1. Even for 5-yr+ investments, FDs and Debt funds have unique attributes and roles, hence selected on their own individual merits by various types of investors as deemed fit.
2. Debt funds are equally convenient as FDs, if not more, and for a tax-paying investor, they also give better long-term post-tax returns than FDs.
3. Sec 80TTA / 80TTB provides aggregate annual tax relief upto Rs. 10,000 / 50,000 interest to citizens below / above 60 years age.
4. A tax-paying investor below 60 years age can avail this tax benefit by building an FD corpus, earning say 8% / 7% pa interest, of only a miniscule Rs.1.02 / 1.03 lakh, and provided he doesn't have any other qualifying products, as any bigger FD corpus will gets taxed at his applicable tax slab rates of 5% / 20% / 30% annually.
5. For a tax-paying senior citizen who avails this tax benefit, his FD corpus, earning say 8% / 7% pa interest, can only be Rs.5.09 / 5.14 lakh, and provided he doesn't have other qualifying products, as any bigger FD corpus will get taxed at his applicable tax slab rates of 5% / 20% / 30% annually.
6. This taxation further pulls down net earnings of FDs besides making it infation-inefficient in long-term.
7. On the other hand, any citizen can invest any amount at any CAGR for any tenure in Debt funds, suiting his individual needs, if so even at FD-equivalent 8% / 7% CAGR, and without any annual tax deduction on his long-term investment.
8. Even when he redeems units any time after 3 years, he pays a flat 20% long-term capital gains tax only on the redeemed units, and not his entire corpus, and after availing CII benefits on purchase price of his redeemed units too.
9. If last 5 years are considered for an illustration, CII alone provides a benefit of 27.2% on purchase price (2013=220, 2018=280), and a long-term growth potential in NAVs of his Debt fund, besides keeping its corpus tax-free too.
10. These increase its long-term post-tax earnings and convenience when compared to FD, for investors of all ages, types and corpus amounts.
2. Debt funds are equally convenient as FDs, if not more, and for a tax-paying investor, they also give better long-term post-tax returns than FDs.
3. Sec 80TTA / 80TTB provides aggregate annual tax relief upto Rs. 10,000 / 50,000 interest to citizens below / above 60 years age.
4. A tax-paying investor below 60 years age can avail this tax benefit by building an FD corpus, earning say 8% / 7% pa interest, of only a miniscule Rs.1.02 / 1.03 lakh, and provided he doesn't have any other qualifying products, as any bigger FD corpus will gets taxed at his applicable tax slab rates of 5% / 20% / 30% annually.
5. For a tax-paying senior citizen who avails this tax benefit, his FD corpus, earning say 8% / 7% pa interest, can only be Rs.5.09 / 5.14 lakh, and provided he doesn't have other qualifying products, as any bigger FD corpus will get taxed at his applicable tax slab rates of 5% / 20% / 30% annually.
6. This taxation further pulls down net earnings of FDs besides making it infation-inefficient in long-term.
7. On the other hand, any citizen can invest any amount at any CAGR for any tenure in Debt funds, suiting his individual needs, if so even at FD-equivalent 8% / 7% CAGR, and without any annual tax deduction on his long-term investment.
8. Even when he redeems units any time after 3 years, he pays a flat 20% long-term capital gains tax only on the redeemed units, and not his entire corpus, and after availing CII benefits on purchase price of his redeemed units too.
9. If last 5 years are considered for an illustration, CII alone provides a benefit of 27.2% on purchase price (2013=220, 2018=280), and a long-term growth potential in NAVs of his Debt fund, besides keeping its corpus tax-free too.
10. These increase its long-term post-tax earnings and convenience when compared to FD, for investors of all ages, types and corpus amounts.