Fixed maturity plans (FMPs) have been popular for quite some time now due to the tax advantage associated with them. But, will FMPs continue to remain attractive once the new tax regime, Direct Tax Code ( DTC), comes into effect? FMPs are basically close-ended debt-oriented mutual fund schemes with a predetermined maturity date.
The objectives of FMPs are to generate steady returns over the maturity period and protect investors against market fluctuations. To achieve these goals, fund managers make investments in short-term bonds, certificate of deposits issued by banks/companies, etc. Under the existing provisions of Income-Tax Act, 1961, dividend from FMPs is exempt in the hands of the recipient.