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Is Fixed Maturity Plans (FMPs) Better than Fixed Deposits?

We all are perplexed with the idea that which is better among the two i.e. the Fixed Maturity Plans (FMPs) or Fixed Deposits in the banks. We have undertaken the analysis of the same and will provide an answer to you in the below succeeding paras as the answer has to be seen in the light of the tax incentive.

Fixed Maturity Plans (FMPs) can also be considered as an option to bank FDs only if you are willing to hold it till maturity ideally over 36 months. The point to note here is that the tax proposal in the budget 2014-15 has eliminated the tax arbitrage which existed earlier, wherein debt mutual funds were tax efficient in comparison to direct investments in bank fixed deposits. But as Finance Bill 2014 is passed by the Government bank fixed deposits and debt mutual funds are almost parallel, if held for a shorter time frame of less than 36 months. It infers that FMPs will not continue to offer double-indexation benefit (as they did) if the investment tenure is lower than 36 months. However before going in for any kind of this instrument you must read whether fixed deposit or Fixed Maturity Plan is suitable for you here.

Hope the confusion is clear and one can go for Fixed Maturity Plans (FMPs) only if one is ready to wait for a period of 36 months and risk averse individuals can go for fixed deposits or alternatively if you are looking for good returns without dabbling in shares every day, then consider going in for short term delivery stocks and make money like professionals.

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