Finpotters

In a debt/income scheme, a major part of the investments are channelized towards debentures, government securities, and other debt instruments. Although capital appreciation is low (compared to the equity mutual funds), this is a relatively low risk-low return investment avenue which is ideal for investors seeing a steady income and secure returns.

Equity funds are a popular mutual fund category amongst retail investors. Although it could be a high-risk investment in the short term, investors can expect capital appreciation in the long run. If at the prime earning stage an ivestor is looking for long-term benefits, growth schemes could be an ideal investment.

As the name suggests, these scheme offers tax benefits to its investors. The funds are invested in equities thereby offering long-term growth opportunities. Tax saving mutual funds (called Equity Linked Savings Schemes) have a 3-year lock-in period as per the guidelines laid down by the Income Tax Act, 1961.

FMPs, as the name suggests, are mutual fund schemes with a defined maturity period. These schemes normally comprise of debt instruments which mature in line with the maturity of the scheme, thereby earning through the interest component (also called coupons) of the securities in the portfolio. FMPs are normally passively managed, i.e. there is no active trading of debt instruments in the portfolio. These FMP's are also for a period of 1,097 days or 3 years.

Tax Planning assumes a significant importance in the modern day. Since the ancient days in India, the concept of taxation has been prevalent. In the Arthashastra, the system of taxation assumed a major significance in the economic development of a nation.