Previously, the goal is to earn a steady income of equity securities
of persons to be used in preference to invest in long-term deposits
(near future), without taking into account the tax effect. Now they have
to obtain a higher return to cover inflation on the rise, protect
capital and to ensure tax efficiency has led to new investment
locations.
Among other things, the avenue that offers similar
benefits to food and beverages with added tax efficiency are fixed
maturity plans (FMP), which are funds with a fixed deposit
investment in a portfolio's underlying debt market instruments,
government and money. The nature of the underlying assets are to provide
current income with capital protection. PGF expected returns have the
same characteristics as other obligations, but are subject to less
volatility due to market fluctuations, and are not as affected by rising
interest rates and credit risk and liquidity risk. PGF are offered by
various mutual fund houses that are generally listed and provide
liquidity to investors. However, PGF still have some disadvantages
compared to the DFI, which have no predetermined interest rate,
unsecured deposits of premature maturity expensive, and investing these
funds in corporate bonds is likely rather than government securities.
Another
important factor that should be taken into consideration when selecting
an investment avenue has tax implications for investment and the
subsequent realization of gains. For taxation, FMPs are investment
income and gains from taxable capital gain, either short or long term,
which is based on the mode.
Investments, with a waiting time is
less than a year, the profits (short term) are aggregated with other
sources of income and taxed at progressive tax rates to. However, in
order to maximize efficiency (effective tax planning), people can choose
the FMPs dividend payout dividend by an investor would have received
tax-exempt fund, and the house would suffer from the dividend
distribution tax (DDT) is 16.995%. If the investment period that they
have more than one year (long term), or 10% rate would be (without
indexation) or 20% (and indexing) is achieved.
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In
comparison, the interest in the near future, derived from ordinary
income are taxed on the basis of the progressive tax rate (from 10% to
30%). However, only silver lining to invest in the near future, the tax
benefits of § s 80C of the Income Tax Act and the basic bet (up to R 1
lakh given to all other eligible investments), for a term of five years
and meets other conditions as per law. Since the objective of equity
security, regular income with minimum risk, the investor can invest in
FMPs find, offering more after-tax returns, investing in the near
future.
Source: [financial express]