What is an FMP? Know more about FMP

FMP (Fixed Maturity Plan)

FMP (Fixed Maturity Plan) is a type of Mutual Fund which has a Fixed Maturity date and can have an indicative return on your investment. Usually FMP’s are used by companies and large investors as a substitute to bank fixed deposits.

FMP’s are close-end funds, means that you can enter when it is launched and exit when the term is over. banks.

Will I really get the Indicative Return in FMP?

FMP’s invest money in fixed income instruments (like bonds, government securities, money market instruments etc). They invest in instruments that get matured at the same time as their schemes. Due to this investment strategy the final earning are predictable. Again, the returns are “indicative” not “guaranteed”.

What is the difference between FD and FMP?

FMP’s do not offer an assured return like FD (Fixed Deposit). Unlike bank deposit, you may have to invest a minimum of Rs. 5,000 in an FMP. The main advantage of investing in FMP is its tax efficiency. The interest gained through an FD is added to your income while evaluating tax. Whereas for FMP’s which is longer than an year, you can choose to take all gains as capital appreciation and the tax is merely 10% with indexation benefit or 20% with indexation. For FMP’s with tenure less than a year, an individual can choose to receive the gains as dividends, which will be taxed at 12.5% only.