Monthly Income Plans by Mutual Funds In India
- Franklin Templeton Mutual Fund.
- ICICI Prudential Mutual Fund.
- Birla Sun Life Mutual Fund.
- Reliance Mutual Fund.
- SBI Mutual Fund.
- IDFC Mutual Fund.
What is Monthly Income Plan – MIP?
MIP is a kind of mixed product with combination of Equity (Shares) and short or long term Bonds.The product is claimed to give you returns better than fixed deposits. Generally the equity part is responsible for the extra returns.
Equity is an asset class which is to be seen for long term only.Since equity has 15% to 25% share in the portfolio of this product, risk element goes up for the investor.
What are the benefits of these plans?
These plans come with risk and have potential to erode your capital also. Because of being a mixed product, it has higher expenses also. In total there is low risk to reward ratio in the product.
Is there any Tax benefit?
The return from the product falls in Capital Gains Tax of debt schemes. If the return is in the form of Dividend, it is tax free in the hand of investor.
The dividend is paid, after the deduction of Dividend Distribution Tax. Any gain from the sale of units before a year is clubbed in the income of individual and if the gain is taken after 1 year from the date of investment, the gain is long term in nature and tax is to be paid at flat rate of 10% or 20% of gain after indexation.
Can it be taken as immediate income?
Answer to this is difficult to answer, any product can be suitable if suits to your situation only. Any investment product can be compared with a train taking you to a destination.
There are n numbers of train but your train depends upon the destination. Similarly you should carefully chose this product because only equity part of the fund is set to give you better returns with volatility.
|Investment||Asset Class||Rate||Return||Expense||Realized Return||Income Tax||Inflation||Your Gain|
|100000||Debt||80000||@ 9%||7200||10%||2%||10% – 2%||@ 10%||8%||Minus 0.80%|