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In your section FD Vs Debt fund if possible please give effect of indextion benefit

In your section FD Vs Debt fund, if possible please give effect of indextion benefit or Income tax rate difference in FD and in MF?

Dec 5, 2015 by Anand, Ahmedbad  |   Mutual Fund

We are assuming that, you are referring to Fixed Deposits versus Debt Fund tool in our Mutual Fund research section. In our tool we have shown both the pre tax and post tax returns of both FD and debt funds. In many cases, the pre tax returns itself of debt funds have been higher than Fixed Deposits. You can know the effect of indexation and taxes by following three simple steps:-

  1. Find out the difference between post tax returns of Debt Funds and FDs, by subtracting the post tax returns of FDs from post tax returns of Debt Funds. Let us call this result X.

  2. Find out the difference between pre tax returns of Debt Funds and FDs, by subtracting the pre tax returns of FDs from pre tax returns of Debt Funds. Let us call this result Y.

  3. Subtract Y from X, and you will get the effect of indexation and taxes.

Just to recap the taxation aspect, Fixed Deposit interest is taxed as per the tax rate of the investor. In the case of debt funds, if the holding period is less than 3 years, the returns are taxed as per the tax rate of the investor. If the holding period is more than 3 years, the returns are taxed at 20% after allowing for indexation benefits.

We thank you for your suggestion. In our next development cycle, we will try to show the effect indexation and taxes separately in this section.

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