PROJECT REPORT

ON
“Investment Planning in India

Taking into Consideration Tax Saving Schemes”

Submitted in Partial Fulfilment for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION (MBA)
(CBCS-2018 COURSE)

Submitted by:
DURGA PANTH
(PNR No: 1828100392)

Under the Guidance of:

MR.Rahul Tripathi

BHARATI VIDYAPEETH DEEMED TO BE UNIVERSITY, PUNE

(SCHOOL OF DISTANCE EDUCATION)

 CERTIFICATE ISSUED BY THE COLLEGE
DATE

CERTIFICATE

This is to certify that the project entitled “Investment Planning in India:

Taking into Consideration Tax Saving Schemes” submitted by Ms.
DURGA PANTH, PRN No. 1828100392 has been done under my guidance
and supervision in partial fulfillment of the requirement for the award of
Master of Business Administration.

To the best of my knowledge the work and analysis mentioned in this

Project Report have been undertaken by the candidate herself and necessary
references have been recognized and acknowledged in the text of the report.

MR. Rahul Tripathi

ACKNOWLEDGEMENT

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 I would like to express my gratitude to almighty God without whose blessing I wouldn’t
have been able to take initial step in this research.
Words are insufficient to express my gratitude to Ms. Ritika Pandey, my industry guide for
his guidance and support in preparing this project.
I am deeply indebted to my guide MR. Rahul Tripathi from Bharati Vidhyapeeth Deemed to
be University whose help, stimulating suggestions and encouragement helped me in all the
time of research and writing of this project.
Finally I would like to thank my parent, family members and friends for their support.
The learning was immense and valuable.

DURGA PANTH
1828100392

DECLARATION

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I hereby declare that the project work entitled “Investment Planning in India taking

into consideration Tax Saving Schemes” submitted to the Bharati Vidhyapeeth Deemed to
be University, is a record of an original work done by me under the guidance of Mr.Rahul Tripathi,
and this project work is submitted in the partial fulfillment of the requirements for the award of the
degree of Master of Business Administration.

I hereby certify that all the endeavor put in the fulfillment of the task are genuine and original to the
best of my knowledge and I have not submitted it earlier elsewhere.

DURGA PANTH

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EXECUTIVE SUMMARY

India is a developing country and we all know that investment planning plays a very important role .
In development with the increasing incomes of individuals in every field, the need for planning
savings and investment is also increasing. Investment Planning is the placing of funds into the proper
investment vehicles based on the investor's future goals, time horizon, and priorities. This
also takes into account the safety of the investments as well as liquidity and level of return. It is also
called money management and asset management, refers to the process of investment analysis
involving portfolio management, budget making, banking, tax planning, and investment risk
assessment. Ideally, proper investment planning will allow the investor's funds to
produce financial rewards over time.

The purpose of the study is to find out the most suitable and popular tax saving instrument used to
save tax. So, this project focuses on the fundamental concepts involved in investment planning. The
basic process of investing and key investment terminology will be introduced, followed by a
discussion of applications to different types of investment products are available within the
geographical boundaries of India, such as stocks, bonds, and money markets — and their relative
advantages and disadvantages, such as rates of return, safety, liquidity, and tax features.

And the study also explains the various important terms and sections related to the e-filing of income
tax. The determination of residential status as per Income Tax Act, documents required to file ITR,
types of ITR, slab rates for the individuals as per financial years 17-18 are also explained. Every
individual’s goal is to reduce their tax liability to the minimum, and the goal is only accomplished by
legitimately taking advantage of all tax exemptions, deductions, rebates and allowances while
ensuring that their investments are in line with their long-term goals.

And adding the value to the same by studying into depth about the tax saving products like ULIP,
ELSS and Provident Fund which will help an investor to reduce their Tax and hence to get a benefit
against the money invested by him and hence to give them a view to reach their different optimum
portfolios. Over all findings reveals that the most adopted tax saving instrument is Life Insurance
Policy, which got the first rank in this study and the second most adopted tax saving instrument is
Provident Fund.

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Table of Contents

S No Topic Page No
1 Certificate (s) ii-iii
2 Acknowledgement (s) iv
3 Declaration iv
4 Executive Summary vi-vii
5 Chapter-1: Introduction
1.1 Investment Planning: Meaning
1.2 Purpose
1.3 When to start investing?
1.4 What care should be taken during investing?
1.5 Process of Investment Planning
1.6 Risk and Return
1.6.1 Interest
1.6.2 Factors determining Interest rate
1.6.3 How much risk can an investor take?
1.6.4 Types of Investor Risk
1.7 Income Tax Return
1.7.1 Income tax slab rates
1.7.2 Deductions & Exemptions in ITR
1.7.3 Types of ITR forms

6 Chapter-2: Research Methodology 28-30

7 Chapter-3: Conceptual Discussion 31-37
8 Chapter-4: Data Analysis 38-55
Chapter-5: Findings & Conclusions 56-58
9 Chapter-6: Suggestions 59-60
10 References 61-62

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 CHAPTER 1

INTRODUCTION

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 INVESTMENT PLANNING

1.1 Meaning

An investment is an asset or item acquired with the goal of generating income or appreciation. In an
economic sense, an investment is the purchase of goods that are not consumed today but are used in
the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that
the asset will provide income in the future or will later be sold at a higher price for a profit.
The major difference in the use of the term investment between the economics field and the finance
field is that economists refer to a real investment (such as a machine or a house), while financial
economists refer to a financial asset, such as money that is put into a bank or the market, which may
then be used to buy a real asset. Advisors, who tell people how to manage their investments, might
say that even when an investment is losing money because of bad times, not to give up and withdraw
it. Instead, wait for the situation to improve. This is a risk for each person to decide.

Investment planning is the process of matching your financial goals and objectives with your
financial resources. Investment planning is a core component of financial planning. It is impossible
to have one without the other.

The placing of funds into the proper investment vehicles based on the investor's future goals, time

horizon, and priorities. This also takes into account the safety of the investments as well
as liquidity and level of return. Ideally, proper investment planning will allow the investor's funds to
produce financial rewards over time.

1.2 Purpose of Investment Planning

Top reasons why should one invest money are:

 Wealth Creation - Investing your money will allow it to grow. Most investment vehicles,
such as stocks, certificates of deposit, or bonds, offer returns on your money over long term.
This return allows your money to compound, earning money on the money already earned
and creating wealth over time.
 Beat Inflation - 100 rupees today would only be 96.5 rupees next year according to recent
Indian inflation statistics, which implies that you would lose 4.5% of our money every year if

8
 kept as cash. Returns from the investment helps maintain the purchasing power at a constant
level. If you don't beat the inflation rate you'd be losing money, not making money.
 Retirement Corpus Creation - A person should invest while he is earning so as to create a
corpus of funds that can be used when one retires. This retirement fund accumulates overtime
and provides security to maintain a comfortable life-style even after retirement.
 Accomplish Financial Goals - Investing can help you reach bigger financial goals. This
return on your investments can be used toward major financial goals, such as buying a home,
buying a car, starting your own business, or putting your children through college.
 Tax-Saving - Some investment vehicles give a double return by providing returns as well as
reducing your taxable income, which in turn minimizes the tax liability such as equity linked
savings scheme (ELSS) funds. Money saved is money earned which can be invested further.
 High-Returns - Investing would help to achieve high returns as compared to bank's saving
account which provides a mere 4 per cent return. Investing in markets could provide you
returns upwards of 20 percent if given the right time horizon.

1.3 When to start Investing?

The sooner one starts investing the better. By investing early you allow your investments more time
to grow, whereby the concept of compounding (as we shall see later) increases your income, by a
cumulating the principal and the interest or dividend earned on it, year after year. The three golden
rules for all investors are:
1. Invest early
2. Invest regularly
3. Invest for long term and not short term
Myth:  This is not the right time to save.
Fact:   You can start investment planning anytime, however; the sooner the better.
You may have avoided thinking about your finances until now. The key is to balance your day-to-
day activities with a long-term investment plan that helps you achieve your future goals and
dreams. It’s never too late or too early to start your plan.

