Financial Health Check

I am a retired person. I do not have the benefit of pension. My only source of income is from the Monthly Income Scheme the of post office. ...

I am a retired person. I do not have the benefit of pension. My only source of income is from the Monthly Income Scheme the of post office. What is my normal standard deduction in this case? What other deductions am I entitled to?
B N Anand

The same rules as a general tax assess apply to you in terms of the standard deduction. For income less than Rs 5 lakh per year, you can reduce Rs 30,000 from your gross income and for income over Rs 5 lakh, you can deduct Rs 20,000. Senior citizens (those over the age of 65) can claim up to Rs 15,000 (under Section 80 D) as a deduction from gross income for mediclaim premium paid for self and dependants. Additionally senior citizens get a rebate of Rs 20,000 from the tax due under Section 88 B. If your tax liability is Rs 20,000 or less, you pay no tax. If your tax liability is, say, Rs 30,000, then you pay only Rs 10,000 as tax. All other deductions, exemptions and rebates are applicable as well. Senior citizens, if you avail of all the possible tax shelters, can earn a tax-free gross income of up to Rs 2.7 lakh per year. Speak to a good CA friend to help you out with this, if still unclear.

I am 18 year old college going student. My father expired a year ago and left behind Rs 7 lakh. I don’t know where to invest them, there is no one to guide me. Please help.
Talwinder Randhawa,
Chandigarh

I’m not sure if you want regular income from this money or want to invest it for the long term so that it grows in value. If you want regular income then you could look at a Post Office Monthly Income Scheme where you can put a maximum of Rs 3 lakh. The rest of the money could go a bank deposit or an income fund, depending on how much risk you are willing to take with the capital. The problem today with lower risk bank deposits is the high inflation that is reducing the purchasing power of the money. If you want to put the money away for a few years, look at buying National Saving Certificates that are attractive at the current rates of return. This is a low risk strategy. If you are able to take higher risk, then you could put part of the money (say 20-30 per cent) in a good diversified equity mutual fund that will allow your capital to grow. Remember diversification is a good strategy across asset classes to protect and grow your money.

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