:NAV Rs/Units: 26.53 AMC Asset (Rs in Cr): 7,579.91 Portfolio Characteristics: Total Stock: 54 Average Market Capitalization (Rs in Cr): 32410 Portfolio P/ B Ratio: 4.64 Portfolio P/E ratio : 19.89 Asset AllocationPercentage (%): Asset Allocation
Equity Others Debt Mutual Funds Money Market Cash/Call Percentage Hold 92.95 0.27 0 0 6.84 -0.06

38

Top 10 Sector Weights (%):

Top Holdings:

Company
HDFC Bank ICICI Bank Infosys ITC

Sector
Financial Financial Technology FMCG
39

P/E Rs.
25.60 16.10 16.60 32.10

Year % Assets Returns

39.64 39.60 -11.56 31.72 6.60 5.46 4.39 4.02

Larsen & Toubro Tata Consultancy Services Reliance Industries State Bank of India ING Vysya Bank Bharti Airtel HDFC BPCL Hindustan Unilever Ashoka Buildcon Maruti Suzuki India Glaxo Consumer Healthcare Oil India Indusind Bank Colgate-Palmolive (I) Wabco India Divi's Laboratories Power Grid Corp. Ipca Laboratories Hathway Cable & Datacom IDFC

Diversified Technology Energy Financial Financial Communication Financial Energy FMCG Construction Automobile FMCG Energy Financial FMCG Automobile Healthcare Energy Healthcare Communication Financial

19.20 22.10 13.60 9.30 11.60 16.40 25.70 32.40 12.50 22.60 30.00 8.20 18.10 34.70 18.40 25.70 15.90 18.90 13.00

42.82 13.93 12.87 17.00 28.94 -27.68 11.32 -25.99 27.23 34.28 29.37 12.13 0.56 45.80 19.07 35.77 52.45 17.42 49.18 61.87 55.26

3.56 3.33 2.97 2.90 2.60 2.60 2.56 2.22 2.15 2.00 1.84 1.69 1.67 1.56 1.53 1.53 1.48 1.47 1.41 1.35 1.34

HDFC Bank And ICICI Bank are having more percentages of assets are holding. In this fund the mostly investment is in the financial sector. IDFC and Hathway Cable & Datacom are hving more year returns than other companies whereas Bharti Airtel is giving less returns in the year. In this fund FMCG sector companies such as ColgatePalmolive (I) and Hindustan Unilever, ITC are having more P/E ratio than other sectorwise companies. IDFC, Hathway Cable & Datacom are having less percent of assets but returns are more

8.3) HDFC Tax Saver Funds Objective And Strategy:

The scheme seeks capital appreciation with at least 80 per cent exposure to equities, FCDs, preference shares and bonds of companies AMC: HDFC Asset Management Company Ltd
40

Register: Computer Age Management Services Ltd.

Asset Allocation Equity Others Debt Mutual Funds Money Market Cash/Call Percentage Hold 79.88 13.85 0 0 0 6.28

Benchmark : S&P CNX 500 Min Investment (Rs.):500 Net Assets: Rs. 3149.8 crore Entry Load and Exit Load: Nil Fund Manager: Rakesh Vyas

For Dividend:NAV Rs/Units: 49.16 Inception Date: Dec 18, 1995 AMC Asset (Rs in Cr): 92,624.52 For Growth:NAV Rs/Units: 216.34 Inception Date: Dec 18, 1995 AMC Asset (Rs in Cr): 92,624.52 Portfolio Characteristics: Total Stock: 35 Average Market Capitalization (Rs in Cr): 23343 Portfolio P/ B Ratio: 4.08 Portfolio P/E ratio : 17.72

Asset Allocation Percentage (%):

41

Top 10 Sector Weights (%):

Top Holdings:

Company
State Bank of India ITC ICICI Bank Infosys

Sector
Financial FMCG Financial Technology
42

P/E Rs.
9.30 32.10 16.10 16.60

Year Returns
17.00 31.72 39.60 -11.56

% Assets
6.43 4.63 4.20 3.92

Tata Consultancy Services Technology 22.10 13.93 3.66 Ipca Laboratories Healthcare 18.90 49.18 3.51 Larsen & Toubro Diversified 19.20 42.82 3.27 BPCL Energy -25.99 3.03 Bharti Airtel Communication 16.40 -27.68 2.85 Tata Motors DVR Automobile 67.80 2.74 Oil India Energy 8.20 0.56 2.42 Britannia Inds. FMCG 30.30 8.17 2.33 Coal India Energy 28.00 21.95 2.28 Carborundum Universal Metals 20.50 8.81 2.24 NTPC Energy 14.60 5.01 2.17 Cipla Healthcare 23.00 14.82 2.15 Bharat Electronics Engineering 15.40 -8.73 2.09 Bank of Baroda Financial 5.20 -2.59 2.08 Divi's Laboratories Healthcare 25.70 52.45 1.98 Petronet LNG Energy 10.60 -2.60 1.90 Axis Bank Financial 10.20 33.42 1.78 Glaxo Consumer FMCG 30.00 12.13 1.76 Healthcare P&G Hygiene & Health FMCG 40.50 21.98 1.65 Care Tata Steel Metals 6.60 15.65 1.55 Others Others 13.85 State Bank of India and ITC are having more percentage of assets than the other companies. P&G Hygiene & Health Care and Tata Steel are having less percentage of assets. In this scheme Healthcare section is having greater returns as compare to other sectors. Ipca Laboratories and Divi's Laboratories are giving more returns than other companies. Energy section is having less returns as compare to other sectors. Bharti Airtel company is giving less return than other companies. FMCG sector is providing more P/E ratio than other sectors. Glaxo Consumer Healthcare and P&G Hygiene & Health Care are having more P/E ratio than other companies. 8.4) ICICI Prudential Tax Plan

Funds Objective And Strategy:

The scheme seeks long-term capital appreciation by investing approximately 90 percent of the investments in equity instruments, while the balance 10 per cent would be a parked in debt and money market instrument and cash ( Including-money at call).

