1. In the long term, debt funds are far more tax efficient than fixed deposits, as they attract a lower tax rate, except when an investor is in the lowest income tax bracket.
2. This is possible because you can calculate your returns from debt funds after deducting the capital gains tax by using the Cost Inflation Indexation (CII), if you opt for the growth option.
3. The longer you hold a debt fund, the bigger is the indexation benefit.
4. There is also no Tax Deduction at Source in debt funds, so no need to submit Form 15H or 15G like in Fixed Deposits.
5. In debt funds, the tax is deferred indefinitely till the investor redeems his units, while the income from Fixed Deposits is taxed on an annual basis even if it matures 5-6 years later.
6. The gains from a debt fund can be set off against short-term and long-term capital losses in other investments.
7. In the case of dividend option too, the dividends received in debt funds are tax-free in your hands, as Dividend Distribution Tax has already been paid by the fund house.
8. Debt funds are also more liquid, as you can withdraw your investments at any time, and can also make partial withdrawals, without having to break the entire investment.
9. When you invest in an open-ended debt fund, there are no hassles of maturity, reinvestment and prevailing interest rates, and you don't lose even a day's growth.
10. You can even invest small amounts through Systematic Investment Plan or even a lumpsum, besides availing Systematic Withdrawal Plan to withdraw a pre-determined sum for your monthly needs.
11. You can also seamlessly shift money from a debt fund to an equity fund of the same fund house through Systematic Transfer Plan, and there is no penalty if it stops due to insufficient money in your debt fund.
2. This is possible because you can calculate your returns from debt funds after deducting the capital gains tax by using the Cost Inflation Indexation (CII), if you opt for the growth option.
3. The longer you hold a debt fund, the bigger is the indexation benefit.
4. There is also no Tax Deduction at Source in debt funds, so no need to submit Form 15H or 15G like in Fixed Deposits.
5. In debt funds, the tax is deferred indefinitely till the investor redeems his units, while the income from Fixed Deposits is taxed on an annual basis even if it matures 5-6 years later.
6. The gains from a debt fund can be set off against short-term and long-term capital losses in other investments.
7. In the case of dividend option too, the dividends received in debt funds are tax-free in your hands, as Dividend Distribution Tax has already been paid by the fund house.
8. Debt funds are also more liquid, as you can withdraw your investments at any time, and can also make partial withdrawals, without having to break the entire investment.
9. When you invest in an open-ended debt fund, there are no hassles of maturity, reinvestment and prevailing interest rates, and you don't lose even a day's growth.
10. You can even invest small amounts through Systematic Investment Plan or even a lumpsum, besides availing Systematic Withdrawal Plan to withdraw a pre-determined sum for your monthly needs.
11. You can also seamlessly shift money from a debt fund to an equity fund of the same fund house through Systematic Transfer Plan, and there is no penalty if it stops due to insufficient money in your debt fund.