Skip to main content

FMPs are good Investmetns over FDs in terms of tax efficiency

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

As these funds invest in highly-graded instruments, there is some amount of certainty about returns

FIXED maturity plans (FMPs), the close-ended debt mutual fund schemes, are often regarded as an alternative to bank and company fixed deposits (FDs).

For long, due to the lack of clarity on returns that these FMPs would generate, they failed to gain enough popularity among retail investors.

However, with passage of time, these FMPs have managed to establish a place in the portfolios of a section of smart debt fund investors.

There are investors, who, at times, do away with FDs and replace them with FMPs.

In some ways, FMPs and bank FDs are similar in nature, particularly in the sense that both give you assured returns. This is, however, notwithstanding the fact that the return from bank FD is fixed and also insured up to Rs 1 lakh, and one knows exactly what one will get and when, whereas, in case of FMPs, the returns are only indicative.

Many FMPs do invest in highly graded instruments and therefore, one can say there is some certainty over returns. Some financial planners and investors brand FMPs as the mutual fund industry version of FDs.

While banks and companies can tell investors what they will pay, mutual funds cannot declare the yield on close-ended debt schemes.

They were earlier also barred from disclosing the indicative portfolio of these schemes. Therefore, there has always been and will always be a debate in the minds of an investor whether to go for FDs or FMPs.

There is no doubt that the Reserve Bank of India (RBI)'s credit policy pronouncements on Friday will render the FD-versus-debt fund debate fiercer. Investors will still face compelling reasons why they should invest in FDs, now that their rates are showing a tendency to firm up. At the same time, investors will have convincing arguments in favour of managed products -short-term debt funds and FMPs which are just showing signs of superior yields.

While the choice becomes a tad more difficult, the lure of assured returns will be stronger indeed -in a market where equity and several other asset classes are failing to satisfy the appetite of investors, chiefly on account of high volatility and negative growth

Analysts think the apex bank, which has signalled a firm policy stand on taming inflation, will have a tough task insofar as the debt market dynamics are concerned. The fixed-income scenario is not likely to change suddenly to accommodate sharper yields.

However, a modification of sorts may be expected.

Investors will keep a particular vigil on trends that may emerge in terms of the shorter end of the curve.

There are already apprehensions that as for FDs, the fight between issuers to get a higher share of investors' allocations will turn uglier. Already banks are aggressively offering deposits (with friendly tenure), and investors have started expecting rates that are closer to 10 per cent.

If someone recommends opting for FMPs, one must ask oneself what is so appealing about FMPs and one should make a conscious decision after clearly knowing the differences between FD and FMP .

There are differences between the two on the taxation front as well. If one invests in an FMP, the dividend is tax-free in the hands of the individual investor, but the fund has to pay a dividend distribution tax. If one invests in the growth option of the FMP for less than a year, the gains are added to the investor's income and taxed at the investor's slab rate. In FDs, the interest income is added to the investor's income and is taxable at the applicable tax slab, also known as the marginal rate of tax.

With FMPs, the tax implication depends on the investment option -dividend or growth. While in the dividend option investors have to bear the dividend distribution tax, in the growth option, returns earned are treated as capital gains (short-term or long-term depending on the investment tenure).

In the case of short-term capital gains (if investments are held for less than 365 days), the gains quantum is added to the investor's income and is taxed at the marginal rate of tax. As for long-term capital gains (if investments are held for more than 365 days), the tax liability is determined based on the lower of with indexation (charged at 20 per cent plus surcharge) and without indexation (charged at 10 per cent plus surcharge).

With the indexation benefit, FMPs end up delivering more tax efficient returns than FDs.

There are many, who think that FDs have an edge over FMPs in liquidity. Being fixed income in nature, there are restrictions on liquidity in both cases. But FDs can generally be withdrawn without penalty or with low penalties, unlike FMPs.

The ultimate analysis, managed products are likely to have an edge, because of the possibility of their scoring more in terms of pure returns. On last count, FMPs are known to have offered 10-11 per cent or thereabouts. The trend, if persists, will ensure more conversions from fixed deposits to debt funds. As always, investors need to consult their financial planners before taking active calls in this direction.

In FDs, the interest income is taxable at the applicable tax slab, also known as the marginal rate of tax In case of FMPs, the tax implication depends on the investment option -dividend or growth While investing in the dividend option, investors have to bear the dividend distribution tax

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

LIC Leave Encashment Plan

LIC Leave Encashment Plan       Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms fro

Power of Compounding in Investments

Power of Compounding in Investments Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds. Save Tax Get Rich Top 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 ELSS Mutual Funds to Invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Tata India Tax Savings Fund  3. Birla Sun Life Tax Relief 96 4. ICICI Prudential Long Term Equity Fund 5. Invesco India Tax Plan 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Sundaram Diversified Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300

MF SIP Top Up Online

Mutual Fund SIP Top Up Online As your monthly income grows, so should your savings. With this facility, you can increase your existing monthly SIP contributions. This can be done on a half-yearly and yearly basis. And you can top up with a minimum of Rs.500 per installment or multiples of Rs.500 as per your convenience.

Kotak Banking Exchange Traded Fund (ETF)

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Kotak Banking Exchange Traded Fund (ETF) Kotak Mahindra Mutual Fund has launched Kotak Banking Exchange Traded Fund ( ETF ). The fund aims to provide returns before expenses that closely correspond to the total returns of stocks belonging to the CNX Bank Index , subject to tracking error. For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call Leave a missed Call on 94 8300 8300 Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual Fund Application Forms from all AMCs Download Mutual Any Fund Application Forms --------------------------------------------- Best Performing Mutual Funds Largecap
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now