43

AMC: ICICI Prudential Asset Mangement Company Ltd Register: Computer Age Management Services Ltd. Benchmark : S&P CNX 500 Min Investment (Rs.):500 Net Assets: Rs 1295.1 crore Entry Load and Exit Load: Nil Fund Manager: Atul Patel For Dividend:NAV Rs/Units: 17.74 Inception Date: Aug 09, 1999 AMC Asset (Rs in Cr): 73,049.66 For Growth:NAV Rs/Units: 139.65 Inception Date : Aug 09, 1999 AMC Asset (Rs in Cr): 73,049.66 Portfolio Characteristics: Total Stock: 53 Average Market Capitalization (Rs in Cr): 30138 Portfolio P/ B Ratio: 2.55 Portfolio P/E ratio : 22.06 Asset Allocation Percentage (%):
Asset Allocation Equity Others Debt Percentage Hold 95.24 0 0 44

Mutual Funds Money Market Cash/Call

0 0 4.77

Top 10 Sector Weights (%):

Top Holdings: Company Sector

45

P/E Rs.

Year

% Assets

Returns
Reliance Industries Infosys Bharti Airtel ICICI Bank Hindustan Zinc HDFC HDFC Bank Wipro Sundaram Finance ONGC Polyplex Corporation FDC Indian Oil Corp. Piramal Healthcare Cairn India Sterlite Industries State Bank of India Kirloskar Brothers Jindal Steel & Power Gujarat State Petronet Satyam Computer Services Coal India Vardhman Textiles Cadila Healthcare Texmaco Rail & Energy Technology Communication Financial Metals Financial Financial Technology Financial Energy Chemicals Healthcare Energy Healthcare Energy Metals Financial Engineering Metals Services Technology Energy Textiles Healthcare Engineering 13.60 16.60 16.40 16.10 9.90 25.70 25.60 19.30 12.20 8.90 7.90 11.10 251.20 55.70 9.30 274.50 23.00 8.50 9.10 28.00 7.30 28.10 11.70 12.87 -11.56 -27.68 39.60 8.99 11.32 39.64 -8.48 69.53 11.73 1.00 1.61 -1.69 32.76 9.43 25.28 17.00 19.47 -12.24 1.28 54.31 21.95 34.48 24.50 -5.48 10.19 8.86 5.56 4.06 3.43 3.10 2.87 2.79 2.78 2.35 2.08 2.06 1.97 1.94 1.91 1.87 1.85 1.79 1.79 1.74 1.68 1.65 1.32 1.32 1.26

Reliance Industries and Infosys are the companies which are holding greater percentage of assets. This scheme is majority invested in Energy sector. Piramal Healthcare and Kirloskar Brothers are having more P/E ratio than other companies which is higher in other fund schemes also. Sundaram Finance and Satyam Computer Services are having more return than other companies. Bharti Airtel company is giving less return which are negative. Coal India is having less percent of assets but giving more returns.

8.5) SBI Magnum Tax Gain

Fund Objective & Strategy

46

The scheme seeks capital appreciation through investments in equities, cumulative convertible preference shares and fully convertible debentures and bonds. The scheme was converted into an open-ended plan in November 1999. AMC: SBI Funds Management Ltd Register: Computer Age Management Services Ltd. Benchmark : S&P CNX 500 Min Investment (Rs.):500 Net Assets: Rs. 4518.1 crore Entry Load and Exit Load: Nil Fund Manager: Jayesh Shroff For Dividend:NAV Rs/Units: 33.43 Inception Date: Mar 31, 1993 AMC Asset (Rs in Cr): 47,184.11 For Growth:NAV Rs/Units: 60.87 Inception Date : Mar 31, 1993 AMC Asset (Rs in Cr): 47,184.11 Portfolio Characteristics: Total Stock: 53 Average Market Capitalization (Rs in Cr): 35350 Portfolio P/ B Ratio: 4.95 Portfolio P/E ratio : 23.86 Asset Allocation Percentage (%):
Asset Percentage 47

Allocation Equity Others Debt Mutual Funds Money Market Cash/Call

Hold 96.07 0 0 0 0 3.93

Top 10 Sector Weights (%):

Top Holdings:

48

Company HDFC Bank ICICI Bank Tata Consultancy Services HDFC Grasim Industries Cadila Healthcare ONGC ITC Hindustan Unilever Reliance Industries Blue Dart Express Lupin Infosys Tata Motors BPCL Axis Bank H C L Technologies Shree Cement Mahindra & Mahindra State Bank of India Nestle India S K F India Dr. Reddy's Lab Larsen & Toubro Bharti Airtel

Sector Financial Financial Technology Financial Diversified Healthcare Energy FMCG FMCG Energy Services Healthcare Technology Automobile Energy Financial Technology Construction Automobile Financial FMCG Engineering Healthcare Diversified Communication

P/E Rs. 25.60 16.10 22.10 25.70 24.50 28.10 8.90 32.10 32.40 13.60 39.60 23.80 16.60 63.50 10.20 19.90 44.20 15.80 9.30 44.70 15.30 44.60 19.20 16.40

