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Mutual Fund houses launch target maturity funds for FY-end indexation benefits. Should you invest?

Some years ago, many fund houses used to launch fixed maturity plans (FMPs). These days barring a few FMPs, many fund houses are starting target maturity funds (TMF).

March 28, 2022 / 12:24 PM IST
 (Representative Image)

(Representative Image)

Many small investors scramble to complete their tax-saving investments before the deadline of March 31. There are smart investors, too, hunting for tax-efficient opportunities at this time of the year. Mutual funds aware of the trend launch fixed-income schemes targeting investors looking for tax-efficient returns.

Fund houses such as Aditya Birla Sun Life, HSBC, Mirae and Tata have launched bond schemes to tap this opportunity. Investors have to consider many factors before making an investment decision.

How do the schemes work?

For the uninitiated, capital gains booked on sale of units of a bond fund held for more than three years are considered long-term gains. Such gains are taxed at a rate of 20 percent post-indexation. Compared with a long-term fixed deposit offering an assured rate of interest that gets taxed as per the slab rate, debt funds offer more tax-efficient returns.