What is the difference between FMP and debt mutual funds

Fixed Maturity Plans (FMPs) are close ended fixed income schemes. You can subscribe to these schemes only during the new offer period (NFO). The tenure of the scheme is fixed and post 2014 Budget, FMPs now have a minimum tenure of 3 years to avoid short term capital gains tax. Being close ended schemes, investors cannot redeem units of FMPs during the tenure of the scheme.

FMPs usually invest in a variety of fixed income securities like, commercial papers, certificates of deposits and corporate bonds. The fund manager ensures that the maturities of the securities match the tenure of the scheme. FMPs with tenures of over three years enjoy significant tax advantages over fixed deposits (FD), especially for investors in the highest tax bracket. Unlike Bank FD interest, FMP returns are not taxed during the tenure of the scheme.

Upon maturity of a FMP scheme, the maturity amount is credited to your bank account. To know more about FMP, read this article https://www.advisorkhoj.com/sbimf...

While FMPs are closed ended debt funds, there are other category of open ended deb funds which provides investment option from 1 day to any number of years. These funds are selected based on your investment needs or objectives. For example, you can invest in liquid funds to park your investments for few days. If your investment need is of 1-2 years you may invest in short term funds and in case it is 3 years or more then you can invest in long term bond funds or income funds.

To know more about debt funds, how they work and and which is the right fund for your investments, you should read the following articles -

https://www.advisorkhoj.com/smf...

https://www.advisorkhoj.com/smf...

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