Sir , Which one is better in year 2012-13 short term fund or FD ? as FD is giving 9 % interest and STF gives around 9 also. which method will be good as i my time frame is 9 month to 15 month
1 Answers
Mutual funds are generally better than fixed deposit if they generate same returns.
TDS may be deducted in fixed deposit but it won't be deducted in case of mutual funds. Declaration of income and paying income taxes would be investor's responsibility in case of mutual funds.
Also tax treatment of mutual funds and fixed deposit is different. Interest from fixed deposit is added to taxable income and taxed as per slab rates (0-30.6%) no matter for how long you are invested in. Whereas in case debt mutual funds, if investment tenure is more than one year, these would be treated as long term gains and subject to 10% income tax without indexation benefit and 20% with indexation benefits.
One may even earn 10% returns on Debt mutual funds/Fixed maturity plans(FMP) and still no income tax is payable due to indexation benefits.
For period less than one year, taxation of debt mutual funds and fixed deposits are same.
TDS will be deducted in FD if interest earned > 10000 in a year .is it correct sir ?if yes then as current FD rate is arround 9 then will it be good to first invest in FD (for one year only) till 10000 interset then go for short term fund?
Not deduction of taxes (in form of TDS) does not mean you need not to pay taxes. You still would have to show interest income and pay taxes on fixed deposit interest and debt mutual fund gains before filing income tax return.
thanks for clearing my doubt. i understood that i have to file tax on FD and debt fund interset as other income . but what does this me"Deduction of upto 10,000 for interest from savings bank accounts under a new section 80TTA" in budget 2012-13"?
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