FMP Returns & Taxation 2013 : Why You Should Consider Investing in FMPs in 2013

October 21, 2012 by  

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Why FMP returns in 2012 and 2013 have made FMPs the preferred debt fund investment in 2013

fmp returns 2013 FMP returns in 2012 have been really good- in many cases, the returns from FMP investments have beaten debt fund benchmarks. No wonder that FMPs form the highest category of mutual fund NFOs in 2012 and 2013

I myself invested in a 370 day FMP last year and this FMP has given returns of over 12% in 2012. These returns are obviously better than most investment in debt mutual funds in 2012

Investors in FMPs NFOs in 2012 need to thank SEBI for the excellent returns that most FMP mutual fund NFOs have returned

SEBI came up with far reaching reforms in FMP NFOs launched by Indian mutual funds and this has led to more transparency and reduced risks in FMP investment returns.

The delay/abandonement of the Direct Tax Code has resulted in continued tax benefits for FMP investments and higher post-tax returns.

The tax benefits of FMP returns due to the FMP tax treatment advantages and related single and double indexation benefits have resulted in superior FMP post-tax returns in 2012 and 2013

We are all aware of the supaerior returns of FMPs vs FDs, purely due to the indexation benefits of FMP investments.

Have you ever wondered why returns from FMP investments do better than comparable debt fund investments?

It is really not all surprising that FMP returns do better than FDs, but FMPs often do better than debt fund / fixed income investments such as income debt funds, floating rate funds and other debt funds. This is because FMPs enable the mutual fund to lock into higher interest rates since there is less chance of withdrawl despite being listed. In a falling interest rate scenario, this enables mutual fund managers to lock into higher interest rates. In addition, investors in FMPs get the benefits of better post tax returns due to indexation benefits.

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