Debt funds or fixed deposits: Where to park your money?

After the changes to debt fund taxation in the Budget, does it still fare as a better option for parking spare cash in debt funds as opposed to FDs?

The recent budget did not significantly change the taxation of debt fund investments made after April 1, 2023. These investments were previously taxed at your income tax slab rate, and that remains the case even now.

However, debt investments made before that, lost the benefit of indexation, which previously helped reduce tax liability when holding these funds for extended periods. This change has eliminated the tax advantage that debt funds once held over fixed deposits (FDs).

However, debt funds still offer advantages over FDs:

Conclusion

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Also read:
Beat the unfair tax on debt funds
Modi & 95 per cent Indians love FDs. But there's a better alternative

This article was originally published on October 01, 2024.