Safety of principal and regular income streams are two criteria we’ve found to be generally quite important to senior citizens.

So, you should invest in low risk and regular returns paying investments. A combination of carefully designed customized portfolio can provide you higher risk adjusted returns.

The mix depends on your risk taking ability and calendar of liquidity needs.

Debt products will indeed form an important portion of the portfolio. This would ensure a regular flow of income besides ensuring relative capital safety.

The interest rates on bank fixed deposits have come down significantly after rate cuts by the Reserve Bank of India (RBI). Post office schemes offer good returns at 8-9 per cent per annum.

There are annuity plans and pension plans offered by insurance companies that also provide fixed returns. However, every investment avenue should be considered after due diligence.

Since returns from fixed rate instruments are taxable, the investment can be in a combination of monthly income plan (MIP), a liquid fund and balanced equity funds.

Fixed deposits are also a favourite choice. They are simple and convenient. However, the interest is taxable and reduces the effective yield.

One may invest either in bank or company fixed deposits.

MIPs are offered by different categories of institutions ranging from post offices to banks. In the case of post offices, there is a cap on the amount that can be invested at Rs 4.5 lakhs per person.

A couple can park as much as Rs 9 lakhs between them for an assured return of eight per cent. Though there is no tax deducted at source from this product, the interest is taxed depending on the income slab.

Mutual funds too offer these plans but the returns are not guaranteed. Mutual funds allocate a portion of the corpus to equity which means it has an element of risk.

Therefore, in a rising market, these can be considered by a senior citizen such as yourself after taking into account your monthly needs. The plan offers the potential of capital appreciation over a period of time.

Also, since mutual funds distribute their profits in the form of dividends, they are tax-free in the hands of investors.

Another popular option is investing in balanced funds. The advantage with a balanced fund is that during an equity downtrend, it acts as an excellent cushion as debt tends to be a performer during such a scenario. During an equity uptrend, they benefit from the rally in the stock prices.

The allocation to equity should be considered after regular income needs have been met. For example, assume a working person retires at the age of 60 with Rs 50 lakhs corpus, and he needs Rs 50,000 per month to maintain the standard of living he had when he was working.

He has to invest in fixed rate instruments that can fetch him Rs 30,000 per month. Assuming he invests in a scheme that yields nine per cent per annum, he will have to invest Rs 40 lakhs. The remaining Rs 10 lakhs can be invested in equity.

A common mistake is putting one's eggs in different baskets without understanding their tax implications.

This results in taxes eating into returns and the inevitability of dipping into the principal amount.

The returns from post office schemes, bank fixed deposits, senior citizen bonds, and unit-linked and traditional pension plans are fully taxable.

Some tax free investment options available to you are:

Life insurance receipts

Under Section 10(10D), any sum received under a Life Insurance Policy (LIP), including the sum allocated by way of bonus on such policy, other than u/s 80DDA or under a Keyman Insurance Policy, or under an insurance policy issued on or after 1.4.2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20 per cent of the actual capital sum assured, is fully exempt from tax.

However, all moneys received on death of the insured are fully exempt from tax Thus, generally moneys received from life insurance policies whether from the Life Insurance Corporation or any other private insurance company would be exempt from income tax.

Payment received from provident funds

Under the provisions of Sections 10(11), (12) and (13) any payment from a government or recognised provident fund (PF) or approved superannuation fund, or PPF is exempt from income tax.

Certain types of interest payment

There are certain types of interest payments which are fully exempt from income tax u/s 10 (15). These are described below:

(i) Income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification in the Official Gazette, specify in this behalf.

(iia) In the case of an individual or a Hindu Undivided Family, interest on such capital investment bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf (i.e. 7 Capital Investment Bonds);

(iib) In the case of an individual or a Hindu Undivided Family, interest on such Relief Bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf (i.e., 9 per cent or 8.5 per cent or 8 per cent or 7 per cent Relief Bonds);
(iic) Interest on NRI bonds;

(iiia) Interest on securities held by the issue department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949;

(iiib) Interest payable to any bank incorporated in a country outside India and authorised to perform central banking functions in that country on any deposits made by it, with the approval of the Reserve Bank of India or with any scheduled bank;

(iv) Certain interest payable by Government or a local authority on moneys borrowed by it, including hedging charges on currency fluctuation (from the AY 2000-2001), etc.;

