Debt funds, 06 Mar 2013

New budget has increased ddtax on debt MF, Is debt still lucrative? Still dividend option?

Fintotal Answer

Yes, the Finance Bill 2013 proposes to increase Dividend Distribution Tax and levy surcharge. This is expected to make it double to approx 25%, higher than the rate you would pay on interest from Term Deposits if you are in 20% or 10% income tax slab. But you can still make higher returns from Debt MFs if you choose 'Growth' option of these funds. You can do a Systematic Withdrawal Pan if you need cash. One thing must be kept in mind- unless your investment has completed 1 year you'd be charged Short Term Capital Gains Tax and prehaps exit load as well.

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