Fixed Maturity Plans

What are they? Fundamentally they are akin to Fixed deposits with the bank, but offerings from a mutual fund.

A comparison between the two: (  Bank Fixed deposits and Fixed maturity Plans)

Similarities:

• Investments for a definite period.
• Avialable for various terms.
• Have choices for periodical returns and cumulative returns.
• Suitable for low and moderate risk takers.

Differences:

• FDs are issued by banks and FMPs are issued by mutual funds.
• Return is known and assured  in case of FDs at the time of placing the deposits, but not known and assured in case of FMP, even though indicated.
• Default Risk is transferred to Banks in case of Fixed deposits and retained by the investor in case of FMP.
• Return from Fixed deposit is treated as income in Income tax assessments whereas treated as gain on investments in case of FMP.