हिंदी सकारात्मक समाचार पोर्टल 2023

करेंट अफेयर्स 2023

Debt Funds: A Potentially Superior Investment Choice Over Fixed Deposits

Why debt funds may work better for you than FDs

The Reserve Bank of India (RBI) has recently increased its rates, causing lending and deposit rates of banks to rise as well. Some major banks are now offering up to 7.5% on fixed deposits of 1-5 years. However, before investing in a fixed deposit, it is crucial to remember that the interest earned on bank deposits is taxed at normal slab rates. In fact, in the 30% tax bracket, the 7.5% interest earned on a fixed deposit is reduced to just a little over 5% after tax.

So, what can you do if you have a longer investment horizon and want to maximize your returns while paying minimal taxes? Consider debt funds. If held for more than three years, debt funds’ gains are classified as long-term capital gains and taxed at 20% after indexation. Indexation adjusts the purchase price of the asset to account for consumer inflation during the holding period, resulting in a lower effective tax rate for mutual fund investments compared to fixed deposits.

And if you’re strategic about when you redeem your debt fund investments, you can benefit even more from indexation. For example, if you invested in a debt fund in March 2020 and redeemed it in March 2023, you would get the benefit of three years of indexation. But if you waited a little longer to redeem the investment after March 31 in the new financial year, you’d get an additional benefit of one more year. This is why savvy investors often stock up on debt funds and bonds just before the financial year ends.

In addition to indexation benefits, debt funds offer greater liquidity and flexibility than fixed deposits. When you redeem your investment, the money is in your bank account the next day, and debt funds allow partial withdrawals without closing the entire investment. Compare this to fixed deposits, which can also be prematurely closed, but at a lower rate of interest.

Another added benefit of debt funds is that gains can be set off against short-term and long-term capital losses on other investments. This means that if you made losses in stocks or gold, you can adjust them against the gains from debt funds. And, perhaps best of all, there is no TDS in debt funds, unlike fixed deposits where the bank deducts 10% TDS if the interest income exceeds Rs 40,000 in a year, forcing a taxpayer who is not liable to pay tax to submit either Form 15H or 15G to escape TDS.

In summary, when considering investment options with a longer horizon, taking into account taxes and potential gains, debt funds are an excellent alternative to fixed deposits. You may even find that by exploring this alternative, you can generate higher returns than fixed deposits while also benefiting from greater liquidity and flexibility, indexation benefits, and no TDS.

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दिव्यांशु एक प्रमुख हिंदी समाचार पत्र शिविरा के वरिष्ठ संपादक हैं, जो पूरे भारत से सकारात्मक समाचारों पर ध्यान केंद्रित करता है। पत्रकारिता में उनका अनुभव और उत्थान की कहानियों के लिए जुनून उन्हें पाठकों को प्रेरक कहानियां, रिपोर्ट और लेख लाने में मदद करता है। उनके काम को व्यापक रूप से प्रभावशाली और प्रेरणादायक माना जाता है, जिससे वह टीम का एक महत्वपूर्ण हिस्सा बन जाते हैं।
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