Are debt funds taxed as FDs now?

Are debt funds taxed the same way as FDs now? – Saartak Juneja

Ashutosh Gupta: Yes. Debt funds now carry the same tax structure as FDs (fixed deposits), taxed at your slab rate. But there is a nuance, and it is about timing.

With an FD, the interest is added to your income and taxed every year, even though you have not withdrawn it and it is still locked in. With a debt fund, you are also taxed at your slab rate, but only when you sell. That deferral helps, because the tax you would have paid each year stays invested and keeps earning.

So the advantage of a debt fund over an FD is the deferral. On the rate itself, the two are now similar.

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