FMP Returns 2011

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3 Reasons Why FMP Returns Are Higher Post Tax compared to similar investment options in India in 2011

FMP returns are compared to fixed income vehicles such as bank fixed deposits and other term deposits. As frequently pointed out, FMP returns are higher compared to FDs since FMPs offer indexation and double indexation tax benefits, per the Indian Income Tax Act.

FMP taxation rules obviously have influenced many investors to invest in this fixed income instrument that is now offered by many Indian Mutual Funds. In fact, you will see that many Indian Mutual Funds have fixed maturity plans as a mainstay of their new fund offers.

What kind of returns can an investor expect in a FMP investment in India in 2011

Given that fixed maturity plans are nothing but investments in fixed term instruments such as Government securities and commercial / corporate fixed term deposits, expectations from FMP returns should be tempered. However, given volatile equity markets and lower post tax FD returns, one can definitely consider investing in fixed maturity plans

What other factors influence FMP returns, especially taxation benefits

Returns from fixed maturity plan mutual fund offers are also influenced by the current inflation rates. This is because of the inflation influenced indexation and double indexation benefits offered by FMPs

Can we guess the exact returns from a particular Mutual Fund FMP investment in India? No Indicative Returns Anymore!

SEBI’s rules do not permit a Mutual Fund offer document to offer indicative FMP returns in 2011. This was a practice earlier but has been discontinued due to new SEBI policies. Of course, you can do the research on current commercial ongoing rates of the same maturity as of your FMP and you may be able to guess approximate returns assuming that the particular fixed maturity fund invests in quality commercial deposits and Government securities

FMP returns from Indian Mutual Funds are not guaranteed in 2011 or anytime before- so please do your research

FMPs are mutual fund investments and you shouldnt invest solely on the assumption of better returns- the usual research and due diligence on the mutual fund, the risks and the particular manager among other factors should influence your decision

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