Investment: If you want to invest for short term then invest in this scheme..

FD has been a reliable investment option for people for years, but today many such options can give better returns than FD. If you want to invest the money for 2 to 3 years and dare to take a little risk on investment, then you should think about a debt fund once. Debt fund is considered to be the safest option among mutual funds and it can give very good returns as compared to FD. Know its benefits, returns, and other important things.

What is a debt fund?

In debt funds, the money taken from investors is invested in fixed-income securities like bonds, government securities, treasury bills non-convertible debentures, etc. That is, the money of the debt fund is invested in a safe place. Debt fund is considered safer than equity. There is also no problem of liquidity in it, that is, you can withdraw your money whenever you want. Usually, debt funds have a fixed maturity date.

Can give better returns than FDs

If you look at it from the profit point of view, debt funds can give you slightly better returns than FDs. Usually, you get 6 percent to 7 or 7.5 percent interest on FDs of 1 year to 3 years. However, the return of debt funds is considered to be around 9 percent. In such a situation, you can earn more profit by investing money in debt funds. However, investors should not expect high returns like equity in debt funds.

Tax rules on FD and Debt Funds

Talking about tax, there is a provision of tax on profits from Debt Funds. The entire profit from debt mutual funds is taxed as per the income tax slab. It depends on whether you have bought the fund before April 2023 or after. If you have bought the fund before April 2023, then tax will be levied under the old rules. If you bought the fund in April 2023 or later, then your profit will be taxed as per the income tax slab.

Short-term capital gain (STCG) from holding for less than three years is taxed as per the income slab of the investor. Long-term capital gain (LTCG) from holding for more than three years is taxed at 20% with indexation benefits. On the other hand, if we talk about FD, 5-year FD is tax-free. You have to pay income tax on FD of less than this period.

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