1.4 What care should one take while investing?

Before making any investment, one must ensure to:

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1.5 Process of Investment Planning

There are six steps for Investment Planning

Step 1: Determine your goals
Step 2: Determine your investment profile
Step 3: Understand your trade-offs
Step 4: Understand your investment choices
Step 5: Determine your investment mix
Step 6: Monitor your investments

Step 1: Determine Your Goals

Setting S.M.A.R.T. goals

• Specific
Don’t just say you want a car; be as specific as possible
• Measurable
What is the cost today and what will you need in the future?
• Actionable

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 Are there steps you can take to accomplish the goal?
• Realistic
Is it practically feasible?
• Time bound
When do you need the money and for how long?

Step 2: Determine Your Investment Profile

Conservative Moderate Aggressive

Years to Goal 1-5 years 5-10 years More than 10 years
Objective Liquidity, Safety Income, Some Growth Capital Growth
Risk Tolerance Low (little to no price Medium (some price High (greater price
fluctuation) fluctuation) fluctuation)
Target Rate of Return Low Medium High
Liquidity Need High Medium Low
Examples of Goals Car, Vacation Home, Collage College Funding,
Funding Retirement

Steps 3: Understand Your Trade-offs

Risk tolerance v/s Meeting your goals

One of the most important parts of a thorough fact find is to assess the level of risk a client is willing
to take. What is their risk profile? Risk is subjective and means something different to everyone, so it
is important that you establish what risk means to investor.
Your risk assessment should explore the client’s general appetite to risk, how much they require to
meet their investment goals and how much loss they are willing and able to bear in reality. This is
often called a client’s risk capacity. The risk capacity can be assessed by exploring the impact of
possible losses on their wider financial position.

Here are a few key discussion points in relation to investor’s circumstances

• How long are they planning to invest for?
• How much can they afford to lose?
• How quickly might they need access to the investment?

Step 4: Understand Your Investment Choices

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The final step is to decide where to invest. There are many different accounts you can use for your
investments. Your budget, goals and risk tolerance will help guide you towards the right types of
investment for you. Consider securities like stocks, bonds and mutual funds, long-term options
like 401(k) plans and IRAs, bank savings accounts or CDs, and 529 plans for education savings. You
can even invest in real estate, art and other physical items.

Step 5: Determining Your Investment Mix

5.1 Managing Investment Risk

Types of Risk How are they managed?
Market Risk => Hedging Period
Business Risk => Diversification
Inflation Risk => Asset Allocation

5.2 Asset Allocation

 Establish your target rate of return
 Determine your risk tolerance
 Know your planning time horizon
 Include all of your investment assets

Step 6: Monitor Your Investments

6.1 Monitor performance periodically (at least annually)

6.2 Assess
 Are your goals still the same?
 Are you paying too much in fees?
 Is your investor profile still the same?
 Does your allocation still make sense?
 Should your rebalance your portfolio?

1.6 Risk & Return

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Return and risk are two important characteristics of any investment product. Generally return and
risk go hand in hand. A rational investor likes return and dislike risk, so most of the investment is a
tradeoff between risk and return.

1.6.1 Interest

The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as

an annual percentage of the principal; the rate is dependent upon the time value of money, the credit
risk of the borrower, and the inflation rate. Here, interest per year divided by principal amount,
expressed as a percentage also called interest rate.

1.6.2 Factors determine Interest Rates

When we talk of interest rates, there are different types of interest rates:
 Rates that banks offer to their depositors
 Rates that they lend to their borrowers
 Rate at which the Government borrows in the Bond/Government Securities market
 Rates offered to investors in small savings schemes like NSC, PPF, rates at which companies
issue fixed deposits etc.
The factors which govern these interest rates are mostly economy related and are commonly referred
to as macroeconomic factors. Some of these factors are:
 Demand for money
 Level of Government borrowings
 Supply of money
 Inflation rate
 The Reserve Bank of India and the Government policies which determine some of the
variables mentioned above.

1.6.3 How much risk can an investor take?

This would depend on the following factors:-

 Risk Tolerance: -How much are you prepared to lose over one year without giving up on
investment?
 Age :- Younger investors can usually afford to be more aggressive

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  Goals: - If you are saving to buy a house or starting to invest for retirement, you will need to
invest in growth stocks. This means taking on more risk
 Time horizon: - The longer you can afford to wait, the less risk is involved. Do not invest in
risky assets if you may need funds in the short term.

1.6.4 Types of Investor Risk

This table highlights some of the risks you could encounter when making an investment.
Risk Type What it means
Mismatch Risk The investment opportunity may not suit your
needs and circumstances.
Inflation Risk The risk that the purchasing power of your
money may be eroded by inflation.
Interest Rate Risk The risk of changing interest rates that may
reduce your returns or cause you to lose money.
Market Risk The risk of movements in asset markets (share
markets, bond markers, etc.) reducing the value
of your investment or returns.
Market Timing Risk The timing of your investment decision exposing
you to the risk of lower returns or capital loss.
Risk of Poor Diversification The poor performance of a small number of asset
classes can significantly affect your total
portfolio.
Currency Risk The risk that currency movements can affect
your investment.
Liquidity Risk The risk of not being able to access your money
quickly or cheaply when you choose to.
Credit Risk That risk that the institution you invest with may
not meet its obligations (i.e. default on interest
payments).
Legislative Risk The risk of losing your circle or suffering
reduced returns due to changes in laws and
regulations.
Gearing Risk The risk involved in borrowing to invest.
1.7 INCOME TAX RETURN

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Income Tax Return is the form in which an assessee files information about his Income and tax
thereon to Income Tax Department.
Everyone who earns or gets an income in India is subject to income tax, be it a resident or a non-
resident of India. Income could be salary, pension or could be from a savings account that’s quietly
accumulating a 4% interest. For simpler classification, the Income Tax Department breaks down
income into five heads:

Head of Income Nature of Income covered

Income from Income from salary and pension are covered under here
Salary

Income from Other Income from savings bank account interest, fixed deposits, winning KBC
Sources

Income from This is rental income mostly

House Property

Income from Income from sale of a capital asset such as mutual funds, shares, house
Capital Gains property

Income from This is when you are self-employed, work as a freelancer or contractor, or you
Business and run a business. Life insurance agents, chartered accountants, doctors and
Profession lawyers who have their own practice, tuition teachers

1.7.1 INCOME TAX SLAB RATES

Income Tax Slabs Rates for FY 2018-19 (AY 2019-20)

In India, income tax is levied on individual taxpayers on the basis of a slab system where different

15
tax rates have been prescribed for different slabs and such tax rates keep increasing with an increase
in the income slab.

Such tax slabs tend to undergo a change during every budget.

Further, since the budget 2018 has not announced any changes in income tax slabs this time, it
remains the same as that of last year.

There are three categories of individual taxpayers:

1.Individuals (below the age of 60 years) which includes residents as well as non-residents
2.Resident Senior citizens (60 years and above but below 80 years of age)
3.Resident Super senior citizens (above 80 years of age)

Income Tax Slabs for Individual Tax Payers & HUF (Less Than 60 Years Old) for
FY 2017-18 – Part I

Income Tax Slabs Tax Rate Health and Education Cess

Income up to Rs 2,50,000* No tax  -

Income from Rs 2,50,000 – Rs 5,00,000 5% 3% of Income Tax

Income from Rs 5,00,000 – 10,00,000 20% 3% of Income Tax

Income more than Rs 10,00,000 30% 3% of Income Tax

Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

*Income tax exemption limit for FY 2017-18 is up to Rs. 2, 50,000 for individual & HUF other than
those covered in Part (II) or (III).

