MoneyVedam

These are closed ended mutual funds that predominantly invest in debt instruments. They can be subscribed through the NFO (New Fund Offer) and redeemed only upon maturity. They are relatively stable and specify in the Scheme Offer Document (SOD) the category of debt instruments in which the fund manager would place your funds. They have gained popularity in the recent 2-3 years due to high yields in Indian bond market. Their tax efficient nature makes them a preferable choice when compared to liquid/debt funds. The only disadvantage is that the funds are illiquid for the entire tenure of the fund. Taxation of FMPs Fund houses issue FMPs with fixed tenure such as 370 days, 500days or 730days. As the tenure is more than 365days / 1year, these securities qualify as long term investments and hence could avail a lower capital gain tax. Long term capital gain tax for FMPs is the lower of 10% without indexation or 20% with indexation benefit. Due to the indexation benefit, the tax realize...

These are long term bonds that provides tax free returns to the investor. This financial instrument falls under fixed income asset class that is issued almost every year by select institutions with the approval of government of India. These bonds carry relatively stable ratings and are considered to be sovereign bonds due to the covering of default risks by government of India. Who issues these bonds? In the previous two fiscal years, the total issue of tax free bonds were about Rs.25,000 to Rs.30,000 crores. For the current fiscal (FY13-14), the approved total sum of such tax free bond issues is Rs.50,000 crores. As the government is fighting the twin deficit of CAD (Current Account Deficit) and Fiscal deficit this year (FY13-14), several institutions such as PFC, REC, IIFCL, NHPC, HUDCO, NHB, NTPC, IRFC, Ennore Ports, Airport Authority of India and Cochin Shipyard Ltd have been granted the approval to issue tax free bonds. What is the nature of the bond? Long term - 10, 15 and 20 ...