Tax on MIS Investment

Santhosh (Trade Marketing) (24 Points)

25 October 2010  

Dear Experts,

One of my family friend whose husband has passed away 5 years ago and has surviving children aged 15yrs and 8 yrs.She has LIC Market Plus policy which will mature in March 2011 and she will get 20lakhs from this LIC policy.

Since she is the only bread earner for her children(dependent) she wants to invest this entire 20lakh rupees in Post Office Monthly Income Scheme(MIS) from Aprl 2011 onwards.Also she will be having no job in hand and hence MIS monthly interest will only be the source of income for her family

a) Is there any kind of tax from Indian Government first of all if she invests in MIS scheme?

b) Being a widow how can she exempt herself from paying taxes

c) Will there be tax levied on monhtly interest that she will receive when investing in MIS scheme.

Please suggest how she can plan investment to avoid heavy taxes