Income Tax Slabs for Senior Citizens (60 Years Old or More but Less than 80
Years Old) for FY 2017-18 – Part II

Income Tax Slabs Tax Rate Health and Education Cess

Income up to Rs 3,00,000* No tax  -

Income from Rs 3,00,000 – Rs 5,00,000 5% 3% of Income Tax

Income from Rs 5,00,000 – 10,00,000 20% 3% of Income Tax

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 Income more than Rs 10,00,000 30% 3% of Income Tax
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

*Income tax exemption limit for FY 2018-19 is up to Rs. 3,00,000 other than those covered in Part
(I) or (III)

Income Tax Slabs for Senior Citizens (80 Years Old or More) for FY 2018-19 – Part
III

Income Tax Slabs Tax Rate Health and Education Cess

Income up to Rs 5,00,000* No tax  -

Income from Rs 5,00,000 – 10,00,000 20% 3% of Income Tax

Income more than Rs 10,00,000 30% 3% of Income Tax

Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

*Income tax exemption limit for FY 2018-19 is up to Rs. 5,00,000 other than those covered in Part
(I) or (II)

1.7.2 DEDUCTIONS & EXEMPTIONS IN ITR

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 Allowed Limit (maximum) FY
Section Deduction on 2018-19

80C Investment in PPF Rs. 1,50,000

– Employee’s share of PF contribution
– NSCs
– Life Insurance Premium payment
– Children’s Tuition Fee
– Principal Repayment of home loan
– Investment in Sukanya Samridhi
Account
– ULIPS
– ELSS
– Sum paid to purchase deferred annuity
– Five year deposit scheme
– Senior Citizens savings scheme
– Subscription to notified

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 Allowed Limit (maximum) FY
Section Deduction on 2018-19

securities/notified deposits scheme

– Contribution to notified Pension Fund
set up by Mutual Fund or UTI.
– Subscription to Home Loan Account
scheme of the National Housing Bank
– Subscription to deposit scheme of a
public sector or company engaged in
providing housing finance
– Contribution to notified annuity Plan of
LIC
– Subscription to equity shares/
debentures of an approved eligible issue
– Subscription to notified bonds of
NABARD

80CCC For amount deposited in annuity plan of -

LIC or any other insurer for a pension
from a fund referred to in Section
10(23AAB)

80CCD(1) Employee’s contribution to NPS account -

(maximum up to Rs 1,50,000)

80CCD(2) Employer’s contribution to NPS account Maximum up to 10% of salary

80CCD(1B Additional contribution to NPS Rs. 50,000

)

80TTA(1) Interest Income from Savings account Maximum up to 10,000

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 Allowed Limit (maximum) FY
Section Deduction on 2018-19

80TTB Exemption of interest from banks, post Maximum up to 50,000

office, etc. Applicable only to senior
citizens

80GG For rent paid when HRA is not received Least of :

from employer – Rent paid minus 10% of total
income
– Rs. 5000/- per month
– 25% of total income

80E Interest on education loan Interest paid for a period of 8

years

80EE Interest on home loan for first time home Rs 50,000

owners

80CCG Rajiv Gandhi Equity Scheme for Lower of

investments in Equities – 50% of amount invested in
equity shares; or
– Rs 25,000

80D Medical Insurance – Self, spouse, children – Rs. 25,000

Medical Insurance – Parents more than 60 – Rs. 50,000
years old or (from FY 2015-16) uninsured
parents more than 80 years old

80DD Medical treatment for handicapped – Rs. 75,000

dependent or payment to specified scheme – Rs. 1,25,000
for maintenance of handicapped
dependent

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 Allowed Limit (maximum) FY
Section Deduction on 2018-19

– Disability is 40% or more but less than

80%
– Disability is 80% or more

80DDB Medical Expenditure on Self or – Lower of Rs 40,000 or the

Dependent Relative for diseases specified amount actually paid
in Rule 11DD – Lower of Rs 1,00,000 or the
– For less than 60 years old amount actually paid
– For more than 60 years old

80U Self-suffering from disability: – Rs. 75,000

– An individual suffering from a physical – Rs. 1,25,000
disability (including blindness) or mental
retardation.
– An individual suffering from severe
disability

80GGB Contribution by companies to political Amount contributed (not

parties allowed if paid in cash)

80GGC Contribution by individuals to political Amount contributed (not

parties allowed if paid in cash)

80RRB Deductions on Income by way of Royalty Lower of Rs 3,00,000 or income

of a Patent received

1.7.3 Types of ITR Forms

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 ITR 1 :-
This Return Form is to be used by an individual whose total income for the assessment year 2018-19
includes:-

 Income from Salary/ Pension; or

 Income from One House Property (excluding cases where loss is brought forward from previous
years); or
 Income from Other Sources (excluding Winning from Lottery and Income from Race Horses)
 Earlier ITR-1 was applicable for both Residents, Residents Not ordinarily resident (RNOR) and
also Non-residents. Now, this form has been made applicable only for resident individuals.
 The condition of the individual having income from salaries, one house property, and other
income and having total income up to Rs 50 lakhs continues.
 There is a requirement to furnish a break-up of salary. Until now, these details would appear only
in Form 16 and the requirement to disclose them in the return had never arisen.
 There is also a requirement to furnish a break up of Income under House Property which was
earlier mandatory only for ITR -2 and other forms.
 Under the Schedule on TDS, there is also an additional field for furnishing details of TDS as per
Form 26QC for TDS made on rent. Also, provision for quoting of PAN of Tenant for such
rent cases has also been made. 

 ITR 2 :-
This Return Form is to be used by an individual or a Hindu Undivided Family whose total income
for the assessment year 2018-19 includes:-
 Income from Salary/Pension; or
 Income from House Property; or
 Income from Capital Gains; or
 Income from Other Sources (including Winnings from Lottery and Income from Race
Horses).
 Income of a person as a partner in the firm
 Foreign Assets/Foreign income
 Agricultural income more than Rs.5,000

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 Further, in a case where the income of another person like one’s spouse, child, etc. is to be
clubbed with the income of the assessee, this Return Form can be used where such income falls
in any of the above categories.
 Given that ITR-1 is not applicable for the RNORs and the non-residents, they have to
necessarily go with ITR-2 for filing their return of income.
 The applicability of ITR-2 has been made clearer in as much as now it is applicable for
individuals and HUF having income other than income under the head “Profits and Gains from
Business or Profession”.
 The field of “Profits and Gains from Business or Profession” which was earlier featuring
under Part B – TI has now been removed.
 Following this, Schedule-IF (Income from Firm) and Schedule-BP have also been removed.
This now means, anyone earning income from a partnership firm, now has to file ITR-3 and
not ITR -2.
 Additionally, under Schedule AL, the field pertaining to “Interest held in the assets of a firm
or association of persons (AOP) as a partner or member thereof” has been done away with.
 Similar to ITR -1, even in ITR-2, under the Schedule on TDS, there is also an additional field
for furnishing details of TDS as per Form 26QC for TDS made on rent. Also, provision for
quoting of PAN of Tenant for such rent cases has also been made.

 ITR 3:-
The Current ITR3 Form is to be used by an individual or a Hindu Undivided Family who have
income from proprietary business or are carrying on profession. The persons having income from
following sources are eligible to file ITR 3:
 Carrying on a business or profession
 Return may include income from House property, Salary/Pension and Income from other
sources
 This ITR-3 has been specifically prescribed for individuals and HUF having “Income from
Profits and Gains from Business or Profession”.
 Under General Information, a field relating to Section 115H has been added which relates to
benefit being availed under certain cases even after the taxpayer becomes a resident.
  Fields under Schedule PL have been modified to include GST related details.
 Depreciation has been limited to a maximum of 40% in all depreciation related schedules.
   

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 ITR 4:-
The current ITR 4 is applicable to individuals and HUFs having income from a business or
profession and who have opted for the presumptive income scheme as per Section 44AD, Sec
44ADA and Section 44AE of the Income Tax Act. However, if the turnover of the business exceeds
Rs.2 crores, the tax payer will have to file ITR-3.
 Now, there is an additional requirement to quote GSTR No. and turnover/gross receipts as per
GST return filed.
 Further, fields have been added under Financial particulars where now an assessee has to
declare the following additional information:
a. Partners/ Members Capital
b. Secured Loan
c. Unsecured Loan
d. Advances
e. Fixed Assets

 ITR 5:-
The ITR-5 form is to be used by only by the following entities for filing income tax returns
 Firms
 Limited Liability Partnerships (LLPs)
 Body of Individuals (BOIs)
 Association of Persons (AOPs)
 Co-operative Societies
 Artificial Judicial Persons
 Local Authorities

 ITR 6:-
For Companies other than companies claiming exemption under section 11 (Income from property
held for charitable or religious purposes)

 ITR 7:-
ITR-7 income tax form is to be filed by individuals or companies

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  Return under section 139(4A) is required to be filed by every person in receipt of income
derived from property held under trust or other legal obligation wholly for charitable or
religious purposes or in part only for such purposes.
 Return under section 139(4B) is required to be filed by a political party if the total income
without giving effect to the provisions of section 139A exceeds the maximum amount which is
not chargeable to income-tax.
 Return under section 139(4C) is required to be filed by every –
o scientific research association;
o news agency ;
o association or institution referred to in section 10(23A);
o institution referred to in section 10(23B);
o Fund or institution or university or other educational institution or any hospital or
other medical institution.
 Return under section 139(4D) is required to be filed by every university, college or other
institution, which is not required to furnish return of income or loss under any other provision
of this section.