Year Returns
39.64 39.60 13.93 11.32 20.89 24.50 11.73 31.72 27.23 12.87 24.81 30.09 -11.56 37.89 -25.99 33.42 43.68 56.83 11.63 17.00 12.91 3.38 6.42 42.82 -27.68

% Assets 6.91 6.71 4.59 3.53 3.32 3.06 2.99 2.93 2.60 2.47 2.46 2.36 2.28 2.26 2.22 2.07 2.07 2.04 2.04 2.01 2.00 1.99 1.83 1.68 1.54

HDFC Bank and ICICI Bank are holding major percentage of assets. Larsen & Toubro and Bharti Airtel are holding less percentage of assets. Considering P/E ratio Shree Cement , Nestle India and Dr. Reddy's Lab are having greater P/E ratio whereas ONGC and State Bank of India are having less P/E ratio as compare to other companies. H C L Technologies and Shree Cement, Larsen & Toubro companies are giving more returns than other companies whereas BPCL and Bharti Airtel are giving lesser returns in the year which is negative value. Though Larsen & Toubro having lesser percentage of assets it gives more returns.

8.6) Principal Personal Tax Saver

49

Fund Objective & Strategy

The scheme is due for redemption in 2006. The scheme seeks capital appreciation with at least 80 per cent exposure to equities, FCDs, preference shares and bonds of companies. The scheme can make investments in money market instruments up to 20 percent. The scheme offers liquidity through repurchase at NAV AMC: Principal PNB Asset Management Company Ltd Register: Karvy Computershare Pvt Ltd.. Benchmark : BSE 100 Min Investment (Rs.):500 Net Assets: Rs. 440.4 crore Entry Load and Exit Load: Nil Fund Manager: Anupam Tiwari For Dividend:NAV Rs/Units: 90.75 Inception Date: Aug 26, 2002 AMC Asset (Rs in Cr): 4,660.34 Portfolio Characteristics: Total Stock: 30 Average Market Capitalization (Rs in Cr): 57370 Portfolio P/ B Ratio: 3.89 Portfolio P/E ratio : 21.97

Asset Allocation Percentage (%):

50

Aseet Allocation Equity Others Debt Money Market Mutual Fund Cash/Call

Percentage Hold 95.34 0 0 0 0 4.66

Top 10 Sector Weights (%):

Top Holdings:
51

Company ICICI Bank Reliance Industries HDFC Bank H C L Technologies Infosys ITC State Bank of India Divi's Laboratories Bharti Airtel Oracle Fin Ser Software ONGC Cipla Tata Motors HDFC Jindal Steel & Power Grasim Industries HPCL Bajaj Holdings & Inv Shree Cement BPCL Dr. Reddy's Lab Bajaj Auto Godrej Industries Glaxosmithkline Pharma Sun Pharmaceutical Inds.

Sector Financial Energy Financial Technology Technology FMCG Financial Healthcare Communication Technology Energy Healthcare Automobile Financial Metals Diversified Energy Financial Construction Energy Healthcare Automobile FMCG Healthcare Healthcare

P/E Rs 16.10 13.60 25.60 19.90 16.60 32.10 9.30 25.70 16.40 19.30 8.90 23.00 63.50 25.70 23.00 24.50 16.00 44.20 44.60 16.40 41.60 31.30 38.50

Year Returns
39.60 12.87 39.64 43.68 -11.56 31.72 17.00 52.45 -27.68 56.64 11.73 14.82 37.89 11.32 -12.24 20.89 26.50 18.17 56.83 -25.99 6.42 7.49 42.73 8.27 33.92

% Assets 7.77 7.47 5.91 5.70 5.32 5.26 5.11 4.92 3.90 3.33 3.23 2.96 2.95 2.83 2.72 2.43 2.41 2.41 2.37 2.32 2.21 2.12 1.97 1.85 1.39

ICICI Bank and Reliance Industries are holding more percentage of assets. Glaxosmithkline Pharma and Sun Pharmaceutical Inds. Are holding less percentage of assets. According to returns Oracle Fin Ser Software and Shree Cement are giving more whereas Bharti Airtel and BPCL are giving less returns. Sun Pharmaceutical Inds. Is having less percentage of asset but giving more returns as compare to other companies who is holding more percentage of assets. P/E ratio of Tata Motors and Shree Cement , Dr. Reddy's Lab are higher and State Bank of India is lower. Healthcare sector is having more P/E values than other sectors. 8.7) Franklin India Tax Shield

52

Fund Objective & Strategy The scheme seeks medium to long term growth of capital, with income tax rebate. The scheme invests in equities and there is an exposure to PSU Bonds and debentures and Money Market instruments. AMC: Franklin Templeton Asset Management India Private Ltd Register: Franklin Templeton International Services (India) Private Limited. Benchmark : S&P CNX 500 Min Investment (Rs.):500 Net Assets: Rs. 821.1 crore Entry Load and Exit Load: Nil Fund Manager: Anil Prabhudas For Dividend:NAV Rs/Units: 28.21 Inception Date: Apr 10, 1999 AMC Asset (Rs in Cr): 35,532.66 For Growth:NAV Rs/Units: 215.71 Inception Date : Apr 10, 1999 AMC Asset (Rs in Cr): 35,532.66 Portfolio Characteristics: Total Stock: 55 Average Market Capitalization (Rs in Cr): 28594 Portfolio P/ B Ratio: 3.96 Portfolio P/E ratio : 21.18 Asset Allocation Percentage (%):
53

