Invest in debt funds for at least 3 years for income tax benefit

Discussion in 'Off-Topic Discussion' started by Sujan Azad Parikh, Jul 26, 2018.

  1. Sujan Azad Parikh

    Sujan Azad Parikh Member

    May 21, 2018
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    I am 29 years old and want to invest a lump sum of ₹2- 2.5 lakh for 2-3 years. I am looking for returns that are better than what FDs give. I am considering investing in liquid funds through a systematic transfer plan (STP). Do I need to increase the time period to get better returns? Please suggest some good schemes.

    —Sushant Suresh

    If you invest for a period of at least three years in debt funds, you will get the benefit of capital gains indexation that will lower taxes on the profits from your portfolio. When this happens, the odds of beating FD returns (which do not get indexation benefits) improve dramatically. So, to answer your last question first, do consider at least a three-year time frame for getting better post-tax returns from your investments.

    Regarding investment choice, you can invest in short-term debt funds such as ICICI Prudential short-term fund and UTI Short-Term Income Fund. Since these are debt funds, there is no need to do STP into these funds—you can invest your lump sum in a single investment.

    I am 35 years old and want to start investing in SIPs. How much do I need to invest per month if I need a retirement corpus of ₹1.5 crore in 15 years from now?