The impact of tax on fixed maturity plans (FMP)offered by mutual funds.

Edited Highlights
0:33 How are fixed maturity plans or FMPs, offered by mutual funds, taxed?

2:34 FMPs are type of debt funds and thus, their taxation is the same as that of other debt funds

2:48 FMPs typically invest in debt securities and these investments are held till maturity

3:00 This lends relative stability to their returns

3:08 If you stay invested in an FMP for less than 3 years, your capital gains get added to your income and you get taxed according to your tax slab

3:21 If it is more than 3 years, you pay long term capital gains tax at a concessional rate of 20%

3:32 The capital gains also gets adjusted according to inflation

3:38 Cost of acquiring the units gets enhanced by the inflation index

3:42 As a result, capital gains for tax purposes gets reduced

3:53 At the highest tax slab of 30%, you get the twin advantage of a lower tax rate and inflation indexation of the cost of investment