Tax on MIS Investment

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Santhosh

Trade Marketing

24 Points Posted on 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

Replies (2)

ADITYA

Manager Finance

742 Points Posted on 25 October 2010

Dear Santosh,

It is a great idea of your friend to invest in a wise manner to help her family in such a sad situation .

Best of my knowledge,

a) Is there any kind of tax from Indian Government first of all if she invests in MIS scheme? -No

b) Being a widow how can she exempt herself from paying taxes - Income TAx payable at the applicable rate

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

No there wouldn't be any tax for the investment, however income tax liability, if any, will be payable annually at the prevalling rate for the income, generated from said investment.

The maximum limit is Rs 3 lacs per person as per post office rules, please check-up before investment.

She can devide the sum of Rs 20 lacs as per Hindu Succussesion Act as She her-self, and her both minor children are successor .

1). Mrs A Rs 3 Lacs

2) Minor Children 15 Yrs (Gaurdian Mrs A) Rs 3 Lacs

3) Minor Children 08 Yrs (Gaurdian Mrs A) Rs 3 Lacs Total Rs 9 lacs

Rest amount of Rs 11 lacs may be invested in Bank FD with monthly interest option.