Asset Allocation Equity Others Debt Mutual Fund Money Market Cash/Call

Percentage Hold 94.75 0 0.03 0 0 5.22

Top 10 Sector Weights (%):

54

Top Holdings:

Company
ICICI Bank Bharti Airtel Infosys HDFC Bank Grasim Industries Indusind Bank Reliance Industries Dr. Reddy's Lab Bosch Kotak Mahindra Bank GMDC Power Grid Corp. Cadila Healthcare ONGC Ipca Laboratories Cummins India Eicher Motors Marico Cipla Axis Bank CRISIL Coal India Mahindra & Mahindra Oracle Fin Ser Software Idea Cellular

Sector
Financial Communication Technology Financial Diversified Financial Energy Healthcare Automobile Financial Energy Energy Healthcare Energy Healthcare Engineering Automobile FMCG Healthcare Financial Financial Energy Automobile Technology Communication

P/E Rs
16.10 16.40 16.60 25.60 24.50 18.10 13.60 44.60 23.60 39.20 12.20 15.90 28.10 8.90 18.90 21.50 37.60 32.20 23.00 10.20 32.40 28.00 15.80 19.30 40.40

Year Returns
39.60 -27.68 -11.56 39.64 20.89 45.80 12.87 6.42 28.16 35.43 19.15 17.42 24.50 11.73 49.18 31.47 48.02 34.29 14.82 33.42 3.38 21.95 11.63 56.64 -8.41

% Assets
7.98 6.55 5.55 5.03 4.60 3.00 2.79 2.74 2.66 2.35 2.13 2.12 2.08 2.02 2.00 2.00 1.99 1.97 1.91 1.86 1.85 1.79 1.70 1.49 1.47

ICICI Bank and Bharti Airtel are holding more percentage of assets whereas Oracle Fin Ser Software and Idea Cellular are holding less percentage of assets. Oracle Fin Ser Software though having less percentage of assets , it gives more returns than other companies holding more percentage of assets. Bharti Airtel and Infosys are giving less returns in the year. Dr. Reddy's Lab and Idea Cellular are having higher P/E values whereas ONGC is having less P/E ratio.in this fund Communication sector is mostly giving negative returns.

55

8.8) Sundaram Tax Saver

Fund Objective & Strategy

The scheme is aimed at generating long-term capital appreciation. Equity investments would account for at least 80 per cent of the corpus, while it can go up to 100 per cent. Exposure to Corporate and PSU bonds and Money market instruments can go up to 20 per cent of the corpus. AMC: Sundaram Asset Management Company Ltd Register: Sundaram BNP Paribas Fund Services. Benchmark: BSE 200 Min Investment (Rs.):500 Net Assets: Rs. 1339.4 crore Entry Load and Exit Load: Nil Fund Manager: Srividhya Rajesh For Dividend:NAV Rs/Units: 10.16 Inception Date: Nov 22, 1999 AMC Asset (Rs in Cr): 13,228.41 For Growth:NAV Rs/Units: 43.09 Inception Date : Nov 22, 1999 AMC Asset (Rs in Cr): 13,228.41 Portfolio Characteristics: Total Stock: 54 Average Market Capitalization (Rs in Cr): 25732 Portfolio P/ B Ratio: 3.14 Portfolio P/E ratio: 21.18
56

Asset Allocation Percentage (%)

Asset Allocation Equity Others Debt Mutual Fund Money Market Cash/Call Percentage Hold 89.36 0 0 0 0 10.64

Top 10 Sector Weights (%):

57

Top Holdings:

Company
Infosys Cipla Larsen & Toubro Bharti Airtel ICICI Bank IDFC Bajaj Finance Reliance Industries Karur Vysya Bank BHEL GAIL Indusind Bank State Bank of India Indraprastha Gas Mphasis CESC H C L Technologies ONGC Ambuja Cements Bajaj Finserv Axis Bank Tata Motors

Sector
Technology Healthcare Diversified Communication Financial Financial Financial Energy Financial Engineering Energy Financial Financial Services Technology Energy Technology Energy Construction Financial Financial Automobile
58

P/E Rs
16.60 23.00 19.20 16.40 16.10 13.00 9.80 13.60 8.20 8.00 12.20 18.10 9.30 11.70 12.50 6.90 19.90 8.90 23.40 172.10 10.20 63.50

Year Returns
-11.56 14.82 42.82 -27.68 39.60 55.26 79.53 12.87 16.17 -3.28 -4.48 45.80 17.00 -30.24 25.84 55.09 43.68 11.73 22.46 91.32 33.42 37.89

% Assets
4.21 4.07 3.68 3.62 3.39 3.35 3.27 2.99 2.87 2.67 2.64 2.60 2.54 2.47 2.35 2.27 2.24 2.23 2.16 1.95 1.86 1.81

Hindustan Unilever FMCG 32.40 27.23 1.60 Tata Consultancy Services Technology 22.10 13.93 1.49 Cummins India Engineering 21.50 31.47 1.44 Infosys and Cipla are holding more percentage of assets whereas Tata Consultancy Services and Cummins India are holding less percentage of assets. Infosys is having more percentage of asset buy giving negative returns . Cummins India is having less percentage of asset but giving more returns in the year. Bharti Airtel and Indraprastha Gas are giving negative returns. Bajaj Finserv, ICICI Bank and Bajaj Finance are giving more returns in the year. In this fund finance sector is giving more return than other sectors. Bajaj Finserv is having highest P/E ratio whereas CESC is having lowest P/E ratio

