You must be listening all around by family members, friends, agents etc to invest in mutual fund. In case you are not convinced & are happy to park your money in bank fixed deposit, have a look at Debt Mutual Fund, which are far less risky as compared to Equity Mutual Fund & Taxation of interest part is almost zero after 3 years due to indexation effect.
MY TAKE: In case your time horizon is greater than 5 years, go for Equity Mutual Fund through SIP mode, else have a look at Debt Mutual Fund.
DEBT MUTUAL FUND
1. Invest in government securities, corporate bonds etc.
2. No TDS
3. Due to indexation effect, Capital gains are almost Tax Free in case you hold it for three years.
4. Capital appreciation is somewhat similar to bank FDs.
Debt MF Vs Bank FDs.
Say a person deposited Rs.1,00,000 in bank fixed deposit on 31st March 2012. Interest rate be 9% for the said period. Assuming that no TDS will be deducted, final amount at maturity (after 3 years) as on 1st April 2015 would be Rs.1,29,502.9
Total interest at the end of 3 years will be Rs.29,502.9 (1,29502.9 – 1,00,000)
Hold on !!!...Rs.29,502.9 is not the net profit. How can you forget TAX !!!!
Taxation of FDs
Note: Interest from bank FDs is added to your income & taxed accordingly
NO
|
PROFIT BEFORE TAX
|
TAX BRACKET
|
PROFIT AFTER TAX
|
| 1. |
29502.9
|
10.3%
|
26464.1
|
| 2. |
29502.9
|
20.6%
|
23425.3
|
| 3. |
29502.9
|
30.9%
|
20386.5
|
Taxation of Debt Mutual Fund
If the same Rs.1,00,000 was deposited in Debt Mutual fund with 3 years time horizon. Assuming the same 9% capital appreciation, amount accumulated at the end of 3 years will be Rs.1,29,502.9.(Similar to bank FDs)
Buying Price
|
100000
|
Selling Price
|
1,29,502.9
|
CII 2011-12
|
785
|
CII 2014-15
|
1024
|
Index Purchase Price
|
(1024/785)*1,00,000 = Rs.1,30,445.9
|
Indexed Profit
|
Selling Price – Indexed Purchase Price
1,29,502.9 – 1,30,445.9 = Rs.(-943)
|
Due to indexation effect, profit comes out to be negative. So there is no point of paying tax on capital gain. So in case you fall in 30% Tax bracket, clearly there is a gain of Rs.9,116.4 in case you invest in Debt Mutual Fund instead of bank fixed deposit.
So why to pay tax on your bank FDs interest. Explore the world of Debt Mutual Fund.
In case your time horizon is greater than 3 years, you can also look for fund with 10-20% equity exposure to give a boost to your overall portfolio.
Note: Kindly consult your Financial Advisor before investing in Mutual Fund
Disclaimer: "Omiga Wealth Solutionz" is into distribution of Mutual Fund.
