Which category of debt fund would you suggest for a horizon of two-three years? I am seeking two-three per cent extra return over and above the fixed deposit returns.
-Deepa Jain
The case for debt funds becomes much stronger if you are going to hold them for more than three years. There isn't a great advantage if you hold it for a lesser time period as the tax advantage kicks in only after three years. If you hold it for even a little more than three years and earn as much return as a fixed deposit, your post-tax return will be higher. Your gains will be indexed for inflation and you will be liable for taxation only on the gains post adjustment of inflation.
On choosing a fund - err on the side of caution. The interest rate outlook is still hazy. So only consider a short duration or a banking and PSU debt fund.
This article was originally published on July 01, 2021.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
