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FMPs Work for the Short-term

Fixed maturity plans are the best place to park your money for a period of 3-5 years

I want to invest Rs 4 lakh for a period of 3 years. I am targeting at least 10 per cent returns. I also want to know if I should go for fixed deposits or mutual funds.
-Kalyan

The best place to park your money for 3-5 years with reasonable safety will be FMP. Today it is possible to invest in an FMP which will yield a little more than 9 per cent, it could well be up to 10 per cent. The returns will be more tax efficient compared to bank FDs. The interest income on bank FD will be taxable and added to your income, if you're in the highest bracket it could be up to 30 per cent. Compared to that, after indexation, the capital gains tax on FMP could be substantially less, 4-5 per cent.



This article was originally published on March 28, 2014.

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