Recheck whether by investing in 366 days FMP, you will get long term capital gains tax or not. Recently there was a change in which you need to keep money in the debt fund till 1 year plus end of that financial year. Which means, today an FMP which will mature on 1st April 2014 will be allowed to be called long term capital gains, and not one which ends on 23 Aug 2013.
Dear Amit, make sure the maturity date meets with your required date in future. I’m more comfortable to put my money in normal open ended debt fund for the sake of liquidity & to keep control in my hand.
Amit,
FMP may be a good option if you are in over 10% tax bracket. FMPs don’t give you more return in comparison to FDs. However, post tax returns are better than FDs as FMPs are taxed as capital gain while FDs are taxed as any other income. Hence if you are in 20% bracket, you can limit your FMP taxation to within 10% bracket, while the returns on FDs are taxed as high as your highest tax bracket.
In order to select your FMP, you would need to keep an eye on any NFO. They have a fixed time within which you need to subscribe to it. Check out on AMFI’s website http://www.amfiindia.com/nfo.aspx which would give you list of all Mutual Fund NFOs and select the FMP which meets your investment time horizon. I wouldn’t say if any particular FMP is better than other.
Amit,
The main factor behind a FMP is its duration. Your investment time horizon should match with the respective FMP’s investment tenure. FMPs have a fixed tenure such as 90 days, 6 months, 1 year and 3 years. If you want to invest for a period of 6 months, then don’t end up investing in a FMP for 1 year. You can’t withdraw your funds in the middle of the tenure (though you can probably sell them over the stock exchange with limited gains).
The question to ask is – why do you want to invest into FMPs in the first instance…
Thanks all.
Dear Ashal, Will I get same tax benefits for both FMP & Open Ended Debt Fund?
Dear Amit, yes is the answer as both are treated as Debt fund for taxation.
Thanks
Ashal
Thanks… I am planning to invest in SBI DEBT FUND SERIES – 366 DAYS – 13
I hope that I am selecting right fund…
Recheck whether by investing in 366 days FMP, you will get long term capital gains tax or not. Recently there was a change in which you need to keep money in the debt fund till 1 year plus end of that financial year. Which means, today an FMP which will mature on 1st April 2014 will be allowed to be called long term capital gains, and not one which ends on 23 Aug 2013.
Dear Amit, make sure the maturity date meets with your required date in future. I’m more comfortable to put my money in normal open ended debt fund for the sake of liquidity & to keep control in my hand.
Thanks
Ashal
Thanks BanyanFA…
I want to invest in FMP as a alternative to my FD. I want to invest in FMP for period of 1 yr. Now how can I select my FMP?
Amit,
FMP may be a good option if you are in over 10% tax bracket. FMPs don’t give you more return in comparison to FDs. However, post tax returns are better than FDs as FMPs are taxed as capital gain while FDs are taxed as any other income. Hence if you are in 20% bracket, you can limit your FMP taxation to within 10% bracket, while the returns on FDs are taxed as high as your highest tax bracket.
In order to select your FMP, you would need to keep an eye on any NFO. They have a fixed time within which you need to subscribe to it. Check out on AMFI’s website http://www.amfiindia.com/nfo.aspx which would give you list of all Mutual Fund NFOs and select the FMP which meets your investment time horizon. I wouldn’t say if any particular FMP is better than other.
Regards
BanyanFA
Amit,
The main factor behind a FMP is its duration. Your investment time horizon should match with the respective FMP’s investment tenure. FMPs have a fixed tenure such as 90 days, 6 months, 1 year and 3 years. If you want to invest for a period of 6 months, then don’t end up investing in a FMP for 1 year. You can’t withdraw your funds in the middle of the tenure (though you can probably sell them over the stock exchange with limited gains).
The question to ask is – why do you want to invest into FMPs in the first instance…
Regards
BanyanFA