‘Fixed’ Financial Term Of The Day

The Fixed Maturity Plan (FMP) is a favourite instrument of a lot of risk-averse investors. There are many reasons why these are popular. The FMP promises an indicative return on a specific date, almost like a fixed deposit (FD). The return will be higher than an FD. Importantly, FMPs can juggle dates to get favourable tax incidence while minimising holding period. A debt fund that’s held for over three years is liable for long-term capital gains after indexation. This means considerable tax-savings for someone in the highest tax bracket. An FMP can be designed to open in March at the end of a fiscal, and close out in April, just after a new fiscal begins. In theory, you could enter an FMP on March 31, 2020 and it would be set to mature on April 1, 2023. This theoretical scheme would give the benefit of four years of indexation for your tax returns, even though you will only hold...