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How to get better return other than fixed deposits and Post Office MIS

I have the following queries of how much to invest and at what funds for a 69 year old senior citizen lady who is does not pay tax and not even files return for her income. kindly elucidate in details? She is in receipt of Post office MIS scheme maturity amount of INR 10 LACS and she does not want to invest in POST OFFICE ANYMORE? She already has some 8-9 lacs investment in FIXED DEPOSITS which is earning her quarterly interest for which she fills up FORM 15H every year. The advise she is seeking, is, in what instruments she should invest her 10 lacs, so that she enjoys monthly or quarterly payout without attracting tax liabllity? SHe does not want to invest in BANK FD also', as she is seeking higher returns than what bank is offering today? Her interest is in DEBT MUTUAL FUNDS, but attracting least or no TAX at all. She wants to avoid the filing of INCOME TAX RETURN PART as she has never filed and does not want to get into it at her age as she will not be able to do it without outside help and she wants to avoid it, simply put. I suggested DEBT ACCRUAL FUNDS-SWP, what about these and what are the return prospects annually for the same in her case and INCOME STATUS? WILL it be taxable once the the funds mature in her hands after the period of funds is over etc? kindly guide her with best possible options in such category, considering her condition as stated above. Kindly let us know the best return oriented MUTUAL FUNDS IN THIS CATEGORY - be it debt accrual or any liquid funds etc?

Jun 13, 2016 by JITA DAS, Kolkata  |   Retirement Planning

As you have rightly mentioned, monthly SWP from debt funds would be an ideal solution for her. We have done two articles in the recent past which completely highlights these benefits in details. Request you to go through the articles titled Systematic Withdrawal Plans from Debt Mutual Funds give the most tax efficient income https://goo.gl/5CFpdN and https://goo.gl/CWw0Be

However, we have following to suggest on other points of your queries –

1. Interest Income and capital gains are taxable items and the investor should consult a tax consultant and file Income Tax returns if her overall income exceeds the threshold limit in a financial year. Currently senior citizens with annual income of upto Rs. 300,000 Lacs need not pay any tax.

2. In case of SWPs, please note that capital gains tax for each SWP instalment need to be calculated in following manner –

The formula will be (NAV on withdrawal date - NAV on deposit date) X Number of units redeemed X your income tax rate. However, please note that there will be no TDS in case the said senior citizen is a resident Indian.

3. Taxation of Debt Funds post her SWP period - Under the current debt fund tax treatment, capital gains from debt mutual funds investments held for less than three years are taxed as per the income tax rate of the investor. For debt mutual funds investments held for more than three years, returns (long term capital gains) are taxed at 20% after allowing for indexation benefits.

4. Please note that we do not give fund specific advice, but you can choose a fund suitable for her from this link https://goo.gl/wz2EUN or from here https://goo.gl/aB5hP7

5. How monthly SWPs has done in the last three years – You may check the following monthly SWP examples of few funds (Pure Debt funds/ Credit opportunities/ liquid funds) to estimate the returns and the fund value after three years. We have presumed monthly withdrawals of Rs. 6,667 (8% annual rate) done on 10th of every month with initial investment as Rs. 10.00 Lacs. However, please note that past performance is no guarantee for future returns.

ICICI Prudential Dynamic Accrual Plan https://goo.gl/QzvVES

ICICI Prudential Liquid Fund https://goo.gl/OJB3QU

Birla Sun Life Medium Term Plan https://goo.gl/PlufY5

Birla Sun Life Dynamic Bond Fund https://goo.gl/qbqZCc

DSP BlackRock Income Opportunities Fund https://goo.gl/WuqltO

Reliance Regular Savings Fund (Debt option) - https://goo.gl/nJ3y7Z

Hope the above helps. In case of any further clarification do write to us again. To understand the above better and help the senior citizen, we suggest that you should avail the services of a financial advisor.

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