I have ₹6 lakhs matured from my bank fixed deposits (FDs). I do not want to reinvest them in a bank deposit as the returns after tax is very low for me. Please suggest some debt/balanced funds where I may get a return of 9 to 10 per cent. I am 63 years old and can afford to take a moderate risk of the capital. My investment horizon is three to five years. I already have investments in mutual funds, mostly in diversified equity and balanced funds.
- Hariharan V
We do not recommend equity-oriented balanced funds to investors with less than five-year investment horizon. You can invest in arbitrage funds for better post-tax returns. These funds exploit the arbitrage opportunities between the cash and the future segments. They qualify for long-term capital gains tax of zero because they are treated as equity funds for taxation purpose. If investments in equity funds are sold after 12 months, they qualify for long-term capital gains tax of zero. You can also consider investing in dynamic bond funds and Monthly Income Plans (MIPs) with an investment horizon of more than three years. Investments in them held over three years qualify for the long-term term capital gains tax of 20 per cent with indexation benefit.
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