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Fixed deposits (FD) have long been the favourite investment option for many, especially those who are averse to taking any risk. Long-term debt funds (LTDF) are relatively new and riskier. Yet, if you are looking to invest for three years or more, LTDF could be a wiser option compared to FD.
To find out why, let’s compare two important factors.
| FD | LTDF | |
| Interest | Tax is payable on interest, whether you withdraw it or not. | Tax payable on withdrawal before completion of three years. After three years, 20% payable on profit after indexation (adjusting for inflation). |
| Post-tax returns | Tax payable on maturity as per applicable slab. | When encashed after three years, taxable capital gains is calculated after adjusting for inflation. This indexation benefit reduces your taxable income on which you need to pay 20% tax regardless of your tax slab. |
So, LTDF is a better option for you. Having said that, please note that if you are a senior citizen or if you fall under a lower tax slab, you should consider FD.
Confused? Consult a financial advisor who will evaluate your goals, your income and your investments and suggest the best investment mix for you.
Start your personal wealth journey with us today!
Plan to Maximize Your Retirement Years
October 4, 2018
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Fixed deposits (FD) have long been the favourite investment option for many, especially those who are averse to taking any risk. Long-term debt funds (LTDF) are relatively new and riskier. Yet, if you are looking to invest for three years or more, LTDF could be a wiser option compared to FD.
To find out why, let’s compare two important factors.
| FD | LTDF | |
| Interest | Tax is payable on interest, whether you withdraw it or not. | Tax payable on withdrawal before completion of three years. After three years, 20% payable on profit after indexation (adjusting for inflation). |
| Post-tax returns | Tax payable on maturity as per applicable slab. | When encashed after three years, taxable capital gains is calculated after adjusting for inflation. This indexation benefit reduces your taxable income on which you need to pay 20% tax regardless of your tax slab. |
So, LTDF is a better option for you. Having said that, please note that if you are a senior citizen or if you fall under a lower tax slab, you should consider FD.
Confused? Consult a financial advisor who will evaluate your goals, your income and your investments and suggest the best investment mix for you.
Start your personal wealth journey with us today!
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