When individuals are looking to invest safely with known returns, people usually look up to Fixed Deposits as an option. However, there is a tax-efficient alternative with much better post-tax returns for Fixed Maturity Plans by Bajaj Finserv. While FMPs and FDs offer stability, the most important additional benefits that FMPs offer compared to FDs are savings in terms of tax and lesser interest rate risk. Let us see how Bajaj Finserv’s FMPs better the FDs and why the former can be a better bet for investors today.
Fixed Maturity Plans Vs. Fixed Deposits: What Do Investors Have To Look Forward To?
They are a type of closed-ended MF online investment where money is locked into fixed-income securities like bonds and government debt for a pre-set period, generally one to five years. FMPs invest in securities with matching maturity dates providing stability and tax efficiency.
Fixed Deposits, on the other hand, are savings products of banks and financial institutions where deposits are not created but locked in for a stipulated period at any given fixed rate of interest. For such reasons, Fixed Deposits garner popularity with stability and returns being guaranteed though fettered at places, notably tax efficiency and movement with an interest rate curve.
This, in turn, makes Bajaj Finserv’s FMPs a flexible investment that combines fixed-income security with mutual fund tax benefits, thereby turning out to be an attractive alternative to traditional FDs.
Key differences between FMP and Fixed Deposits
- Tax Efficiency: Another significant advantage of FMPs is the issue of tax treatment. Provided that such investments are held for more than three years, they would qualify for long-term capital gains tax that is traditionally lower than tax rates applied on FD interest. Additionally, FMPs offer the indexation advantage; the purchased price in which the investment has been held is adjusted for inflation, therefore reducing the taxed gains.
- Returns and Interest Rate Exposure: FDs ensure that at all times during the tenure, the fixed rate will be available. FMPs invest in securities matching the market rates prevailing at the time of investment, thereby earning benefits if interest rates rise. That way, it may make FMPs over and above FDs during rising interest rate regimes.
- Liquidity and Flexibility: FDs are relatively more liquid as one can withdraw the amount prematurely but will need to pay a penalty. FMPs are closed-ended funds that get locked in until maturity. However, Bajaj Finserv also provides FMP in various tenures that can be accommodated according to the investment horizon.
- Market-Linked Returns: Even though FMPs tend to return a little bit differently than others depending on the market, the returns of FD are entirely on a fixed basis. As interest rates go up, FMPs can take advantage of higher-yielding bonds. This is one of the primary market-linked advantages FDs cannot offer.
Bajaj Finserv’s Fixed Maturity Plans Tax Benefits
As the tax efficiency in FMPs is good, it definitely makes them an engaging choice for taxpayers. Here’s how Bajaj Finserv’s FMPs help optimize tax efficiency
- LTCG: Those FMPs which are held for more than three years attract LTCG tax, which would be relatively lower than tax rates of FD interest and would reduce the burden of tax for taxpayers in higher brackets.
- Indexation advantage: FMPs give the indexation benefits wherein the cost of investment is adjusted for inflation, thus reducing taxable gains and eventually, it reduces the tax liability as well. It is one of the definitive advantages of FMP that offers a distinct tax benefit.
- No TDS: FMPs rarely command TDS, and this gives investors an opportunity to let the returns earn without being taxed immediately. That would allow it to reap maximum returns on the entire investment.
The tax benefits bring the FMPs of Bajaj Finserv very close to the investors’ heart for aligning stable returns with effective tax planning.
Returns Comparison with the MF Calculator
Investors can use the Bajaj Finserv MF Calculator to know how FMPs stand in comparison with FDs. This computes an estimated return on investment in FMP by taking the inputs like investment tenure and rate of return to determine the returns. This way, investors can make proper comparisons for their investments.
Now, let’s see how to use the MF Calculator to compare FMP and FD:
- Enter Investment Amount: Input the amount invested in FMP. This is the base on which the computed returns may be calculated.
- Expected Rate of Return: Enter the rate of return based on current market conditions for FMPs.
- Tenor Choose: Three years or more to calculate returns with LTCG and indexation benefits.
- Estimated Returns Preview: The calculator provides maturity value projections, which help investors take an informed decision between investing in FMPs and FDs.
This tool will help investors to confidently analyse how Bajaj Finserv’s FMPs stand against the conventional FD in terms of growth and tax advantages.
Who Should Choose FMP Over FD?
FMPs as well as FDs provide security and fixed returns. However, Bajaj Finserv’s FMP is designed keeping the profile of specific investors in mind.
- Tax-Strategic Investors: Those taxpayers at higher slab get LTCG tax benefits and indexation benefit and are, hence, attracted more by an FMP rather than an FD.
- Long-term investors: Investment horizons of three years and more will reap the maximum tax benefits, thereby being fit to meet education or future down payments.
- Inflation-conscious investors: FMPs would provide returns adjusted for inflation, aligned with market conditions to curb erosion of FD returns on account of inflation.
Bajaj Finserv’s FMPs, therefore, are suitable for investors who look for predictable growth and tax savings, thereby making them an effective means for managing medium-term goals.
Why Bajaj Finserv’s FMPs Might Be a Better Alternative
Bajaj Finserv’s FMP is a combination of the tax efficacy, stability, and returns that are linked with the market in an adaptable manner compared to the FD. The entity provides LTCG tax as well as indexation for any individual who has an investment in the higher tax bracket. In addition, the MF Calculator can calculate the returns also, providing a crystal clear view for decisions. There is also the ease of processing online MF from Bajaj Finserv without complicating the procedure.
Conclusion
While FDs are always a safe bet, Bajaj Finserv FMPs represent an upgrade in terms of tax efficiency as well as inflation-adjusted returns, especially. Using the MF Calculator to project return, here is how an investor compares favourably with FDs even post-tax. For investors looking to optimise returns while managing the tax impact, Bajaj Finserv FMPs present an attractive alternative in sync with the growth and tax planning requirements for investors.
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