8.9) Sahara Tax Gain Fund Objective & Strategy

The scheme is due for redemption in 2007. The scheme seeks to provide immediate tax relief and long term capital appreciation through investment primarily in equities. AMC: Sahara Asset Management Company Ltd Register: Karvy Computershare Pvt Ltd. Benchmark: BSE 200 Min Investment (Rs.):500 Net Assets: Rs. 11.3 crore Entry Load and Exit Load: Nil Fund Manager: A N Sridhar For Dividend:NAV Rs/Units: 13.89 Inception Date: Apr 01, 1997 AMC Asset (Rs in Cr): 787.17 For Growth:59

NAV Rs/Units: 37.00 Inception Date : Apr 01, 1997 AMC Asset (Rs in Cr): 787.17 Portfolio Characteristics: Total Stock: 48 Average Market Capitalization (Rs in Cr): 11628 Portfolio P/ B Ratio: 4.12 Portfolio P/E ratio: 23.34

Asset Allocation Percentage (%):

Asset Allocation Equity Others Debt Mutual Fund Money Market Cash/Call Percentage Hold 96.43 0 0 0 0 3.57

Top 10 Sector Weights (%):

60

Top Holdings:

Company
ICICI Bank Maruti Suzuki India Tamil Nadu Newsprint Ultratech Cement TTK Prestige Cairn India State Bank of India Engineers India Lupin BPCL Den Networks J B Chemicals & Pharma Coal India VA Tech Wabag Cadila Healthcare Voltamp Transformers KPIT Cummins Infosystems ITC Paper Products United Phosphorus Lumax Industries Bank of Baroda Larsen & Toubro HDFC

Sector
Financial Automobile FMCG Construction Cons Durable Energy Financial Construction Healthcare Energy Services Healthcare Energy Engineering Healthcare Engineering Technology FMCG FMCG Chemicals Automobile Financial Diversified Financial
61

P/E Rs
16.10 22.60 7.50 18.60 32.70 9.30 11.70 23.80 87.90 0.90 28.00 17.50 28.10 16.00 33.00 32.10 9.50 19.50 38.10 5.20 19.20 25.70

Year Returns
39.60 29.37 42.05 48.16 36.63 9.43 17.00 7.10 30.09 -25.99 152.95 6.34 21.95 40.81 24.50 1.49 77.35 31.72 17.46 -10.37 5.01 -2.59 42.82 11.32

% Assets
3.29 2.91 2.90 2.80 2.77 2.71 2.57 2.46 2.41 2.36 2.36 2.35 2.30 2.30 2.28 2.27 2.21 2.21 2.19 2.15 2.12 2.12 2.11 2.07

Power Grid Corp.

Energy

15.90

17.42

2.03

ICICI Bank and Maruti Suzuki India are holding more percentage of assets than other companies. HDFC and Power Grid Corp. are holding less percentage of assets. KPIT Cummins Infosystems and Den Networks are providing higher returns in the year. And BPCL and United Phosphorus are providing lesser returns in the year. Den Networks having P/E ratio Higher and also provided higher returns whereas Bank OF Baroda having Less P/E values.

8.10) Reliance Tax Saver Fund Objective & Strategy

The scheme aims to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments. AMC: Reliance Capital Asset Management Ltd Register: Karvy Computershare Pvt Ltd. Benchmark: BSE 100 Min Investment (Rs.):500 Net Assets: Rs. 1969.8 crore Entry Load and Exit Load: Nil Fund Manager: Viral Berawala For Dividend:NAV Rs/Units: 13.73 Inception Date: Aug 23, 2005 AMC Asset (Rs in Cr): 80,694.47

62

For Growth:NAV Rs/Units: 21.69 Inception Date : Aug 23, 2005 AMC Asset (Rs in Cr): 80,694.47 Portfolio Characteristics: Total Stock: 36 Average Market Capitalization (Rs in Cr): 7392 Portfolio P/ B Ratio: 3.85 Portfolio P/E ratio: 24.67 Asset Allocation Percentage (%):
Asset Allocation Equity Others Debt Mutual Fund Money Market Cash/Call Percentage Hold 91.23 7.18 0 0 0 1.59

Top 10 Sector Weights (%):

63

Top Holdings:

Company
Eicher Motors Maruti Suzuki India Madras Cements Bajaj Finance State Bank of India Divi's Laboratories ICICI Bank Bharat Forge HPCL Sanofi India ABB Siemens Alstom T&D Cummins India Federal Mogul Goetze SML Isuzu Swaraj Engines Info Edge (India) Trent Larsen & Toubro United Spirits Schneider Electric

Sector
Automobile Automobile Construction Financial Financial Healthcare Financial Automobile Energy Healthcare Engineering Engineering Engineering Engineering Automobile Automobile Engineering Services Services Diversified FMCG Engineering
64

P/E Rs
37.60 22.60 10.80 9.80 9.30 25.70 16.10 18.10 29.10 86.20 38.90 31.10 21.50 63.50 12.80 9.40 29.50 58.50 19.20 35.10 81.50

Year Returns
48.02 29.37 84.43 79.53 17.00 52.45 39.60 12.94 26.50 -6.29 27.28 4.24 17.65 31.47 6.53 -2.50 -1.14 -38.81 24.54 42.82 91.09

% Assets
6.31 5.59 4.61 4.25 4.24 4.02 3.97 3.75 3.72 3.48 3.33 3.12 3.06 2.61 2.57 2.56 2.44 2.29 2.23 1.89 1.86 1.82

S K F India Glaxosmithkline Pharma Others

Engineering Healthcare Others

15.30 31.30

3.38 8.27

1.77 1.64 7.19

Eicher Motors and Maruti Suzuki India are having more percentage of assets than other companies whereas Glaxosmithkline Pharma and S K F India are having less percentage of assets. This fund is mostly holding Engineering Sector. United Spirits and Madras Cements are giving more retuns in the year whereas Info Edge is giving less return which is negative. P/E of State Bank of India is lower but ABB and Schneider Electric are having higher P/E values than other companies. FMCG sector is providing more returns in the year.

