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.
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.