Over the last few days, we saw many banks cutting rates on saving account balances. The interest on bank fixed deposits has also fallen. Interest income on bank fixed deposits is clubbed with your taxable income and is taxed at your marginal tax rate.
Unlike bank FDs, debt mutual funds offer three key advantages:
- Easy liquidity – You can withdraw money without any penalty in most liquid funds.
- Better post-tax return – Our analysis suggests that debt mutual funds are more tax efficient irrespective of holding period.
- No tax deduction at source for resident Indians.
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The above content is just for information and should not be construed as an offer to buy or sell or recommendation. Contact your financial advisor for guidance on any investment related query.
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