Comparison Of Return: Peri od Mark Birla et Sun Index Life Tax Relief 96 17.77 19.55 Cana -ra Robe -co Equit y Tax Saver 16.42 HDF C Tax saver ICICI Prudential Tax Plan 21.59 SBI Magnum Taxgain 21.91 Principal Personal Tax Saver 21.32 Frank -lin India Tax Shiel d 15.65 Sund aram Tax Saver Sahar a Tax Gain Reliance Tax Saver

Year To dat-e 1 year 3 year 5 year 7 year 10 year

12.25

20.74

20.00

28.40

7.84 7.10 5.07 10.73 22.41

5.62 4.20 2.58 11.62 20.63

8.71 11.46 12.50 17.44 23.56

2.50 9.77 7.20 13.09 27.84

11.11 12.61 9.50 11.83 27.55

13.37 7.09 5.26 12.57 30.37

9.28 5.27 1.71 10.58 19.68

10.18 11.85 9.72 14.54 24.69

10.87 4.82 8.52 14.88 25.94

6.36 8.87 11.10 15.06 23.63

13.14 12.40 8.17 -

The above table reveals that, For considering the overall performance upto the year 2012 , Canara Robeco Equity Tax Saver and ICICI Prudential Tax Plan are
65

performing more than the Market Index from last 10 year. And Reliance Tax Saver is perfoming good from last 5 year up to this date. The performance of the Birla Sun Life Tax Relief 96 has more than average category of fund for 10 and 7 year performance, but for the last 5, 3 and 1 year performance it is lagging from the all funds in the category. Canara Robeco Equity Tax Saver is performing good from the all funds in the category. It gives good returns in 7 year performance. HDFC Tax saver is perform well in last 10 year but it is lagging last year from the category of all funds so this year return percentage is less than the average return of all funds in the category . ICICI Prudential Tax Plan this fund is given more return than average return of all funds in the category throughout the last 10 year , there is not more difference in average return of all funds in the category up to last year but the last year return is more than the average return of all funds in the category so that year to date return value is increased than the average return of all funds in the category. SBI Magnum Tax-gain is given more return in 10 th year ago but now it just provides return near to the average return of all funds in the category. And last year return percentage is more than the average return of all funds in the category. So year to date return percentage has increased. Principal Personal Tax Saver is in the last 3rd and 5th year percentage is less than the average return of all funds in the category but last 1 year return percentage is more than the average return of all funds in the category as well as last 10 and 7 year performance is more than the average return of all funds in the category. Franklin India Tax Shield is lagging performance in last 5 th year than the average return of all funds in the category but in other year there performance is more than the average return of all funds in the category but year to date performance is lagging from the required return from the market.

66

Sundaram Tax Saver has given last 3rd year return is less than the average return of all funds in the category but in other year it always gives more return than the average return of all funds in the category as well as it is giving year to date return is more than the the average return of all funds in the category. Sahara Tax Gain has its return year to date is more than the average return of all funds in the category. But the last year return is less than the required overall return of the funds category While considering the last 3, 5 ,7 and 10 year return is always more than that of the average return of all funds in the category. Reliance Tax Saver is giving more return than the average return of all funds in the category from last 5 year and year to date return percentage is more than the other top tax saving mutual fund.

Analysis of Risk:
Fund Birla Sun Life Tax Relief 96
Canara Robeco Equity Tax Saver

Expense Ratio (%) 1.97 2.32

Standard Deviation 19.11 15.33

Sharpe Ratio -0.00 0.49

Beta 0.91 0.70

RSquared 0.92 0.85

Alpha -0.76 6.88

HDFC Tax Saver ICICI Prudential Tax Plan SBI Magnum Taxgain Principal Personal Tax Saver Franklin India Tax Shield Sundaram

1.85 1.98 1.81 2.26 2.10

16.88 18.43 17.21 18.30 15.51

0.32 0.47 0.13 0.04 0.45

0.79 0.85 0.82 0.89 0.74

0.89 0.87 0.94 0.96 0.93

4.68 7.98 1.60 0.01 6.42

67

Tax Saver Sahara Tax Gain Reliance Tax Saver

1.96 2.49 1.91

18.31 17.88 19.94

0.04 0.31 0.38

0.85 0.81 0.90

0.89 0.84 0.84

0.04 4.80 6.80

Expense Ratio is Higher in Sahara Tax Gain and Canara Robeco Equity Tax Saver
whereas lower in SBI Magnum Taxgain and HDFC Tax saver. Expense Ratio refers to

the percentage of the average daily assets that the fund charged as its management expenses during the year. Standard Deviation is fluctuation of return. Birla Sun Life Tax Relief 96 and Reliance Tax Saver are more fluctuating whereas Canara Robeco Equity Tax Saver and Franklin India Tax Shield are less fluctuating. Sharpe Ratio measures a risk. Birla Sun Life Tax Relief 96 and Principal Personal Tax Saver, Sundaram Tax Saver are less risky but Canara Robeco Equity Tax Saver , ICICI Prudential Tax Plan are having more risk. Beta of a fund measures its past price volatile relative to a particular stock market index. Birla Sun Life Tax Relief 96 and Reliance Tax Saver according to market whereas
Canara Robeco Equity Tax Saver and Franklin India Tax Shield are less volatile than

market. R-squard is delivers extent to which a return to which a return of a mutual fund is explained by a particular financial market. Principal Personal Tax Saver is more fluctuating attributable to movements compare to other funds. Alpha measures extra return earned on a scheme on a risk adjusted basis. . Birla Sun Life Tax Relief 96 not handle extra risk earned it gives negative values whereas ICICI Prudential Tax Plan having greater than other funds

