If you are planning to invest in someplace these days where you can get better returns than fixed deposits with less risk, then you can invest in debt mutual funds. This category of mutual funds has given returns of up to 11% in the last 1 year.
A debt fund is a type of mutual fund. It mainly invests in fixed income securities such as government securities, corporate bonds and certificates of deposit, etc. Debt funds are primarily such funds that give higher returns than bank FDs (Fixed Deposits). Since it is invested in fixed interest resources, it is not subject to much volatility like the equity market. In this, investors get safe returns.
These mutual fund schemes are less risky than stocks and give better returns than bank fixed deposits. You can opt for Debt Mutual Funds for investment for 3-4 years.
Harshvardhan Rungta, CFP, and Personal Finance Expert at Rungta Securities say that in debt mutual funds, you should invest the same percentage of your total portfolio as your age. That is if you are 50 years old and your total investment is 1 lakh rupees, then you can invest up to 50 thousand rupees in debt mutual funds.
Redemption of debt funds after 3 years attracts Long Term Capital Gains Tax (LTCG). On the other hand, Short Term Capital Gains Tax (STCG) is levied on withdrawals before 3 years. For example, if someone invested Rs 50,000 in debt mutual funds. and withdraws the amount before 3 years after investment, then Short Term Capital Gains Tax (STCG) will be levied, as per the income tax slab of the investor. 50 thousand Rs. will be added to taxable income and taxed accordingly. If an investor withdraws his money after 3 years, 20% long-term capital gains tax is levied.
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