BSE – Bombay Stock Exchange

Live Stock Rates

Live Market Updates

Investing in debt mutual funds rather than directly investing in the bonds

The return that you can get from a bond does not change irrespective of whether you invest in it directly or indirectly like using a mutual fund.
Debt mutual funds convert the interest income from a bond into capital gain. This is actually beneficial from the taxation perspective if the holding period is more than three years. That means if you hold a fixed-income fund for more than three years, then the capital gains that you derive from it are taxed at the rate of 20 per cent after providing the indexation benefit, which is beneficial tax treatment.
As limited investments of an average retail investor and the large ticket size are involved in investing in bonds directly. we may not be able to diversify adequately by investing directly in them. But in the case of the mutual fund even with small investments, we can achieve diversification by investing in a basket of bonds.

Leave a Reply

Your email address will not be published.