 ITR-8:-
ITR-8 is for Individuals who have no any income but only has Fringe Benefits

INDIVIDUAL AND HUF

Nature of income ITR 1* ITR 2 ITR ITR 4

(Sahaj) 3
Income from salary/pension (for ordinarily resident ✓ ✓ ✓ ✓
person)
Income from salary/pension (for not ordinarily   *** *** ***
resident and non-resident person)
Income or loss from one house property (excluding *** *** *** ***
brought forward and carried forward losses)
Income or loss from more than one house property   *** ***  
Agricultural income exceeding Rs. 5,000   *** ***  
Total income exceeding Rs. 50 lakhs   *** *** ***
Dividend income exceeding Rs. 10 lakhs taxable   *** ***  
under Section 115BBDA
Unexplained credit or unexplained investment   *** ***  

25
 taxable at 60% under Sections 68, 69, 69A, etc.
Income from other sources (other than winnings *** *** *** ***
from lottery and race horses or losses under this
head)
Income from other sources (including winnings   *** *** ***
from lottery and race horses or losses under this
head)
Capital gains/loss on sale of investments/property   *** ***  
Interest, salary, bonus, commission or share of     ***  
profit received by a partner from a partnership
firm.
Income from business or profession     ***  
Income from presumptive business       ***
Income from foreign sources or Foreign assets or   *** ***  
having Signing authority in any account outside
India
Income to be apportioned in accordance with   *** *** ***
Section 5A
Claiming relief of tax under sections 90, 90A or 91   *** ***  
* Only an Individual, who is an ordinarily resident in India, can file income-tax return in
Form ITR-1.

Other Assessees

Status of Assessee ITR 4 ITR 5 ITR ITR 7

6
Firm (excluding LLPs) opting for presumptive ***      
taxation scheme
Firm (including LLPs)   ***    
Association of Persons (AOP)   ***    
Body of Individuals (BOI)   ***    
Local Authority   ***    
Artificial Juridical Person   ***    
Companies other than companies claiming     ***  
exemption under Sec. 11
Persons including companies required to furnish       ***
return under:
A.    Section 139(4A);
B.     Section 139(4B);
C.     Section 139(4C);

26
 D.    Section 139(4D);
E.     Section 139(4E); and
F.      Section 139(4F)

27
 CHAPTER 2
Research Methodology

OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE

 To Study the various investment avenues and the investors risk preference towards it .

SECONDARY OBJECTIVES

 To find out the general demographic factors of the investors dealing in capital market.
 To find out the preference level of investors on various Capital Market instruments.
 To find out the type of risk which are considered by the investors.
 To find out the ways through which the investors minimizes their risk.
 To find out the preferences of Investors in derivatives market.

Research Design

28
 A Research design is purely and simply the framework of plan for a study that guides the
collection and analysis of data. The study is intended to find the investors preference
towards cash market and derivatives. The study design is descriptive in nature.

29
as well as good return on
investment that is invested on
regular basis. Respondents are
much
more aware about the different
investment avenues available in
India except female investors.
This Current study deals with the
Saving And Investment Pattern
Of Salaried Class People
With Special Reference To Pune
City (India).
Introduction of Topic:
The developing countries in
world , like India face as seen
the enormous task of finding

30
sufficient capital to utilize in
their development efforts. Most
of countries find it difficult at at
stage to get out of the vicious
circle of poverty that is
prevailing of low income, low
saving,
low investment, low employment
etc and the list goes on. With
high capital output ratio, that
is observed India needs very high
rates of investments that would
take and make leap forward
in her efforts continues of
attaining high levels of growth.

31
The major features that is seen
in an investment are safety of
principal amount, liquidity,
income and its stability,
appreciation and lastly easy
transferability. A different
variety of
investment avenues in
abundance and types are
available such as shares, bank,
companies,
gold and silver, real estate, life
insurance, postal savings. All the
investors invest who wish to

32
invest , invest their surplus
money in the above mentioned
avenues that are available based
on their risk taking attitude and
capacity bearing.
Key Differences between
Savings and Investment
The differences between savings
and investment are explained in
the following points:
1. Savings means to set keep
aside a part of your earned
income for future use.
Investment is often defined as the
act of putting funds into the
productive uses, i.e. investing

33
in such investment vehicles
which can reap money over a
period of time.
2. People often save money, to
fulfill their unexpected and
sudden expenses or urgent
money requirements. Conversely,
investments are made or done to
generate returns over the
period so that it can help in
capital formation of an
individual.
3. With an investment, there is
follows always a risk of losing
money. Unlike savings,

34
there are comparatively fewer
chances of the losing the hard-
earned mone
as well as good return on
investment that is invested on
regular basis. Respondents are
much
more aware about the different
investment avenues available in
India except female investors.
This Current study deals with the
Saving And Investment Pattern
Of Salaried Class People
With Special Reference To Pune
City (India).
Introduction of Topic:

35
The developing countries in
world , like India face as seen
the enormous task of finding
sufficient capital to utilize in
their development efforts. Most
of countries find it difficult at at
stage to get out of the vicious
circle of poverty that is
prevailing of low income, low
saving,
low investment, low employment
etc and the list goes on. With
high capital output ratio, that
is observed India needs very high
rates of investments that would
take and make leap forward

36
in her efforts continues of
attaining high levels of growth.
The major features that is seen
in an investment are safety of
principal amount, liquidity,
income and its stability,
appreciation and lastly easy
transferability. A different
variety of
investment avenues in
abundance and types are
available such as shares, bank,
companies,
gold and silver, real estate, life
insurance, postal savings. All the
investors invest who wish to

37
invest , invest their surplus
money in the above mentioned
avenues that are available based
on their risk taking attitude and
capacity bearing.
Key Differences between
Savings and Investment
The differences between savings
and investment are explained in
the following points:
1. Savings means to set keep
aside a part of your earned
income for future use.
Investment is often defined as the
act of putting funds into the
productive uses, i.e. investing

38
in such investment vehicles
which can reap money over a
period of time.
2. People often save money, to
fulfill their unexpected and
sudden expenses or urgent
money requirements. Conversely,
investments are made or done to
generate returns over the
period so that it can help in
capital formation of an
individual.
3. With an investment, there is
follows always a risk of losing
money. Unlike savings,

39
there are comparatively fewer
chances of the losing the hard-
earned mon
Methodology

Primary data collection involved a structured questionnaire (Annexure-I) with limited and
focused questions covering questions regarding the saving/investment behavior amongst
students. The questionnaire addressed areas such as how much (approximately) of the
income is saved, whether it is put into traditional modes of savings or into the capital markets
and also questions regarding how much do social factors like friends and family influence
their choices. Around 80 percent of the contacted base (300 respondents) shared information
sufficient for inclusion into the study sample. The focus was on students working or having
an earning source and studying at the same time.

Secondary data regarding Macroeconomic statistics was collected from sources mentioned
along with such data.

40
41
 CHAPTER 3
Conceptual Discussion

42
1. Bharathraj Shetty and M. Muthu Gopalakrishnan (2015), an analysis of
investor’s attitude towards various tax saving schemes, International Research
Journal of Business and Management, The paper studied the investor’s preferred
towards various tax savings schemes as eligible under Income Tax Act 1961. The
paper also studies where these investors have invested and to identify patterns of
investment in to tax saving schemes. It was concluded that individual in order to
reduce their tax burden through tax planning does resort to tax saving investments.
There are a large number of schemes for tax savings. The tax savings investments
does not give the same advantages to all investor alike, save as suited for high tax
bracket individuals , while some are suited for lower tax bracket individuals. While
investing, all the benefits available in a particular investment are not known to
individual investors they shall thus must make all possible efforts to see that the
terms of investment are known. It is also suggested by the researcher that the
government and financial institution & local people about various, tax savings
Schemes, introducing attractive investment schemes, organize investor education
program.

