I am holding a 370-day FMP for an amount of ₹30,000. It is maturing this month. Please advise me should I encash it or extend it for further period? The fund company is offering to extend it for another period of two years. Please advise me to avoid any short term gain tax.
- Subahs Chand Sachdeva
This year's budget has changed the tax treatment of debt funds. From July 11, 2014 onwards, a debt investment held for 36 months or less will be treated as 'short term' and accordingly, the capital gains from it will be taxed as short term capital gains. These gains would be added to your income and taxed according to the applicable slab rate. As these rules are applicable even on investments made before the budget, AMCs are providing an option to investors to extend their FMPs beyond 3 years so that investors can save on taxes. If you do not need this money at present you may extend your FMP for another two years to save your tax outflow.
This article was originally published on September 29, 2014.
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