16th February 2010

A presentation on

Personal Finance

Tax India
February 17, 2010 1
 Rightly quoted

We must treasure the achievers of our

land because it's they who raise the
sights of all the others….

You are here as you are Heroes – The true achievers

Congratulations - You are Best of the BEST.

The NADT Brigade

Tax India
February 17, 2010 2
You are…

The Torch Bearers of the nation

The ones who take the Key Positions &

responsibilities to lead from the front

The Ones who would be able to guide others

Tax India
 When we step into our new roles, we face various
questions

The most important being how to safeguard the

interests of ourselves and dear ones as also make
present life enjoyable

Tax India
February 17, 2010 4
THE CASH FLOW QUADRANT

Source: Rich Dad Poor Dad Robert T. Kayosaki

Tax India
E – The Employee

 Safe and secure job

 Good Pay

 Excellent benefits

 Dislikes uncertainties

 Employees can be the Presidents, CEO, COO

etc.

Tax India
S – The Self Employed

 I am my own “boss”

 They do not want their income to be

dependent on others

 They own their own job.

 Motto: “Do it yourself”

 Doctors, lawyers, hair stylists, shop keepers,

consultants etc.

Tax India
B – The Business Owner

 Opposites of “S”
 They are surrounded by smart people
from all the four quadrants i.e. E, S, B, I.
 “B” loves delegating.
 Motto: “why do it yourself if you can hire
someone to do it for you”.
 Tatas, Birla, Ambani, Azim Premjee,
Narayan Murthy etc.

Tax India
I – The Investor

 Makes money with money

 “I” quadrant is the play ground of the rich

 The quadrant of rich people

Tax India
 Rich V/S Middle Class
 Rich earns
 30% from E or S

 70% from I

 Others earn
 80% or more from

E and S

 20% or less from I

Tax India
Definition: Investments

 Use money in order to make more money.

 Rs.1000/- should give you Rs.1000/- + X.

Tax India
Types of investments

 Education – Increases your income earning

potential

 Loyalty and hard work – Pension

 Large families: children will take care of

parents

 Pension Plans / Retirement Plans

Tax India
The ‘I’ Quadrant Investment

 The “I” quadrant focuses on investments

that generate income on ongoing basis
during your working years.

 How much income you generate without

working for it.

Tax India
Types of Investments “I”

 Insurance

 Mutual Funds

 Direct Equity

 Real Estate

Tax India
 Must haves

 Personal Accident Policy (PA Policy)

Covers not only death but also temporary &
permanent disablement
(cost Rs 1,000 for cover of Rs 5.00 Lacs)

 Mediclaim Insurance Policy

Covers all hospitalisation pertaining to accidental or
naturals . Benefit u/s 80 D
(Rs 5.00 Lacs cover for whole family @ Rs 15,000)

Tax India
LIC’s Health Plan (In addition to mediclaom)
Benefit policy for long term care
in case of hospitalisation:
Hospital Cash Benefit, ICU Benefit Major
Surgical Benefit

Critical Illness Policy

Compensation payable to insured in case
diagnosed as suffering from a critical illness
specified in policy

Tax India
Public Provident Fund (PPF Account)
One of the best options available in the
market as on today giving 8% tax free returns

Post Office Schemes

MIS, RD, Sr. Citizen Scheme etc.

Bhavishya Nirman Bonds

Attractive return, better safety than FDs &
flexibility
Tax India
 Section I

Life Insurance

Tax India
February 17, 2010 18
Why Life Insurance???

 Human Life Value Concept

“When a child is born, a life is born”

He acquires education and

experience

His knowledge and

skill gives him
earning power

Tax India
 Human Life Value is
Economic Interpretation of Life Insurance

There are two types of Capitals

Human Capital Material Capital

There are two types of Economic Values

Life Value Property Value

At any time the human life value in society is far

greater in magnitude than value of all property put
together. The life values are the cause and creator
of property values
Tax India
 Family welfare economics

The First ‘C’ The second ‘C’ The

The Third
Third‘C’
‘C’ The
The Fourth
Fourth ‘C’
‘C’

Continuation Conservation
Creation of Consumption of Income
Continuation Conservation
of Income
Income of Income of Income of Income

Tax India
Continuation of Income

 Economic life Value

 MI x 150

For Example : Your monthly income is Rs. 30,000/-.Then Your Economical

life value is Rs.45,00,000/-. Because in case of you death if your family can
deposit Rs. 45,00,000 in tax free interest @ 8% interest.

