Comparative Income Analysis of NRO, NRE V/s FMP's (Fixed Maturity Plan) 

 

Particulars	NRO 1 Yr. Deposit	NRO  Savings	NRE 1 Yr. Deposit	NRE  Savings	ICICI Pru.  Mutual Fund FMP	TATA  Mutual Fund FMP
Return (p.a.)	9.50%	3.50%	4.17%	3.50%	8.75%	9.00%
Tax rate *	33.66%	33.66%	NIL	NIL	11.33%	22.66%
Net	6.30%	2.32%	4.17%	3.50%	7.76%	6.96%
Tenure	1 Yr.	Min. 1 mnth.	1 Yr.	Min. 1 mnth.	370 Days	13 Mnths
Lock in period and Liquidity	1 yr.	Min. 1 mnth for Interest	1 Yr.	Min. 1 mnth for Interest	^redemptions made during repurchase facility period	^Redemption before maturity
Repatriation	Not Repatriable	Not Repatriable	Repatriable	Repatriable	Repatriable	Repatriable
Tax status Interest/Dividend	Taxable	Taxable	TAX FREE	TAX FREE	Subject to Max. 10% Tax	Subject to Max. 10% Tax

Salient Features of Fixed Maturity Plan

1 Initial investment is made in Indian Rupee  Fixed Maturity Plan of  leading Mutual Funds like Standard Chartered, Franklin Templeton Mutual Fund, Tata Mutual Fund and others.

02 The principal amount and fixed returns are both guaranteed.

03 The gains are  taxed after indexation.

04 Annualized yield for NRI investor after tax ranges to 9.90 % to 10.10 %.

05 The Principal amount as also gains are fully repatriable.

Currently no FMPs are available.

Safe, predictable and better post-tax returns than bank FDs Rising interest rates not only mean rising EMIs but also offer an opportunity to earn higher returns. Debt schemes are now offering attractive returns with short-term rates in the region of 8-10%. Call money rates have been moving higher to about 7.5-8% due to tight liquidity conditions. With the RBI deciding to raise the cash reserve ratio (CRR), liquidity conditions have worsened. Tightness in the money markets is expected to continue till the end of the current financial year and investors can consider investing in short term options like FMPs or floating rate schemes. Fixed maturity plans, or FMPs as they are popularly called, are close-ended funds with a fixed tenure and invest in a portfolio of debt products whose maturity coincides with the maturity of the product. The primary objective of a FMP is to generate income while protecting the capital by investing in a portfolio of debt and money market securities. The tenure can be of different maturities, ranging from one month to five years. FMPs can be compared to fixed deposits of a bank. While a fixed deposit offers a 'guaranteed' return, returns in FMPs are only 'indicative'. Typically, the fund house fixes a 'target amount' for a scheme, which it ties up informally with borrowers before the scheme opens. That way it knows the interest rate it will earn on its investments, providing the 'indicative return' to investors.                                                                                                                                                                         

Benefits of FMPs

FMPs offer many benefits like tax efficiency, fixed tenure and low sensitivity to interest rates. The minimum investment amount is usually Rs 5,000, which a retail investor can easily invest.

Capital protection: FMPs have less risk of capital loss than equity funds due to their investment in debt and money market instruments.

Low interest rate sensitivity: As the securities are held till maturity, FMPs are not affected by interest rate volatility. The actual returns are more or less close to the indicative returns declared at the scheme's launch.

Lower cost: FMPs involve minimum expenditure on fund management, as there is no requirement for a time-to-time review by fund managers to buy/sell the instruments constituting the fund. Since these instruments are held till maturity, there is a cost saving in respect of buying and selling of instruments.

Tax benefits: FMPs score over fixed deposits because of their tax efficiencies both in the short-term as well in the long-term.

** If you wish to open new NRE / NRO bank account, please inform.

However, if you do not have the Permanent Account Number  (PAN) and Know Your Customer (KYC) compliance which is mandatory and if you wish to avail, we will provide professional assistance for application of Permanent Account Number  (PAN) and Know Your Customer (KYC) compliance.

* N.A. stands for Not Applicable.

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