I am 25, and I want to invest ₹10,000 per month for 15 months. I will need the money in December 2016. I am confused whether I should put the money in a recurring deposit or a short term debt mutual fund scheme. RD gives an interest of 8.20 per cent only, but I heard that short term mutual funds give 10-11 per cent in a shorter period of time. Can you suggest some good short term funds for me.
- Mittal Modh
Recurring deposits offer fixed assured returns, whereas returns on debt mutual funds are linked to the market. If you are looking for assured returns, you should opt for a recurring bank deposit. If you are ready to take a little extra risk, you can consider investing in short-term debt schemes. Short-term debt schemes have given round 9.85 per cent in the last year.However, you need to consider whether it is worth the effort because the difference in returns may not be very big at the end of the exercise.
Investments in debt schemes held below three years attract short-term capital gains tax. That means the returns would be added to your income and taxed as per the applicable slab. The fund house will not cut any TDS and you will have to show the entire amount as other income while filing Income Tax returns.
Here is a list of short-term debt schemes we had recommended last year: HDFC Short Term Opportunities, Peerless Short Term, Principal Income Short-Term, Sundaram Select Debt Short-Term, Franklin India Short-Term Income Ret and UTI Short-Term Income Inst.