Aug 28, 2017 02:56 PM
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(Updated Sep 05, 2017 03:12 PM)
Debt funds are mutual funds that invest in fixed income securities like bonds and treasurey bills.MIPS, STPS, FMP are some of the available options in debt funds.
Less riskier than investing in direct equity.It is comparatively less volatile and provides steady returns.
It is not a right option if your looking for retirement income.If your looking for a dividend option from Debt funds think twice.The dividend option doesn't guarantee any monthly income, as dividend are paid only from surpluses and not from capital.
The dividend from Debt funds are also taxed into the hands of the investor.The DDT works out to about 28.8% .Hence you would end up getting a 1.4 on a dividend of Rs 2 declared by the fund.
If you need a regular flow of income then SWP or systematic withdrawal plan is the best option.
Post 2014 Budget, capital gains made on debt funds less than 3 years are taxed as per income tax slab rate, just like FD, depriving you of the tax advantage.Hence debt funds are not ideal for income generation, compared to other instrument vehicles.
