Hi, I am planning to fixed deposit Rs 5,00,000/- on my kid's name and the interest I get on every month will be invested into mutual funds in SIP mode for next 5 years.
Can you please suggest me wether my approch is correct, and also suggest me some better ways and good funds.
Thanks in Advance, Ravi
Your approach is fine, but please also note that interest on fixed deposit would be taxable as per your slab rates.
You may also consider investing into a debt mutual fund and start systematic transfer plan (STP). For first year, taxabliity of gains from debt funds would be same as that on bank fixed deposit interest, but after a year it would become long term gains and would be taxed @ 10% or 20% with indexation benefit.
Hi pankaj,
I have one doubt,
STP : Liquid -----> Equity fund Debt Fund ---> equity fund
In the above two options pls tell me which one will be effficient in tax point of view and returns point of view ?say 1L STP of 5000 per month
Debt fund would have better returns than liquid funds. But they may have an exit load if redeemed before a particular period (say 3-6 months).
In case of STP executed in exit load period, upto 1% may be charged on each redemption. I think, even after this exit load, you would have better return from debt fund STP.
From tax point of view, both would be same.