68

Comparison Of NAV:
Fund Birla Sun Life Tax Relief 96
Canara Robeco Equity Tax Saver

2012 71.77 17.67

2011 61.34 16.06

2010 91.58 22.42

2009 87.85 21.80

2008 45.65 11.51

2007 161.73 25.78

HDFC Tax saver ICICI Prudential Tax Plan SBI Magnum Taxgain Principal Personal Tax Saver Franklin India Tax Shield Sundaram

216.34 139.65 60.87 90.75 215.71 43.09

192.73 114.85 49.93 74.80 186.52 35.69

249.07 151.03 65.27 104.86 219.92 47.81

69

197.02 121.69 57.77 90.22 178.12 42.29

98.97 57.40 30.99 48.28 99.61 24.58

204.28 130.53 68.66 221.26 196.15 46.89

Tax Saver Sahara Tax Gain Reliance Tax Saver

37.00 21.69

30.83 16.90

39.82 22.30

33.07 18.20

17.35 10.00

34.40 20.99

From the above table it can observe that in the year 2011 and 2008 every funds net asset value are decreases from the NAV of last year value. HDFC tax Saver and Frankline India Tax Shield is having greater NAV Among all other Funds whereras Canara Robeco Equity Tax Saver And Reliance is having less NAV among all other funds. The NAV value of 2007 has decreased in 2012 in respective funds Birla Sun Life Tax Relief 96, Sundaram Tax Saver, Principal Personal Tax Saver ,SBI Magnum Taxgain, Canara Robeco Equity Tax Saver but for all other Open-end and Equity the NAV value has increased. The decrease in the value of NAV regarding Birla Sun Life Tax Relief 96 and Principal Personal Tax Saver are very much more than the NAV value in the 2007 is more but in the 2012 it decreases. NAV value is dependent on the securities which changes day to day so the reason NAV val.ue changes every day

70

9. Findings

ICICI Prudential Tax Plan is performing excellent throughout the period and giving more returns more than market value.

All Funds mostly hold more percentage of assets in Financial Sector. HDFC Tax Saver is Having greater NAV than other Mutual Funds. FMCG sector is giving more P/E values than other sectors.

71

10. Suggestion:

Give Important consideration to three technical factors: Ex-Mark, Beta, Gross Dividend Yield

Do not decide the funds based on NAV. Look at the performance track record for at least 1 year (3 year better) and asses how the fund has been performing over that period. If it has been giving consistant returns, then it might be a good fund. But look at other features such as fund Manager profile, lock-in period, expense ratio etc.

Carefully consider the cost of acquiring (sales load) and cost of holding (expense ratio) of the mutual fund scheme

72

Avoid schemes that are at top of the performance deck because hot funds tend to cool of. Likewise ,avoid schemes that are persistently at tle bottom of the performance deck,because while success does not persist there is some evidence that failure does.

11) Limitation
The study has certain limitations The concept of mutual funds is like ocean. So a detailed study of each and every component of this concept is not possible because of the limited time constraint. The mutual funds and securities investment are subjected to market risks and there can be no assurances or guarantee that the schemes objectives will be achieved. The analysis as had been done very few schemes of selected tax saving mutual funds.

73

12. BIBLIOGRAPHY Internet references: www.valueresearchonline.com www.mutualfundsindia.com www.business.mapsofindia.com www.investmentyogi.com www.moneycontrol.com www.onemint.com

74

Books and magazines references: Security analysis & Portfolio management by Prasanna Chandra

Tax Planning:

For most individuals,financial planning and tax-planning are to mutually exclusive exercises. While planning our investments we spend a considerable amount of time evaluating various options and determining which suits us the best. But when it comes to planning out investments from a tax saving perspective, more often than not, we simply go the 75

traditional way and do the exact same thing that we did in the earlier years. Well, in case you were not aware the guidelines governing such investments are a lot different this year and lethargy on your part to rework your investment plan could cost you dear.

Why are the stakes higher this year?

Until the previous,tax benefit was provided as a rebate on the investment amount, which could not exceed Rs 1,00,000 ; of this Rs 30,000 was exclusively reserved for infrastructure Bonds. Also, the rebate reduced with every rise in the income slab; individuals earning over Rs 500,000 per year were not eligible to clain any rebate.For the current financial year, the Rs 1,00,000 limit has been retained; however internal caps have been done away with. Individuals have a greater degree of flexibility in deciding how much to invest in the eligible instruments. The other significant changer are One, the rebate has been replaced by a deduction from gross total income, effectively. The higher your income slab, the greater is the tax benefit. And two, all individuals irrespective of the income bracket are eligible for this investment. For most readers, these developments will result in higher tax-savings.