2. A. N. Paunikar (2014), Equity Linked Saving Schemes are similar to equity

diversification schemes with tax saving benefit under section 80C. The study aims at
understanding scheme- wise benefits under Equity Linked Saving Schemes for tax
saving. Data analysis shows that Equity Linked Saving Schemes has better returns on
investments.

3. Savita and Lokesh Gautam (2013), Income Tax Planning: A Study of Tax Saving
Instruments, International Journal of Management and Social Sciences Research
(IJMSSR) Volume 2, No. 5, ISSN: 2319-4421, the paper studied the options for
investments for tax savings, the object of the study was to find the most popular form
of investment for tax savings. It was observed that investment by way of premium
paid for life insurance policy, followed by provident fund contribution and fixed
deposits savings were the most popular forms of investment. The other forms of
investment followed. The paper also revealed that the savings for tax purpose was

43
 the maximum in age group 50-60 and least in age group 20-30. It also states that as
income increase the investment for tax saving increases. If the income is between Rs.
5 lakhs to Rs. 10 lakhs investment is Rs. 70000 to Rs. 90000.

4. V. R. Palanivelu, K. Chandrakumar (2013), this study divides the investment in

different categories like Equity with high rate of return and risk , Debts with fixed
interest rate on investments, Fixed deposits with bank , insurance , public provident
fund low rate of return on investment and secured. Data analyses reveals that
40percent respondents like to invest in insurance, 30 percent respondents like to
invest in bank deposits, 18 percent like to invest in Gold and real estate.

5. Ganesh Dash, TulikaSood (2013), why should one invest in a life insurance
product? an empirical study, Researchers World -Journal of Arts, Science &
Commerce, ISSN -2231- 4172.The author concluded in the study that a good tax
saving plan or saving scheme with good return financial security for the family &
risk coverage were consider important by the customer.

6. Radha Gupta(2012), Impact of Income Tax on Saving and Investment: A Case

Study of Assesses In Jammu, Indian journal of applied research, The study was
undertaken to find the socio economic status, knowledge about the tax saving
scheme, amongst the Individuals and Investors. To analyze whether these Schemes,
inculcate a saving habit for investors and suggesting suitable measure for better tax
structure. The paper concluded that if the tax liability of an investor is reduced, he
would have more disposable income which alternatively can be used for saving and
investment. Higher tax rate may result in high tax burden in turn promoting tax
evasions which may not be good for the nation as a whole. Though tax saving
promotes saving habit, it is not encouraging side as people don’t save with
productive investments, but save for reducing their burden.

7. Ravi Vyas (2012), this study finds the form of investments preferred by investors.
Mutual fund investment is a secured investment with good returns on investments.
Data analyses shows that maximum respondent invest in Gold followed by bank
deposits and Insurance schemes. Mutual fund investments are very limited. For
Safety, Liquidity, Reliability, Tax benefits and high returns Mutual fund has average

44
 score among investors.

8. Yogesh P. Patel and Charul Y. Patel (2012), a study of investment perspective of

salaried people (private sector) Asia Pacific Journal of Marketing & Management,
the paper studied the behavioral pattern of investments among salaried people
working in private sector. It also studied the differences in perception of an
individual related to various investment alternatives the authors also considered the
various factors for appropriate investment. Various criteria’s were evaluated like the
tax factor, the inflation factor, risk return linkage, credit rating. It was observed that
mutual fund investment in the form of SIP was considered as the most favored
option amongst youngsters followed by real estate, which however is not considered
at all a bad investment; however it lacks fixed return and is risky. Traditional
investment option like Fixed Deposits, Post Office Schemes is NSC / KVP/ NSS
/IVP are losing their sparkle. Due to the constant in the Gold prices the authors
observed that gold is still one of the investment options. They also observed that
youngsters are fully aware of the happening around and are intelligent enough to
decide the best investment to be made from their hard earned money.

9. N. Geetha, M. Ramesh (2011) this study Examines the factors responsible for
investment behavior of people and different investment options available. Equity are
high risk and high return investment with liquidity, debts are low risk and fixed
return instruments, Mutual funds and bonds are low risk with normal returns
instruments, Company deposits and bank deposits has low risk and low returns, post
office savings, PPF and insurance policies are no risk investment with low returns,
Real estate and Gold has no returns on investment but has capital appreciation.

10. Karthikeyan (2001) has conducted research on Small Investors' Perception on Post
Office Saving Schemes and found that there was a significant difference among the
four age groups, in the level of awareness for KisanVikas Patra (KVP), National
Savings Schemes (NSS), and Deposit Scheme for Retired Employees (DSRE), and
the overall score confirmed that the level of awareness among investors in the old
age group was higher than in those of the young age group. No difference was
observed between male and female investors except for the NSS and KVP. Out of

45
 the factors analyzed, necessities of life and tax benefits were the two major ones that
influence the investors both in semi-urban and urban areas. The Majority (73.3 per
cent) of investors of both semi- urban and urban areas were very much willing to
invest in small savings schemes in future provided they have more for savings.

11. Securities, Exchange Board of India (SEBI), and NCAER (2000), 'Survey of
Indian Investors' has reported that safety and liquidity were the primary
considerations, which determined the choice of an asset. Ranked by an ascending
order of risk perception fixed deposit accounts in bank were considered very safe,
followed by gold, units of UTI-US64, fixed deposits of non- government companies,
mutual funds, equity shares, and debentures. Therefore it is essential to understand
the attitude of the investor so that the marketing efforts could be tuned towards their
preferences. The types of assets that are owned by individuals with similar
personality profiles if identified could be used to suggest various types of assets that
would appeal to new investors. Also Asian investors are found to be very
knowledgeable of markets and instruments and willing to try new things.

12. Nahar (1994) tried to examine the impact of personal income tax on household
savings with special reference to salaried class in India. He studied income tax
burden, progressiveness of income tax and special incentive provisions for
motivating savings during the period 1970-71 to 1990-91. He collected primary data
with random sampling technique from 300 salaried persons in Delhi with respect to
their income, savings and tax liability. The study revealed that household savings
had sustained exponential growth rate of 13.7 per cent from 1950-51 to 1990-91. The
study also highlighted that people shifted their investment from currency and saving
deposits to shares, debentures and provident funds for availing benefit of incentive
provisions. The author opined that assesses covered by different income groups had
availed the benefit in same manner and all types of assesses were psychologically
attuned to tax incentives. Lastly, he suggested for simplification of tax incentive
provisions and rationalization of tax rate structure.

13. Mittal (1988) tried to outline the impact of corporate and personal income tax policy
on saving and investment behavior in India during the period 1970-71 to 1985-1986.

46
 The time series analysis showed that the burden of personal income tax was very
high in India having a negative effect on savings and investment. She observed that
effective corporate tax rates were lower as compared to statutory corporate tax rates
indicating that people had availed benefit of various tax incentives under the Act. It
was observed that investment allowance scheme was successful to take care of
adverse effect of inflation on depreciation allowance. In the end, the researcher
suggested that it was preferable to have higher corporate tax rates with higher
depreciation and investment allowance rather than lower corporate tax rates with
lower allowances. She also emphasized for introduction of real economic
depreciation rates on various assets by constructing life tables for the same.

14. Chitale (1978) reviewed the tax incentives for savings available under the Income
Tax Act and evaluated different alternatives to make tax structure more savings
oriented. The author recommended the extension in scope of Sec. 80C to cover 10-15
years fixed deposits in banks and removal of Rs. 20000 ceiling of qualified amount.
It was highlighted that tax benefit from qualified savings did not depend on amount
saved, but it depended upon one’s taxable income. It implied that cost benefit
principle was ignored under section 80 C. It was suggested that the rate of tax benefit
should be made progressive as in the case of tax rates. The study also suggested that
instead of an individual, the family consisting of father, mother and minor children
should be recognized as basic unit of assessment as that could curb the problem of
inequality of consumption by checking the splitting of income.

