FMP Review: ICICI Pru FMP - Series 83 - Plan A and B open for subscriptionICICI Prudential Mutual Fund has launched two fixed maturity plans. They are ICICI Prudential Fixed Maturity Plan – Series 83 (1105 days) Plan A and ICICI Prudential – Series 83 (1412 days) Plan B. Subscription is open from 22nd to 24th May. An FMP usually invests in debt that has approximately the same tenure as the FMP itself. According to the Scheme Offer Document (SID), ICICI Pru Fixed Maturity Plan Series 83 Plan A has a tenure of 1105 days or about 3 years and 1 month. ICICI Pru Fixed Maturity Plan Series 83 Plan B has a tenure of 1412 days or 3 years and 10 months.  

In the table below we give you the ‘intended allocation’ of ICICI Pru Fixed Maturity Plan Series 83 Plan A.

Sr No. Instrument Allocation
1. 80 – 100% in Debt instruments as follows
2. 0-20% in Money Market Instruments
Credit Allocation
1. 50-55% NCDs rated AAA
2. 45-50% Government Securities

Source: SID

In case of ICICI Pru Fixed Maturity Plan Series 83 Plan B, the instrument allocation is the same. However, in terms of credit allocation, all the assets of the scheme will be invested in government securities. Government securities carry almost no credit risk but also typically have lower yields.

The benchmark of both the schemes is the Crisil Composite Bond Index and the yield on it is 7.85% as of April 2018.

Taxation

FMPs are treated as debt funds. Gains in them for holding periods of less than three years are taxed as Short Term Capital Gains (STCG). They are taxed as per your slab rate (which could be as high as 30%). Gains in FMPs for longer holding periods than three years are taxed as Long Term Capital Gains (LTCG). They are taxed at 20% along with the benefit of indexation.

Indexation takes inflation into account while computing taxable gains, thereby potentially reducing the effective tax rate. Some FMPs which commence in the last few months of a financial year mature over four rather than three financial years, giving them an additional tax advantage. Nonetheless, this FMP has a tenure above three years, making it eligible for LTCG taxation. You can also choose the dividend option but this will incur Dividend Distribution tax (DDT) which adds up to about 29% (including cess etc).

Key Details:

NFO Period: 22nd-24th May 2018

Tenure: 1105 days, 1412 days

Benchmark: Crisil Composite Bond Index

Options: Growth and Dividend

Minimum Investment Amount: Rs 5000

Fund Managers: Rahul Goswami and Rohan Maru

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.