FMP review: Invseco India FMP Series 31 Plan DInvesco India FMP Series 31 Plan D opens today on 4th June and will close on 6th June 2018. It is a fixed maturity plan (FMP) that has a tenure of 1468 days (roughly 4 years). An FMP usually invests in debt that has approximately the same tenure as the FMP itself. Its ‘intended portfolio allocation’ specifies a focus on NCDs (Non-convertible debentures) rated AAA. The yield on the CRISIL AAA bond index was 8.20%-8.35% at the end of April 2018.   

This fund is benchmarked against the CRISIL Composite Bond Index which had a yield of 7.85% (as of April 2018). This is likely to have increased a little in the current month. Nitish Sikand, who manages various Invesco India debt funds, will be the manager of this fund.

The intended portfolio allocation of the fund is as follows:

Sr No. Instrument Allocation
1. 80 – 100% in Debt instruments as follows
2. 0 – 20% in Money Market Instruments
Credit Allocation
1. 95 – 100% in NCDs rated AAA
2. 0 – 5% in CBLOs, GSecs, T-bills

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. Invesco India FMP Series 31 Plan D has a tenure of four years but it is not launched towards the end of the year. This means that it is not likely to benefit from five, rather than four years of indexation. 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

Minimum Investment: Rs 5000

Tenure: 1468 days

Options: Growth and Dividend Payout

NFO Period: 2nd June to 4th June

Author
Neil Borate

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