Debt Mutual Funds Taxation new rulw

In a very surprising move by the government of India, now the Debt mutual funds will be taxed as per the income tax slab from 1st April 2023. This is one of the worst move for investors in India who actually put their money in debt fund thinking to reduce the tax. One thing to note here is thar, it is only applicable for the the funds purchased after 1st April, 2023. So if you have funds before it, then you don't have to worry.


But what is the option for us now from April 2023. I think now we should change the strategy as the debt funds does not provide any benefit to us. We can switch to fixed deposits for Recurring deposits for the long term goals as well have to give the same tax. And the best part is now the bank rates are higher so we can get good interest rate too on our investment.

This is one strategy which can be followed other strategy is to invest in those funds which have more than 35% exposure of equity. That means a fund with combination of both equity and debt. The good thing about this is that you can club some of your equity and some debt into that fund so that you don't have to pay any tax. Paying tax on debt fund is like giving away part of your money to the government. But think about it, why are you saving in the debt fund at the first place.

Debt fund gives you the cushion which is needed to protect you from market fluctuations. Now for a longer duration goal, what people usually do is to lower the equity and increase the debt whenever their goal is approaching. So similarly you can also do the same, decrease the equity but instead put it in RD or FD so thar you get the guaranteed returns. I still have not decided what I will be doing but I need to decide before 31st March.

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