15. Suman (1974) examined the role of personal income tax and corporation tax in the
Indian tax structure, their impact on savings and investments and role in mobilizing
resources for public sector during first three five year plans. He calculated coefficient
of income elasticity, coefficient of correlation and regression coefficient of these two
taxes. His study revealed that corporate tax played a significant role in raising public
revenue as compared to personal income tax during the period 1950-51 to 1966-67.
The study also highlighted that although tax rates seemed to be high but it did not
adversely affect personal and corporate savings and investments. The author pointed
out that inadequate taxation of agricultural income, political considerations,

47
 existence of non-monetary sector, inefficiency of tax administration and a large
degree of tax evasion were the main weaknesses of the Indian tax structure. The
researcher suggested for simplification of tax law stability in tax laws, proper
assessment by Income tax authorities and concentration on realization of tax arrears.

16. Jhaveri (1972) tried to analyze the impact of income tax concessions on post-tax
income from different financial assets eligible for such concession. For this purpose,
hypothetical examples were worked out by taking certain assumed tax rates, rate of
interest before tax, different levels of income and saving period. The results showed
that qualifying financial assets were more useful for those taxpayers who had to pay
high marginal rate of tax. Taxpayers in middle and small income groups did not get
benefit in real terms by investing in qualifying assets. So, they could prefer
investment in units, preference shares rather than Public Provident Fund, Cumulative
Time Deposit and Employees Provident Fund. The author suggested that deduction
related to savings in specified assets should be given in graded manner. It should
vary from more than 100 per cent at low levels of gross assessable income to 40 per
cent at high gross assessable income. It was also suggested that exemption of income
earned from qualifying financial assets for tax relief should be withdrawn.

48
 CHAPTER 4

Data Analysis

Methodology and Methods of Enquiry

METHODOLOGY ADOPTED

 The template for statistics was prepared on the basis of previous statistics published by the
Department and assessment of information available in various databases of the Income Tax
Department.

 The statistics have been generated from India Post and various investment instruments.

 Certain statistics have been mentioned in percentage.

49
  Various terms used in the statistics have been defined below respective tables.

SOURCES OF DATA
The study relied basically on the secondary data, that is
a. Interest rates of Post office small saving schemes
b. Sections of Income tax department
c. Other tax saving investment instruments

METHOD OF ANALYSIS
The data thus collected was analyzed using adequate financial theories, various statistical tools like
tables, pie charts and bar diagrams are used so as to bring this study to reasonable conclusion.

4.1 FINANCIAL INVESTMENT OPTIONS

50
4.1.1 SHORT-TERM FINANCIAL OPTIONS AVALAIBLE FOR
INVESTMENT

A) Savings Bank Account

Use only for short-term (less than 30 days) surpluses.

Often the first banking product people use, savings accounts offer low interest (4%-5% p.a.), making
them only marginally better than safe deposit lockers and fixed deposits. 

B) Money Market Funds (also known as liquid funds)

Offer better returns than savings account without compromising liquidity.

Money market funds are a specialized form of mutual funds that invest in extremely short-term fixed
income instruments and thereby provide easy liquidity. Unlike most mutual funds, money market funds
are primarily oriented towards protecting your capital and then, aim to maximize returns.
Money market funds usually yield better returns than savings accounts, but lower than bank fixed
deposits. With the flexibility to issue cheques from a money market fund account now available,
explore this option before putting your money in a savings account. 

51
C)Bank Fixed Deposit (Bank FDs)
For investors with low risk appetite, best for 6-12 months investment period.

Fixed Deposits are also referred to as term deposits, this product would be offered by all banks and
Minimum investment period for bank FDs is 30 days. 

The ideal investment time for bank FDs is 6 to 12 months as normally interest on less than 6 months
bank FDs is likely to be lower than money market fund returns. It is important to plan your investment
time frame while investing in this instrument because early withdrawals typically carry a penalty. 

4.1.1 LONG-TERM FINANCIAL OPTIONS AVAILABLE FOR INVESTMENT

A) Post Office Savings Schemes (POSS)

Low risk and no TDS.

 
POSS are popular because they typically yield a higher return than bank FDs. The monthly income
plan could suit you if you are a retired individual or have regular income needs. 
Besides the low (Government) risk, the fact that there is no tax deducted at source (TDS) in a POSS
is amongst the key attractive features.

The Post Office offers various schemes that include National Savings Certificates (NSC), National
Savings Scheme (NSS), KisanVikas Patra, Monthly Income Scheme and Recurring Deposit
Scheme. 

B) Public Provident Fund (PPF)

Best fixed-income investment for high tax payers.
 
PPF is a very attractive fixed income investment option for small investors primarily because of - 
1. An 11% post-tax return - effective pre-tax rate of 15.7% assuming a 30% tax rate
2. A tax-rebate - deduction of 20% of the amount invested from your tax liability for the year, subject
to a maximum Rs.60000 for a tax rebate.

3. Low risk - risk attached is Government risk. So, what's the catch? Lack of liquidity is a big
negative. You can withdraw your investment made in Year 1 only in Year 7 (although there are some

52
loan options that begin earlier).

If you are willing to live with poor liquidity, you should invest as much as you can in this scheme
before looking for other fixed income investment options. 

C) Company Fixed Deposits (FDs)

Option to maximize returns within a fixed-income portfolio.

FDs are instruments used by companies to borrow from small investors. Typically FDs are open
throughout the year. Invest in FDs only if you have surplus funds for more than 12 months. Select
your investment period carefully as most FDs are not encashable prior to their maturity. 
Just as in any other instrument, risk is an embedded feature of FDs, more so because it is not
mandatory for non-finance companies to get a credit rating for this instrument. 
Investors should consciously (either though a credit rating or through an expert) select the companies
they invest in. Quite a few small investors have lost their life's savings by investing in FDs issued by
companies that have run into financial problems. 

D) Bonds and Debentures

Option for large investments or to avail of some capital gains tax rebates.

 
Besides company FDs, bonds and debentures are the other fixed-income instruments issued by
companies. As a result of an illiquid secondary market and a lack-lustre primary market, investment
in these instruments is largely skewed towards issues from financial institutions. 
While you might find some high-yielding options in the secondary market, if you do not want the
problems associated with bad deliveries and the transfer process or you want to invest a large sum of
money, the primary market is the better option.

E) Mutual Funds
Unless you rate high on our Investment IQ Test, use mutual funds as a vehicle to invest.

Have you ever made an investment in partnership with someone else? Well, mutual funds work on
more or less the same principles. Investors pool together their money to buy stocks, bonds, or any
other investments. 
Investing through mutual funds allows an investor to-

1. Avail the services of a professional money manager (who manages the mutual fund)
2. Access a diversified portfolio despite making a limited investment 

53
Our primer Investing in Mutual Funds should educate you a lot more on the benefits of investing in
mutual funds and strategies you could employ. 
 

F) Life Insurance Policies

Don't buy life insurance solely as an investment.

  Life insurance premiums, depending upon the policy selected, include the costs of - 
1) death-benefit coverage 
2) built-in investment returns (average 8.0% to 9.5% post-tax)
3) significant overheads, including commissions. 
This implies that if you buy insurance solely as an investment, you are incurring costs that you would
not incur in alternate investment options. 

It is, however, important to insure your life if you’re financial needs and profile so require. Use
our Are You Adequately Insured planning tool to find out if you need life insurance, and if yes, how
much. 

G) Equity Shares
Maximum returns over the long-term, invest funds you do not need for at least five years.

  There are two ways in which you can invest in equities- 

1. Through the secondary market (by buying shares that are listed on the stock exchanges) 
2. Through the primary market (by applying for shares that are offered to the public) 
Over the long term, equity shares have offered the maximum return to investors. As an investment
option, investing in equity shares is also perceived to carry a high level of risk. 

4.2Fixed Income Instruments

A fixed-income security is a debt instrument issued by a government, corporation or other entity to
finance and expand their operations. Fixed-income securities provide investors a return in the form
of fixed periodic payments and eventual return of principal at maturity.

4.2.1 Government Securities

1. Dated Securities: - These are generally of fixed maturity and fixed coupon securities usually
carrying semi- annual coupon. These are called dated securities because these are identified by
their date of maturity and the coupon.

