It seems the only thing that's certain to go up in life is taxes. And with the government hastily striking off indexation benefits on capital gains tax, that seems more of a reality than passable humour. Not surprisingly, many have gone into a frenzy, opening doors for dubious salespeople to create a 'buying panic'. Many jumped headlong into ill-fitted investments just to get tax advantages before April 1. And many sought our opinion on whether they should shift their debt fund investment to FDs (fixed deposits), NPS Tier 2 or PPF (Public Provident Fund), a valid question we will tackle here. But before you move ahead, remember that your existing investments (bought before April 1, 2023) still enjoy indexation benefits. So, do not liquidate your existing investments. Fixed deposits or debt funds? Let's put it bluntly, the death of indexation has given debt investments a bloody nose. There's no hiding that. Given the background, investors are looking at greener pastures, among them being FDs. So, let's find out if FDs now outweigh debt funds by comparing them across different parameters. What you should do Debt funds retain the edge over FDs - even in the tax department. Having said that, you need to reset your return expectations due to the indexation blow. You'll also need to revisit your asset allocation. Having a high fixed-income allocation in your long-term portfolio was anyways less than optimal. Now, with a higher tax incidence on debt funds, it is even more so. Since FDs can't stand their ground against debt mutual funds, what about NPS Tier 2's debt investments? Let's make a head-on comparison in the next segment. NPS Tier 2 or debt funds? To give you a brief context, investors of NPS Tier 2
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