My mother retired in June this year and she has got her retirement benefits that add up to Rs 40 lakh. Equities don’t work for her, how can she make this corpus tax efficient and safe for the next ten years?
Rajesh Makhija, Delhi
Tax efficiency and safety leaves you with no choice but to stick to investments in debt instruments. Given the time frame that your mother has, the choice is limited. Moreover, it is not clear if she needs the money over the next ten years or not. In case she does not need this money for the next ten years, you will be in a better position if you put it in equity mutual fund like balanced funds. The automatic asset allocation and rebalancing discipline followed by these funds ensure that you don’t face extreme volatility demonstrated by equity investments. In case she is looking to draw income from this money she has received, she could look at Pradhan Mantri Vaya Vandana Yojana (PMVVY), which is for senior citizens. This scheme provides an assured return of 8 per cent per annum payable monthly (equivalent to 8.30 per cent per annum) for 10 years. The pension is payable at the end of each period, during the policy term of 10 years, as per the frequency of monthly, quarterly, half-yearly and yearly as chosen by the pensioner at the time of purchase. The minimum that one can invest in this scheme is Rs 1.5 lakh and the maximum is Rs 7.5 lakh, based on which the pension payout works. There are also debt fund options available that one can explore depending on the risk that your mother can tolerate with her investments.