(v) Interest on Gold Deposit Bonds;

(vi) Interest on certain deposits: Bhopal Gas victims;

(vii) Interest on bonds of local authorities as notified,

(viii) Interest on 6.5 per cent Savings Bonds [Exempt] issued by the RBI, and

(ix) Stipulated new tax free bonds to be notified from time to time.
Dividends on shares and units -- Section 10(34) & (35)
With effect from the Assessment Year 2004-05, the dividend income and income of units of mutual funds received by the assessee completely exempt from income tax.
Long-term capital gains of transfer of securities -- Section 10(38)
With effect from FY 2004-05, any income arising to a taxpayer on account of sale of long-term capital asset being securities is completely outside the purview of tax liability especially when the transaction has been subjected to Securities Transaction Tax (STT).
Thus, if the shares of any company listed in the stock exchange are sold after holding it for a minimum period of one year then there will be no liability to payment of capital gains. This provision would even apply for the old shares which are held by an assessee and are sold after the Finance (No.2) Act, 2004 came into force.
Tax exemption regarding reverse mortgage scheme -- sections 2(47) and 47(x)
Any transfer of a capital asset in a transaction of reverse mortgage for senior citizens under a scheme made and notified by the Central Government would not be regarded as a transfer and therefore would not attract capital gains tax. The loan amount would also be exempt from tax. These amendments by the Finance Bill, 2008 apply from FY 2007-08 onwards.

Senior Citizen Savings Scheme

In 2004 Government of India introduced one special scheme known as Senior Citizen Savings Scheme or SCSS to cater the financial needs of senior citizens such as yourself.

The only shortfall of the scheme is the interest earned on it is taxable. In case the interest income in a year exceeds Rs 10,000, then there is TDS (tax deducted at source).

Although investment of up to Rs 1,00,000 in a year done under this scheme has been exempted under Section 80C of the Income Tax Act.

Here the advantages and disadvantages of the scheme have been discussed to help the senior citizens to compare it with other options available.

Senior citizen, a person who has completed 60 years or above is eligible for the SCSS but there is a provision that a person who has completed 55 years and opted for voluntary or any special retirement scheme, can avail this scheme subject to certain conditions.

• The scheme is basically for senior citizens such as yourself therefore it has some special features.


• The scheme offers a fixed rate of return at 9% per annum, which is higher than the returns offered on other fixed income instruments like PPF and NSC.
  
• The investor gets interest income quarterly. Generally, it is the last working day of every quarter. There is no option of getting interest income yearly or cumulative interest at the time of maturity.


• The tenure of the scheme is 5 years, but premature withdrawal after a year is permissible which gives the benefit of better liquidity to meet unforeseen expenses. Premature withdrawal involves some cost. In case the deposit account is closed after the first yea, but before the second year, 1.5% of the principal amount is deducted otherwise 1% of the principal amount is charged once the scheme completes two years.


• One gets the option of extending the scheme for another three years on maturity at the prevailing interest rate at that time.



• The minimum amount of investment is Rs 1,000 while the maximum investment can be Rs 15 lakh. The investment has to be made in multiples of Rs 1000.


• One also gets the option of opening more than one account, but the new account can be opened after a one month gap. The account can be opened in an individual’s name or can be opened jointly with spouse. Joint account with any other family member or relative is not allowed. Although one can open more than one account but there is the cumulative investment limit has been set to Rs 15 lakh.

Under RBI rules, every Indian can remit upto $200,000 per year outside of India. This money can be utilized for investment purposes including purchasing real estate.

It's not even necessary that this entire amount be used to buy the property. The investor can very well even bank finance this property. Furthermore, the buyer can also claim capital gains exemption on a property he may have sold in India by purchasing this property abroad as long as the conditions specified in Sec. 54 are satisfied. This is because, even for properties bought using mortgage, the borrower instantly becomes the owner of the property. That he is paying his EMIs (mortgage) on the loan taken is an agreement between the lender and the borrower inter se. It has no bearing on the ownership of the property. In other words, as far as Sec. 54 is concerned, an investment has indeed been made in property. Whether it's through the mechanism of mortgage or otherwise is immaterial.

We can facilitate the process of purchasing property outside of India.

