Tax liability of a conservative debt-oriented fund

POSTED BY Mukesh Gutpa ON October 28, 2010 5:41 pm COMMENTS (3)

Hi

I plan to start a monthly SIP of Rs 1000 in 5 conservative debt-oriented mutual funds like HDFC MIP plan, UTI Mahila plan etc. These funds invest 20-30% in equity and rest in debt-market.

What would be my tax liability if i stay invested for 15-20yrs. I’m planning to invest in these funds mainly for child education.

Assuming a conservative return of 8% for the next 20 yrs and assuming that i invest Rs 5000 per month, the corpus would be around Rs 30 Lac. So what would be my approximate tax liability.

regards

Mukesh

 

 

3 replies on this article “Tax liability of a conservative debt-oriented fund”

  1. Mukesh Gutpa says:

    Correction: My previous reply was pertaining to the second comment by Manish that
    “On the another note , for that long period of 20 yrs , you should not be staying in Debt for these goals , be in equity unless you have no idea of how to take care of basic investments”

    regards
    Mukesh

  2. Mukesh Gutpa says:

    >>>>>>>> For a long term (more than 1 yr) , debt funds provide indexation benefits , so you will have to pay 20% tax after incorporating indexation .

    Hi Manish

    UTI Mahila has given returns of 16% since inception (2001). According
    to your own analyis, the long-term results of stock market are around
    15%. Secondly, to get guaranteed returns from stock market, one has to
    stay invested for at least 11 years (another of your own study).

    So do you think it is worth taking such a risk when you can get a
    similar return in debt-oriented funds.

    On a side note, DJIA was trading at 381 in Sept 1939 and after the
    crash, it took it more than 20 years (in 1952) to come back to this
    high!

    Mukesh

  3. For a long term (more than 1 yr) , debt funds provide indexation benefits , so you will have to pay 20% tax after incorporating indexation .

    Now after DTC comes into effect this thing will go , as after DTC the tax structure will change .

    On the another note , for that long period of 20 yrs , you should not be staying in Debt for these goals , be in equity unless you have no idea of how to take care of basic investments ..

    Manish

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