FD Vs Debt Funds: This scheme will give huge returns, if you want to make money then know the benefits..

Nowadays, there are many investment options in which the investor invests according to his convenience and benefits. Some investors are reluctant to take risks in their investments. Of course, the returns may be a little less, but it is more important for them that their investment remains safe. Such investors mostly include FD in their portfolios.

But if you can take a little risk, then you can also choose the option of debt fund instead of FD. Especially when you want to invest only for a short period of 2 to 3 years. In such a situation, you can choose a debt fund or in mutual fund. Debt fund is considered to be the safest option in mutual funds and it has the potential to give much better returns than FD. Let us tell you its benefits.

Know what is a debt fund?
In debt funds, the money taken from investors is invested in fixed-income securities like bonds, government securities, treasury bills non-convertible debentures, etc. This means that the money of debt funds is invested in a safe place. Debt funds are considered safer than equity. There is no liquidity problem in this, which means you can withdraw your money whenever you want. Usually, debt funds have a fixed maturity date.

Better returns than FDs
If you look at it from the profit point of view, debt funds can give you slightly better returns than FDs. Usually, you get 6 percent to 7 or 7.5 percent interest on FDs of 1 year to 3 years. However, the return of debt funds is considered to be around 9 percent. In such a situation, you can earn more profit by investing money in debt funds. However, investors should not expect high returns like equity in debt funds.

Tax rules on FD and Debt Funds
Talking about tax, there is a provision of tax on profits from Debt Funds. The short-term capital gain tax has to be paid on the profit made by selling debt mutual fund units before 3 years. You will have to pay tax on the gains as per the income tax slab. Talking about FD, 5 year FD is tax-free. You have to pay income tax on FD of lesser duration than this.

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