Myth and Reality - Debt Funds always outperform bank deposits

Returns from debt funds can be lower or higher than that of a fixed deposit depending upon how well is the fund managed by fund manager. Hence the higher returns provided by a debt fund come with a (little) higher risk. However as these funds enjoy tax benefits-while income from FDs is charged at normal tax rate (considered a part of income), long term capital gains (>1 yr) from debt funds are charged at only 10%. Also dividend from these funds is not taxable, hence giving them an edge over conventional fixed deposits.

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