Change in debt-fund taxation: Where to invest now?

The removal of indexation benefit from debt funds has created a level playing field between debt funds and fixed deposits (FDs). Despite the change, the high interest rate environment provides attractive fixed income options for investors. For investors with short- to medium-term horizons, arbitrage funds are low-risk, provide stability and are tax efficient. For the medium term, debt funds are a better option than FDs due to their liquidity and potential to provide better returns. For investments greater than four years, public provident fund, traditional insurance plans, and debt funds offer flexibility and security.