You do not invest in a Mutual fund or a life insurance policy.

You invest through a Mutual fund or a life policy.

The mutual fund or insurance (pension) policy is a wrapper in which you put money. What the wrapper should contain you decide. So you can invest through a Mutual fund and the scheme will decide whether to invest in liquid assets, longer term deposits, equity, private equity, large cap…..you should decide what you want.

Remember it is the wrapper which decides how much tax you pay. Wait, the gap is made by the wrapper provider.

So if you buy Gilt directly (soon ETF will be available) and you get interest on a regular basis you will pay regular income tax. EEks…for me it is about 40%. Criminally high did you say?

Well if I keep it in an ETF (obviously) for 15 years and take the maturity amount I will pay much lesser tax. It will be 10% cap gains – and I will be eligible for indexation.

However if I buy a Gilt Mutual fund and that in Growth option, I postpone the incidence of taxation  to a date when I want it. Say after 20 years post investing. Possible? well as of now no. Edelweiss has a plan which goes only up to 10 years. You will have to wait for Gilt ETF with say 15 years maturity product.

As of now the market may not be ready for a 15 year, 20 year and 30 year schemes. Who knows in 5 years there may be demand for such products and Edel could become the fund house with a full range from 3 year to 30 year ETF. If you plotted all of this you will be able to derive a PSU yield curve. Imagine being able to draw yield curves for groups – hey this is a new concept. Would love to see this happen. Sadly the cart (market development for debt) is being put ahead of the horse (etf). ETF will become popular – I am sure fund houses which are “disturbing” the club will not be liked, but hey it is happening. Who knows a Paytm or Sodexho could set up their own amc with only one product – the liquid fund. Or with 2 products – liquid fund and index fund? Sorry I digress.

If you buy gilt (as of now) through an endowment plan, it is completely tax free.

One day things could change.

Wait a minute. Does the gov not know this?

I am not so sure.