TAX SAVING SCHEME: In the care of close ended fund, the investors have to look their funds with the trust for particular periods of time as a specified y the terms of the offer. The main problem for the investor is that they cannot move in out of the fund freely. In the case of Closed Ended schemes the prices of the units are calculated in the same manner as in the case of Open Ended schemes. However these schemes do not charge an Entry/ Exit load as in the case of open ended scheme. In this scheme main advantage is that the investor can claim for the tax saving. This one on the other same to the closed ended scheme but one extra feature is in this that the tax saving he

76

can claim that under the section 80 C for this the investor has to through with the tax brackets. According to the new budget 2006 07 every body who earns an income falls under a Tax Bracket. It is important to keep in mid that your Taxable Income, or income after deductions, defines your tax bracket which could actually be lower than the amount of money you have earned over the year. The current income tax determined four main tax brackets, which are as follows: Lower Limit 0 Rs.1,00,00 1 Rs.1,50,00 1 Rs.2,50,00 1 No Upper Limit Rs.2,50,000 Rs.5,000 + 20% of income in excess of Rs.1,50,000 Rs.25,000 + 30% of income in excess of Rs.2,50,000 Upper limit Rs.1,00,000 Rs.1,50,000 Nil 10% of income in excess of Rs.1,00,000 Tax Payable

For example, if your taxable income is Rs.2,00,000 for the year, you would fall within the Rs.1,50,001 to Rs.2,50,000 tax bracket. You would have to pay the fixed sum for this slab, which is Rs.5,000 plus 20% of the amount that exceeds Rs.1,50,000. In your case, this excess amount would be Rs.50,000. So, your total income tax for the year would be Rs.5,000 + Rs.10,000 = Rs.15,000. You can move into a lower tax bracket by investing in a tax saving instrument. How does this work? Read on.

How much can you save: The government has made a host of individual savings Tax deductible under one umbrella called Section 80C and a simple new rule has 77

emerged if you invest up to Ra.1 lakh in a tax saving instrument or even a combination of them, you effectively reduce our taxable income by up to Rs.1 lakh. This means you could save up to Rs.30,000* (Conditions apply) in taxes. The chart below shows how this happens: Your annual taxable income (Rs) 1,20,000 1,50,000 2,00,000 3,00,000 4,00,000 5,00,000 7,50,000 9,00,000 Your applicable tax before investment (Rs) 2,000 5,000 15,000 40,000 70,000 1,00,000 1,75,000 2,20,000 Amount invested under Section 80C (Rs) 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 Your new taxable income (Rs) 20,000 50,000 1,00,000 2,00,000 3,00,000 4,00,000 6,50,000 8,00,000 Your applicable tax after investment (Rs) 0 0 0 15,000 40,000 70,000 1,45,000 1,90,000 Your Savings (Rs)

2,000 5,000 15,000 25,000 30,000 30,000 30,000 30,000

The qualities that have to be seen before investing are that, All Equity Linked Saving Schemes are eligible for tax benefits under Section 80C. While there is no set way of determining which scheme may fit your requirements, remember that by investing in an ELSS, you trust your hard earned money to the asset management company for at least three years. Ask yourself certain questions before making your decisions. Is the company respected in the investment field? Has it done well in the past? Does it have the right credentials, experience, philosophy and expertise to make your money grow in the long run? Does it have a well - defined investment process and has it demonstrated commitment to this process through good and not so good times? Above all, do you trust it to make the right decisions for you?

78

By satisfying these questions, you can rest assured that your money is in good hands. As always, speaking to your tax and/ or your investment adviser will certainly help you make the right tax saving investment for your future.

According to the new budget 2007 08 every body who earns an income falls under a Tax Bracket. It is important to keep in mind that your Taxable Income, or income after deductions, defines your tax bracket which could actually be lower than the amount of money you have earned over the year. The current income tax determined four main tax brackets, which are as follows:

Lower Limit 0 Rs.1,10,00 1 Rs.1,50,00 1 Rs.2,50,00 1 RS 10,00,000

Upper limit Rs.1,10,000 Rs.1,50,000 Nil

Tax Payable

10% of (TI - Rs.1,10,000)+3%EC

Rs.2,50,000

Rs.4,000 + 20% of (TI - Rs.1,50,000)+3%EC

Rs10,00,000

Rs.25,000 + 30% (TI - Rs.2,50,000)+3%EC

No limit

Rs 2,49,000 +30%(TI Rs 10,00,000)+10%SC+3%EC

For example, if your taxable income is Rs.2,00,000 for the year, you would fall within the Rs.1,50,001 to Rs.2,50,000 tax bracket. You would have to pay the fixed sum for this slab, which is Rs.4,000 plus 20% of the amount that exceeds Rs.1,50,000. In your case, this excess amount would be Rs.50,000. So, your total income tax for the year would be Rs.4,000 + Rs.10,000 = Rs.14,000.In this example for simple calculation no extra tax are considered other than the slab rates. 79

The government has made a host of individual savings Tax deductible under one umbrella called Section 80C and a simple new rule has emerged if you invest up to Ra.1 lakh in a tax saving instrument or even a combination of them, you effectively reduce our taxable income by up to Rs.1 lakh. This means you could save up to Rs.30,000* (Conditions apply) in taxes. The chart below shows how this happens: Your annual taxable income (Rs) 1,20,000 1,50,000 2,00,000 3,00,000 4,00,000 5,00,000 7,50,000 9,00,000 Your applicable tax before investment (Rs) 1000 4,000 14,000 39,000 69,000 99,000 1,74,000 2,19,000 Amount invested under Section 80C (Rs) 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 Your new taxable income (Rs) 20,000 50,000 1,00,000 2,00,000 3,00,000 4,00,000 6,50,000 8,00,000 Your applicable tax after investment (Rs) 0 0 0 14,000 39,000 69,000 1,44,000 1,89,000 Your Savings (Rs)

1,000 4,000 14,000 25,000 30,000 30,000 30,000 30,000

80