FMP Review: Reliance Fixed Horizon Fund XXXVII Series 10 opens todayReliance Fixed Horizon Fund XXXVII Series 10 (1131 days) is a fixed maturity plan (FMP) with a tenure of 1131 days or roughly 3 years and one month. The fund will be open for subscription between 28th May 2018 and 30th May 2018. An FMP usually invests in debt that has approximately the same tenure as the FMP itself.

The ‘intended portfolio allocation’ of Reliance Fixed Horizon Fund XXXVII Series 10 is focused on AAA-rated NCDs. As per the Scheme Information Document (SID), the yield on AAA-rated debentures/bonds was 8.25-8.48% as of 14th May 2018.

Sr No. Instrument Allocation
1. 90 – 100% in Debt, Government Securities, State Development Loans
2. 0 – 10% in Money Market Instruments
Credit Allocation
1. 70 – 75 % in NCDs rated AAA
2. 25 – 30% Government Securities and State Development Loans
3. 0 – 5%, CBLO and Reverse Repos

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. However, this is not the case with Reliance Fixed Horizon Fund XXXVII Series 10 (1131 days). Nonetheless, this FMP has a tenure above three years, making it eligible for Long-Term Capital Gains (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

Minimum Investment: Rs 5,000

Tenure: 1131 days (roughly 3 years and 1 month)

Options: Growth and Dividend Payout

NFO Period: 28th May to 30th June 2018

Author
Neil Borate

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