FMP – short term less than 1 year

POSTED BY abhijeet modi ON December 28, 2011 8:12 pm COMMENTS (7)

i am new to this site. i find interesting discussion about NHAI bond.
my question is if i will invest in FMP which is less than 1 year – what would be tax liability at maturity amount.
Recently i invested 1 lacs in HDFC 92 D scheme.

second question is about SIP – my SIP is continue in 2 fund- HDFC top 200 and Reliance growth since last 2 yrs – but in both fund returns are in negative so may i switch to other group or should wait for some more time?
i like to switch it to ELSS scheme so at least it will give me Tax benefit.

7 replies on this article “FMP – short term less than 1 year”

  1. Dear Abhijeet Modi, if time frame is not fixed, short term debt funds are better option. As you are in 20% tax slab, you may opt growth option.



  2. Abhishek says:

    Hi Abhijeet,

    Go for open ended short term debt funds instead of FMPs. The current market environment should help u give good returns in open ended debt funds with liquidity. Take the Dividend option.


  3. Dear Abhijeet, when market itself is going down, how can your investments remain isolated to that? Please check the performance of the 2 funds in question to their respective index as well as Nifty & sensex & then only decide to quit or continue.

    Actually the current time is the best time to keep continuing your SIPs to average out your cost of units.



  4. Dear Abhijeet modi, the FMPs are classified as debt fund. Hence for less than 1 y holding, the gains if any ‘ll be taxed at your marginal rate of tax. if the gains are given to you as dividend, it ‘ll be tax free in your hands but the MF ‘ll have to pay Div. Distribution Tax on the dividend amount declared.



    1. To add to what Ashal said the dividend is free in the hands of the investor (whatever is received) but really there is a Dividend Distribution Tax (DDT) deduction at the payout. If the dividend declared is 1.00 a DDT of 0.15 is deducted and the investor receives only 0.85. Technically this is same as 15% tax on the income (far better than the 20% or 30% marginal rate some may pay). If you are in 10% tax bracket go for the Growth option.

      Also Abhijeet – you should not directly look at fund returns only. Compare them versus the market. In a year the markets have fell from 20,000 levels to 16,000 levels, a fall of ~20%. Most MFs would have comparable performance. Dont stop the SIP now as it is a good accumulation phase with markets beaten down.

      1. abhijeet modi says:

        Thanks for your reply.
        i will continue my SIP

    2. abhijeet modi says:

      thanks for your reply.
      Tell me one more thing which one is more better option for short term fixed investment –
      FD or Debt fund ?
      time horizon is 1 year or less and tax bracket is 20 %

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