Funds for short-term investment | Value Research Individuals in the higher tax bracket may get better tax-adjusted superior returns from debt mutual fund schemes
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Funds for short-term investment

Individuals in the higher tax bracket may get better tax-adjusted superior returns from debt mutual fund schemes

My mother is a retired government employee and she wants to invest her retirement benefits (approx ₹35 lakh) in mutual funds. She had them in fixed deposits but now wants to put them in MFs. Could you please suggest some funds where the capital is safe and returns are better than fixed deposits and returns also beat inflation. She is looking for short-term investments for two to three years.
- Sundeep

You cannot beat inflation with fixed income investments like debt mutual funds. You need equity investments to beat inflation. However, you cannot invest in equity with a two or three-year time-frame. Even investments in debt mutual fund schemes are not tax-efficient if you invest for less than three years.

Fixed deposits offer safe, assured returns, but debt mutual funds has the potential to offer slightly superior returns. However, the returns are linked to the performance of the underlying market. If your mother is in the higher tax bracket and ready to park the money for three years, she may get better tax-adjusted superior returns from debt mutual fund schemes. Returns on debt mutual funds held over three years qualify for long-term capital gains tax of 20 per cent with the indexation benefit. You can consider short-term debt schemes to park money for up to three years.

Here's a selection of short-term schemes for you: Click Here


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