54
  They are issued at face value.
 Coupon or interest rate is fixed at the time of issuance and remains constant till
redemption of the security.
 The tenor of the security is also fixed.
 Interest /Coupon payment is made on a half yearly basis on its face value.
 The security is redeemed at par on its maturity date.
2. Zero Coupon Bonds: - Theseare the bonds issued at discount to face value and redeemed at par.
The key features of these bonds are:
 They are issued at a discount to the face value.
 The tenor of the security is fixed.
 The securities do not carry any coupon or interest rate. The
difference between the issue price and face value is the return on this security.
 The security is redeemed at par on its maturity date.
 Though the benchmark does not change, the rate of interest may vary according to
the change in the benchmark rate till redemption of the security. The tenor of the
security is also fixed.
 Interest /Coupon payment is made on a half yearly basis on its face value.
 The security is redeemed at par on its maturity date.
3. Floating Rate Bonds: - are bonds with variable interest rate with a fixed percentage over a
benchmark rate. There may be a cap and a floor rate attached, thereby fixing a maximum and
minimum interest rate payable on it. The key features of these securities are:
 They are issued at face value.
 Coupon or interest rate is fixed as a percentage over a predefined benchmark rate at the
time of issuance. The benchmark rate may be TB rate, Bank rate, etc.
4. Treasury Bills: There are different types of TBs based on the maturity period and utility
of the issuance like, ad-hoc TBs, 3 months, 12 months TBs etc. At present, the TBs in vogue are the
91-days and 364-days TBs.

4.2.2 CORPORATE BONDS:-

Corporate bonds are debt obligations, issued by private and public corporations. They are
typically issued in multiples of Rs 1,000. Companies use the funds they raise from selling
bonds for a variety of purposes, from building facilities to purchasing equipment to
expanding the business. When you buy a bond, you are lending money to the corporation

55
 that issued it. The corporation promises to return your money, or principal, on a specified
maturity date. Until that time, it also pays you a stated rate of interest, usually semiannually.

Types of Corporate Bonds:

 Short-term notes
 Maturities of up to 5 years
 Medium-term notes/bonds
 Maturities of 5-12 years
 Long-term bonds
 Maturities greater than 12 years

4.3 GOLD

India's fixation on gold is legendary – the country is the world's second-largest consumer market
for the yellow metal. Gold is also a must have in every Indian investor's portfolio.

Gold prices often go up when other financial assets like stocks and bonds fall in value. During
financial crash, inflation or global trade issues, an investment in gold is considered as a safe
haven. This means by investing in gold, you can ensure good returns even during bad phases.
And there's no better way of investing in gold than through the government-backed methods.
Go gold: 3 gold investment schemes backed by Indian government in 2018

1. Gold Monetization Scheme

The Gold Monetization Scheme (GMS) was introduced by the Central Government in 2015-16.

 Under GMS people can deposit gold in any form gold bars or coins, or even jewellery and the
investor will get an interest on the weight of the deposit
 Under the GMS, customers may be asked to complete KYC (know-your-customer) process
 The interest rate is determined by the banks individually
 The minimum investment required under GMS is 30 grams of gold
 There is 3 term deposit plans- short-term (1 to 3 years), medium term (5 to 7 years), and long-
term (12 to 15 years) are available under the GMS. 

56
2. Indian Gold Coin 

Indian Gold Coin (IGC) is the first ever national gold coin of Indian and it was launched by the
Prime Minister Narendra Modi in 2015.

 The IGC has the emblem of Ashok Chakra on the one side and face of Mahatma Gandhi on
the other.
 IGC is available in the denomination of 5, 10 and 20 grams
 The pricing of the coin is being managed by MMTC, a Government of India Undertaking
 Every Indian Gold Coin is certified as per the Bureau of Indian Standards (BIS) Hallmark
 Customers can purchase IGC through selected bank branches and MMTC units
 MMTC also offers the buy-back option for IGC through its own showrooms across India
 MMTC will repurchase the Indian Gold Coin, in intact tamper-proof packaging and with
original invoice, at the prevailing gold base rate

3. Sovereign Gold Bonds Scheme 

Sovereign Gold Bonds Scheme (SGBs) are government securities denominated in grams of gold.
They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the
bonds will be redeemed in cash on maturity.

 Under Sovereign Gold Bonds Scheme (SGBS) gold bonds are issued in paper and demat
form
 SGBS are issued by the Reserve Bank of India (RBI) and are alternatives to owning physical
gold
 Bonds will be tradable on stock exchanges within a fortnight of the issuance on a date as
notified by the RBI
 The investors will be paid Interest on the amount of initial investment at the rate notified by
RBI
 The tenor of the bond will be for a period of 8 years with an exit option from 5th year
onwards to be exercised on the interest payment dates

Post Office Savings: Savings Account

How much you can invest? Single Account – Minimum Rs.20 and up to any

57

How much do you earn?
When you can withdraw?
What do you get on redemption?
Is it safe?
Is it secured?
Is the income taxable?
Any other tax concessions?
Post Office Savings: Recurring Deposit Account
How much you can invest?
How much do you earn?
When you can withdraw?
What do you get on redemption?
Is it safe?
amount
Joint Account – Minimum Rs.20 and up to any
amount
4 % annually
Any time
Amount balance in the account
Very safe
Secured
Totally tax free U/s 80c of Income Tax Act, 1961
• Interest income exempted from income tax U/s
10(15) of Income Tax Act, 1961up to Rs.3500
in individual and up to Rs.7000 in joint
account to certain extent.
• Effective from A.Y. 2013-14 deduction to the
extent of Rs.10000 or interest actually earned
whichever is less is provided under section
80TTA.
No maximum limit, minimum Rs.10 p.a. or
in multiple of Rs.5 thereafter.
7.3 % p.a. (quarterly compounded)
After 5 years
• Extension of account after maturity
period: Continue account, may be for a
further period of five years and make
monthly deposits during such extended
period.
• Retention of amount of repayment
beyond maturity period: The Depositor
may at his option, continue the account and
retain in it the amount of repayment due for
a further period up to maximum of five
years without making any fresh deposits.
Amount balance in the account
Very safe
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 Is it secured? Secured
Is the income taxable? Taxable
• No TDS
•· No Wealth Tax
Any other tax concessions? Rebate on advance deposits
• Deposits – Six or more but not exceeding
elevendeposits made in a calendar month;
Rebate – Rs.10 for an account of Rs.100
denomination
• Deposits – Twelve or more deposits made
in a calendar month; Rebate – Rs.40 for
every twelve deposits of Rs.100
denomination

Post Office Savings: Time Deposit Account

How much you can invest? Rs.200 to any amount
How much do you earn? • 1st Year 6.9%
• 2nd Year 7.0%
• 3rd Year 7.2%
• 5th Year 7.8%
When you can withdraw? After the return (1 – 5 years)
What do you get on redemption? Amount balance in the account
Is it safe? Very safe
Is it secured? Secured
Is the income taxable? • Taxable
• No TDS
Any other tax concessions? • Interest chargeable to tax
• Any sum deposited in a five year time
deposit account to quantify for deduction
u/s 80C A.Y.2008 -09(maximum
amount eligible for deduction
Rs.150000)
• No Wealth Tax

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Post Office Savings: Monthly Income Scheme Account
How much you can invest? • Single Account – Minimum Rs.1500 and
up to Rs.4.5 lac
• Joint Account – Minimum Rs.1500 and
up to Rs.9 lac
How much do you earn? 7.7% p.a. payable monthly
When you can withdraw? 5 years (6 years prior to 1.12.2011)
What do you get on redemption? Amount balance in the account, plus 10%
bonuson maturity if no withdrawal is made.