Your family shall be receiving Rs. 3,60,000/- p.a. Which means your family
shall continue to get the same Rs.30,000/- even after we are not there.

Therefore Adam Smith said we must make sufficient arrangement of funds

equivalent to our Economic Life Value from the very first day of earning. But
how to do? Tax India
 What Life Insurance can do??

It is a bridge from where you are today financially, to where

you would like to be in future.

Tax India
 Need of Life Insurance

 In Life Insurance, what we cover is not the loss of

life but the loss of income for the dependants

 People don’t really buy life insurance because they

might die. They buy it because someone they love
and care about will live.

Tax India
Tax India
Tax India
 Most of us regret at the time of retirement
that we have not saved enough.

Tax India
 Chase your passion

Small savings today, give you dual advantage

Tax India
 Section II

Mutual Funds

Tax India
February 17, 2010 29
 What is a SIP?

A ‘Systematic Investment Plan’ (SIP) is an

investment strategy used in mutual fund
investing that allows investments of
fixed at regular at the
amounts + intervals + prevailing
NAV
An Example
 Investing Rs 1,000 each month in a mutual fund
 The investment is done at the applicable NAV of the
mutual fund on the date of investment

30
Tax India
 Regular Investing
A MUST

It helps you
average out your
investment cost…
It may help
regular additions
to your investment
kitty

Using the concept of

Rupee Cost
Averaging…

31
Tax India
 Rupee Cost Averaging

 Regular investing works on the principle of

rupee-cost averaging Equity investing
 It means buying more units when the prices are is not about timing
the market but
low and fewer units when the prices are high
time in
 This helps to average out your purchase price the market…

 Example:

Month Am ount Invested (Rs.) Purchase Price (Rs.) No. of Units Purchas ed
1 1,000 10 100
2 1,000 9 111.11
3 1,000 10 100
4 1,000 11 90.9

Total Investment = Rs. 4,000

No. of units purchased = 402.01

32
Average cost per unit = Rs.Tax9.95
India < 10
Advantages of SIP

Easy to
understand
and
Allows operate
investments of
small amounts
(as low as Rs
1000)
Instills
discipline –
Forces the forced
investor to saving
commit
investments in
any market
Helps avoid scenario
investing large
sums in volatile
and overheated
markets

33
Tax India
 Want to be a Millionaire?

Let’s say you invest Rs. 2500 per month… how will your
money grow?
No. of Amount No. of Amount No. of Amount
Years (In Rs. Lacs) Years (In Rs. Lacs) Years (In Rs. Lacs)
1 0.32 11 7.34 21 32.91
2 0.69 12 8.68 22 37.78
3 1.11 13 10.19 23 43.31
4 1.58 14 11.92 24 49.62
5 2.12 15 13.89 25 56.79
6 2.73 16 16.13 26 64.95
7 3.43 17 18.68 27 74.23
8 4.23 18 21.58 28 84.80
9 5.14 19 24.88 29 96.83
10 6.17 20 28.64 30
110.52

Assuming 13% CAGR and that investments are 1

made at the beginning of each month
All figures
34 cited in the illustration are notional
Tax India CRORE!!!
 Tax India
February 17, 2010 35
Remember… the more you save makes a difference

Tiny drops of water make the mighty ocean

36 Tax India
 Section III

Home Loans

Tax India
February 17, 2010 37
 Start young… fulfill your desire

Home loans
Your dream home
Tax Advantage

•Create asset •Benefit u/s 24 – on interest

•Create your second income •Benefit u/s 80C – principal repayment

Tax India
February 17, 2010 38
 A brief on important
sections of Income Tax

Tax India
February 17, 2010 39
 So many options…

Why now?

Tax India
February 17, 2010 40
OH! “I CAN’T INVEST NOW”

Tax India
OH! “I CAN’T INVEST NOW…”

Tax India
OH! “I CAN’T INVEST NOW…”

Tax India
OH! “I CAN’T INVEST NOW…”

Tax India
OH! “I CAN’T INVEST NOW…”

Tax India
SORRY, “I CAN’T INVEST NOW”

Tax India
Tax India
 Tax India
February 17, 2010 48
Thank You

 Q&A

Tax India