FMP – Birla Sun Life Short Term FMP – Series 3

POSTED BY Dominic Prakash ON December 7, 2010 6:04 pm COMMENTS (6)

How do I research this fund or earlier series 2 or series 1 performance? I cannot get any details from VResearch. I want to invest in this short term FMP and I would like to make sure that the return is better than liquid fund like HDFC Cash mgmt.

Regards

Dominic

6 replies on this article “FMP – Birla Sun Life Short Term FMP – Series 3”

  1. HI Trupti,

    1. The returns that you are going to generate in 4-5 Months will be treated as short term capital gain and you need to pay the tax as per your individual tax bracket.

    2. TDS is not deducted on the sale proceeds for Resident Indians.
    In case of NRI’s, TDS will be deducted on the sale proceeds. The TDS will be deducted depending upon whether it is a short-term capital gain or long term capital gains. For short term capital gain the tax is deducted @ 33% while in case of long term capital gains it is deducted @ 11%.

    3. DDT ranges between 14% – 28%.

    For debt schemes, the exact DDT is 14.163% and for money market and liquid schemes it is 28.325%.

    Hope it clarifies. Visit the link for more details.

    http://www.thewealthwisher.com/2010/08/29/taxation-of-debt-mutual-funds/

    Thanks – Siva

  2. Ramesh Mangal says:

    Taxation for medium and short term debt funds is the same. Well dividend distribution tax is deducted and then dividends are paid to investors.

    Tax on debt funds for short term capital gains tax is as per individual tax bracket, so if you are in 30% tax bracket, you will have to pay 30%. Long term capital gains tax is (i) with indexation 20% on gains (ii) 10% without indexation. Indexation is used to reduce the profits and thus the tax on it.

    For dividend distribution tax on money market funds, i.e., ultra short term for example cash funds or liquid funds, dividend distribution tax is 25 % for individuals and 33% for corporate. For rest all types of debt mutual funds, it is 14.25% for individual and 33% corporate.

    Ramesh

    1. trupti says:

      Ramesh,

      thanks for your explanation

      I am still unclear about few things about taxation with debt mutual funds here
      I have around 1.5 lacs to invest for short term(3-4 months)
      so if I invest that amount in some good short term debt fund what happens to the return I get on that amount after 4 months ?
      few questions here, please guide me
      1. Does a AMC them self deducts these taxes at their source like TDS ?
      2. why I would be paying DDT(dividend dist. tax) of 12.5% when I am going to invest it as growth option and NOT dividend option ?
      3. at one place u said DDT for debt mutual fund it is 12.5% and at some other place u said it is 14.25%
      please clarify…

  3. Ramesh Mangal says:

    Taxation for medium and short term debt funds is the same. Well dividend distribution tax is deducted and then dividends are paid to investors.

    Tax on debt funds for short term capital gains tax is as per individual tax bracket, so if you are in 30% tax bracket, you will have to pay 30%. Long term capital gains tax is (i) with indexation 20% on gains (ii) 10% without indexation. Indexation is used to reduce the profits and thus the tax on it.

    For dividend distribution tax on money market funds, i.e., ultra short term for example cash funds or liquid funds, dividend distribution tax is 25 % for individuals and 33% for corporate. For rest all types of debt mutual funds, it is 14.25% for individual and 33% corporate.

    From http://hubpages.com/hub/investing-in-mutual-funds
    Also see this,
    http://money.sulekha.com/no-dividend-distribution-tax-for-debt-funds_09_2010_postedby_deepak-shenoy

  4. Dominic Prakash says:

    Thanks Ramesh.

    I am not clear on the last part of your response.

    Does this mean 12.5% DD tax for Short term Debt fund gains and 27.5%+ for liquid funds?

    Kindly clarify.

  5. Ramesh Mangal says:

    @Dominic,
    Search google.com and moneycontrol.com for the above mentioned series.

    I do not see any major benefit in using a short term FMP. Why do you want to pay 2.25% FMC for this, without guaranteed returns and overall no tax benefit w.r.t. bank FD. If you want a relatively better return in lieu of relative less liquidity, go for a short term debt fund (DDT is 12.5 + and not 27%+ for liquid funds). 🙂

    Ramesh

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