Is it safe? Very safe

Is it secured? Secured
Is the income taxable? • Taxable
• No TDS
Any other tax concessions? • No Wealth Tax
• Monthly interest can be credited to the
savingsbank account in the same Post
Office

National Savings: Public Provident Fund (PPF)

How much you can invest? Minimum Rs.500 and up to Rs.150000 per
annum in financial year.
How much do you earn? 8% p.a. (compounded yearly)
When you can withdraw? After 15 years
• Extension at the option of account holder
for block 5 years at one time.
What do you get on redemption? Entire balance in the account
Is it safe? Very safe
Is it secured? • Secured
• Even courts cannot attach the PPF
balance
Is the income taxable? Totally tax free
Any other tax concessions? • Rebate U/s 80c of Income Tax Act, 1961
• Interest exempt under section 10(11)
• No Wealth Tax

National Savings: National Savings Certificates (NSC VIII)

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 How much you can invest? Minimum Rs.100 and up to any amount, in
multiples of Rs.100
How much do you earn? 8% compounded annually but payable at
maturity
When you can withdraw? 5 years (6 year if NSC issued before
1.12.2011).
What do you get on redemption? Amount outstanding with interest
Is it safe? Very safe
Is it secured? • Secured
Is the income taxable? • Taxable
• No TDS
Any other tax concessions? • Annual accrued interest is also eligible
for rebate U/s 80c of Income Tax Act, 1961
• Maximum limit of investment
Rs.150000 as per section 80C in a year,
no limit under post office rule
• No Wealth Tax

National Savings: KisanVikas Patra (KVP)

How much you can invest? Minimum Rs.100 and up to any amount, in
multiples of Rs.1000
How much do you earn? 7.7% compounded annually
When you can withdraw? 9 years 4 months
What do you get on redemption? Double the amount invested
Is it safe? Very safe
Is it secured? Secured
Is the income taxable? • Taxable
• No TDS
Any other tax concessions? No Wealth Tax

Sukanya Samriddhi Scheme

How much you can invest? Minimum Rs.1000 and maximum limit
150000 in a financial year
How much do you earn? 8.5% p.a.
When you can withdraw? Till 21 age
Benefits under Income Tax No Wealth Tax

8% Saving Bonds

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 How much you can invest?
How much do you earn?
When you can withdraw?
Benefits under Income Tax
Minimum Rs.1000 and no maximum limit
8% payable half yearly
6 years
• Tax deduction
• Interest taxable

Listed Shares of Limited Company

How much you can invest? Any amount
How much do you earn? Variable
When you can withdraw? Period of investment continues till
dissolution
Benefits under Income Tax Dividend exempt(high risk)

Deposit Scheme for Retiring Government Employees

How much you can invest? Minimum Rs.1000 and maximum not
exceeding retirement benefits.
How much do you earn? 7% p.a.(8% p.a. if deposit made before
01.03.2003) payable half yearly on 30th June
and 31st December
When you can withdraw? 3 years
Benefits under Income Tax Interest exempt from tax u/s 10(15)(iv)(i)

Deposit Scheme for Retiring Employees of PSUs

How much you can invest? Minimum Rs.1000 and maximum not
exceeding retirement benefits.
How much do you earn? 7% p.a.(8% p.a. if deposit made before
01.03.2003)
When you can withdraw? 3 years
Benefits under Income Tax Interest fully exempt from tax u/s 10(15)(iv)
(i)

Senior Citizens Saving Scheme

How much you can invest?
How much do you earn?
Minimum Rs.1000 and maximum limit
Rs.15lac.
8.7% per annum, payable from the date of
deposit of 31st March/30th Sept/31st
December in the first instance & thereafter,
interest shall be payable on 31st March,
30th June, 30th Sept and 31st December.

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 When you can withdraw?
Benefits under Income Tax
Mutual Funds (Tax Saving Scheme only)
How much you can invest?
How much do you earn?
When you can withdraw?
Benefits under Income Tax
Bank Saving Account
How much you can invest?
How much do you earn?
When you can withdraw?
Benefits under Income Tax
Bank Fixed Deposit
How much you can invest?
How much do you earn?
When you can withdraw?
Benefits under Income Tax
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5 years extendable by another 3 years
• Interest fully taxable
• Tax deduction if interest payable exceed
Rs.10000
• Sum deposited in an account under the
senior citizens saving scheme to quantify
for deduction under section 80C from
A.Y.2008-09(maximum amount eligible
for deduction Rs.150000)
Minimum Rs.500 and maximum limit
rs.150000 as per u/s 80C
No guarantee income declared if fund so
chooses
No restriction
Amount paid eligible for deduction u/s 80C
No limit
4% p.a. payable half yearly. Banks can pay
higher interest on deposit above Rs.100000
No restrictions
• No benefits except TDS
• Effective from A.Y.2013-14 deduction to
the extent of Rs.10000 or interest
actually earned whichever is less is
provided u/s 80TTA
No limit
Rate varies from bank to bank
As per period for which FD purchased and
FD can be extended
• TDS if interest exceed Rs.10000 p.a.
• Deposit made on or after 01.04.2006
eligible for deduction u/s 80C subject to

ULIP
How much you can invest?
How much do you earn?
When you can withdraw?
Safety
Benefits under Income Tax
EQUITY LINKED SAVING SCHEMES
How much you can invest?
How much do you earn?
When you can withdraw?
Safety
Benefits under Income Tax
CHAPTER 5
condition that such a fixed deposit is
issued under the bank term deposit
scheme,2006
Minimum limit is Rs.500 up to Rs.150000
5% to 11% p.a.
5 years
Medium
Maturity revenues earned are tax-free.
Minimum limit is Rs.5000 to Rs.150000
15% to 18% in long term
3 years
Medium
deductioncan be claimed u/s 80C 
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 Findings & Conclusions

TAX SAVING SCHEMES

Selecting the right tax-saving investments may not come easy for all. While some tax-savers are
market-linked, i.e., the return generated is not fixed (rather it depends on the performance of the
underlying securities such as equity or debt), there are those that come with assured returns. 

Choosing between the two will largely be a function of one's appetite for risk and other factors such
as liquidity. While those with a higher risk appetite will have more 'unpredictable' products like
equity in their portfolios, the risk averse will look for more stable investments. Risk averse investors
would not to expose their savings to volatile investments where returns are not fixed.

So, for the one who does not want to take much risk in their investment and want assured returns,
here are some fixed income, tax saving avenues.

Particular Lock-in Minimum Maximum Safety Expecte Frequency Taxation

s Period Investmen Investmen d of Return on
t t Annual Interest

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 Return
ELSS 3 years 500 150000 Mediu 15% to Not Assured Tax Free
m 18% Dividend
ULIP 5 years 5000 150000 Mediu 5% to Capital Tax Free
m 11% Guarantee/
Market
Linked
Return
PPF 15 years 500 150000 High 8% Compounde Tax Free
d Annually
Sukanya Till 21 1000 150000 High 8.5% Compounde Tax Free
Samriddhi age d Annually
Account
Rajeev 3 years - 25000 Market 12% Not Assured Tax Free
Gandhi (1 year linked Dividend
Equity fixed &
Saving 2 years
Scheme flexible)
Life Variabl - 150000 High - Assured Tax Free
Insurance e Dividend

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CHAPTER 6

Suggestions

67
 RECCOMENDATIONS AND LIMITATIONS

 Simplification of the investment planning procedure, so that more and more people are
encouraged to be able to plan their investments themselves and not be dependant or any other
individual.

 Discussion of applications to different types of investment products are available within the
geographical boundaries of India, such as stocks, bonds, and money markets — and their
relative advantages and disadvantages, such as rates of return, safety, liquidity, and tax
features.
 Every individual’s goal is to reduce their tax liability to the minimum, and the goal is only
accomplished by legitimately taking advantage of all tax exemptions, deductions, rebates and
allowances while ensuring that their investments are in line with their long-term goals.

 More taxation education and knowledge to be provided to individuals so that they come up to
invest in tax saving schemes instead of running away from taxes.

 Tax saving instruments are defined so that investor can earn maximum returns with minimum
risk. Tax saving products like ULIP, ELSS and Provident Fund which will help an investor to
reduce their Tax and hence to get a benefit against the money invested by him and hence to
give them a view to reach their different optimum portfolios.

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 The statistics relating to sources of interest rates have been prepared on the basis of rates
mentioned in India Post and the same are variable in nature so they can change in near future.
Therefore, the accuracy of the statistics is limited by the accuracy of returns.

REFERENCES

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 Handbook on Basics of Financial Market by NSE

 https://cleartax.in/s/itr2

 https://cleartax.in/s/which-itr-to-file

 http://financeminister.in/latest-india-income-tax-slabs

 Research Paper: - Personal Finance: Another Perspective 2015-2016

 Introduction to Financial Market Part 1 – CBSE

 http://taxguru.in/income-tax/income-tax-rate-chart-slabs-for-ay-2017-18-fy-2016-
17.html

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