For most NRI's the difficult part about knowing how to go about investing in the Indian stock markets is finding one place where they can get all the required information. To start off with, there is definitely quite an amount of paper work. For instance you would need to open bank accounts and complete other related formalities. But what investors prefer is to have an account with a good bank, open an account with a good stock broker and be comfortable that their funds are safe and that all trades would be executed fairly and transparently.

So here are the basics on how an NRI could invest in the Indian stock markets :

Firstly, you would need to open a bank account and decide whether you need to trade on a repatriable or a non repatriable basis. Now those who already have bank accounts should check with their bankers to find out whether those are suitable for stock trading. Know that you can nominate only one bank account for your stock trading that you’ll do with a broker. Some of the leading private banks are competent in this regard and can help you open an account through the internet that can be faster.

NRIs are allowed to invest in Indian stock market under :

1.	The Portfolio Investment Scheme (PIS) (buying through the secondary market) and
2.	Through the Direct Subscription route (Investments though IPO’s/Private Placements).
An NRI has to follow the following basic steps :
1.	Open a savings bank account (Non – PIS) with approved designated bank branch – linked to
	Demat Account for Dividend Credit
2.	Take approval of designated bank for investment in Indian Stock Market. We work with Kotak
	Mahindra Bank which is one of the premier banks in India and is amongst one of the designated banks for issuing RBI Approval which is called PIS (Port folio investment scheme)
3.	Open a Demat Account with a Depository Participant – Holds shares in electronic form.
4.	Appoint a broker to execute trades on your behalf on the Exchange. Used to buy/sell
	stocks/invest in mutual funds.
	Accounts can be opened in NRE (Repatriable), NRO (Non Repatriable) or Both status
Proofs To Be Submitted For Opening Of Bank/Trading/Demat Accounts With Us
Passport with the following details is collected : Name Passport No Date & place of issue Date of Expiry Address (should be the same as on the form) Date & place of Birth Signature Photograph Visa Stamp Country of Issue Type of Visa (Immigrant / work permit / dependent etc) Date of Expiry Immigration stamps Date of Issue Person of Indian origin proof NOTE: if the client is born before 1947 needs to give an affidavit stating that he is person of Indian origin. In case if the client doesn't have person of Indian origin proof than Other proofs included for an nri s to person of Indian origin is can give birth certificate or passport copy of his parents grand parents Copy of PIS permission in case if the client already has an PIS account with another designated bank Client Master Copy, for existing demat account that the client already has and only wants open a trading account with us through Kotak Securities Bankers Verification for having a Pins and saving or pins or saving account with the designated branch PAN card it is mandatory for all the clients Signed across Photograph on all the account opening forms POA to our partner, Kotak Securities Ltd depends whether you want to give a power of attorney or not. But it largely serves convenience to the clients, so that you don't need to give delivery instruction for execution of shares from your demat account every time you make a sale. If the client belongs from US than we would require Social security card or if the client belongs from Middle East than we would require his lease agreements copy from the client. Copy of tax residential certificate issued by the tax /competent authority of country of residence. AND/OR Copy of tax residential certificate issued by the tax /competent authority of country of residence. AND/OR Copy of Tax Identification number certificate issued by the tax /competent authority of country of resident. AND/OR Copy of my/our latest tax returns/forms filed in the said country of my/ our residence along with the Social Security card copy. *Note Charges for account opening For bank 300 stamp papers charges will be debited after opening of account with the bank to the customer's bank account. For Trinity accounts Rs. 1500 is compulsorily to be collected as account opening charges. *These charges are subject to change Note: In case of investment through primary market a NRI does not need to open a PINS Account or does not needs a approval of designated bank for investment. Our partner Kotak is privileged to provide the above facilities under one umbrella to be able to serve a NRI better. There are two types of Rupee accounts permitted to be maintained by the NRI's An NRI can maintain two types of Rupee accounts. Those are NRE and NRO Accounts : Non-Resident (External) Rupee Accounts (NRE Accounts) and Ordinary Non-Resident Rupee. (NRO Accounts) The distinction between NRE and NRO accounts Funds remitted from abroad or local funds which can otherwise be remitted abroad to the account holder, can be credited to NRE Accounts. Local funds, which do not qualify for remittance outside India, are required to be credited to NRO accounts. In simple terms in NRE account an Nri can remit the money abroad but in case of NRO he/she cannot.