What are Fixed Income Schemes?
Fixed
Income Schemes invest in securities such as bonds, debentures, government
securities, money market instruments and other similar instruments. The main
purpose of such schemes is to invest is to generate a steady income against a
balanced investment risk.
Fixed
Income securities carry minimum investment risk as the main motive is to offer
the promised returns to the investors. On the other hand equity securities have
no such obligation to pay back the investors. Though the promised return is
comparatively higher, equity funds have high risk of investment loss. So,
conservative investors prefer going with fixed income schemes.
Following are a few schemes that offer investment benefits
to investors:
More tax efficient
Fixed Income Schemes are more tax efficient than
several other investment instruments. After a year, the invested income is
always treated as a long term capital and is taxed at 10% or 20%. If you hold
the debt fund for a longer duration or period, then the indexation benefit is
higher. For instance, DSPBR Banking &
PSU Debt Fund offers extensive tax benefits to investors by heavily
investing in debt and money market instruments, which have special tax
exemption.
Better returns
The longer the period of investment, higher are the
returns. Funds that invest in long term bonds are not applicable to changes in
rate which occur in short-term debt funds’ investments. For instance, DSPBR Government Securities Fund has a longer
lock-in period and directly invests in GOI bonds. As lock-in period is longer, it
offers better returns as compared to other short term funds.
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