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Taxation for the Retired
August 24 , 2012

Since you do not have earnings taxation would seem to be unnecessary. However you will be taxed on returns from investments made. You have to live in a limited amount so a bad investment could have devastating consequences. As an example, the returns from certain financial instruments attract a larger tax than others. For a low tax, high income retired life you have to plan your way in a systematic manner.

Chose investments with low taxes
1. Government bonds are low tax bonds and a safe outlet for your money.
2. Mutual funds that are designed for no taxes up to investment of Rs 1,00,000 are available such as ELSS and these have dividend option.
3. Tax free bonds are available instead of taxable bonds.
4. Tax deferred bonds are available with a ceiling on the tax rate. 

Converting investments to Cash
Instruments that attract tax should be converted to cash earlier. Compare the taxation of the capital gains versus dividend. Income from capital gain is usually taxed lighter than from dividend. Make sure that you have as much money as possible at a future date even if you have to sacrifice some at the present. However, you have to be careful that if you live long you do not become taxable again from the returns of your investments. In this case it is important to withdraw some money earlier. 

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