What do I like about Debt funds?

There are lots of risks and negatives with debt funds. This post is NOT about that. This post only lists down the reasons that i like about them.

Tax deferment
You pay tax only when you need the money. If you don't need the money, it stays invested and keeps growing with no tax incidence. With FD, u have to either pay taxes every year or at maturity. You do not have any control

Tax reduction
Debt funds provide you Long Term Capital Gains benefit which is 20% tax after you apply indexation. This indexation helps to reduce your tax incidence a lot. FD interest is always taxed at slab rate

Tax nullification
All the income that you make in debt funds are called capital gains. Capital gains can be completely set off by equivalent capital losses in any other equity or debt investments. If managed properly, tax can be completely nullified. 


Putting out a calculation. Consider 10L invested for 30yrs with 5% interest. This will generate an income of 33L. With FD, you will have to pay tax on this.. You can't save a single penny. Approx 13.5L. With debt funds you can either reduce this significantly or completely eliminate it

Let me know your thoughts 

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