Debt instruments have become the flavor of the season courtesy of a regime of rising interest rates. Fund houses are focused on launching fixed maturity plans (FMPs) aggressive.

In 2009, only 90 forest management plans launched in 2010, as far as 340th this year in the first eight months, the fund was launched houses as many as 410 plans.

PGF are typically debt securities that invest in different types of securities such as bonds issued by the government and business, and money market instruments such as treasury bills, certificates of deposit and commercial paper.

Investors in these products is a major problem in the right of possession. Dhirendra Kumar, managing director of Value Research Online, the fund rating agency, says: "If you do not need money in the near future (less than a year), it is advisable to go for FMPs tenure longer , ie, one or two years. " FMPs possessions are 15 days in five years.

While fund houses can not give indicative yields of these products, you can get the approximate return. PGF to maturity of one year, offers 9.25 %, while nearly two years (600 days) offered approximately 7 %. For comparison, the State Bank of India to offer 9.25 % for fixed deposits (FDs) for periods of one to 10 years. But there is a catch.

Tax rate will return shortly. So, for the highest income bracket, there is a fee 33 %, which will produce about 6.47 up to 9.25 %. FMP provides the same output can double the benefits of indexing. Tax return to receive two of the inflation indexing performance - is an annual sum is invested and the annual amount of withdrawal. Income tax rate is 10 % without indexation and 20 per cent, and indexing. After-tax returns a year FMP is 8.32 %.

There are a number of non-communicable diseases offer attractive prices. For example, Shriram City Union Finance and Manappuram offers more than 12 % per year. Shriram City will return 12.1 % a year for four years and 11.85 % in three years. Manappuram give 12 % pa for 400 days and 12.20 % in two years.

But because of the tax, he would be back if Shriram City Manappuram and fall to 8.5 %. In addition, these instruments are less liquid than longer terms and more risky in nature.

Another advantage of investing in longer-term arrangements at present, according to Mahendra Jajoo, CEO and Chief Investment Officer (Fixed Income) at Pramerica mutual funds, is that the interest rate cycle is likely to peak out soon. If you need to get locked into one more tool would pay significantly higher returns.

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If you do not want to be locked to the current rates in the short term PAF (less than a year) offers nearly 9 %. But remember to choose the option to participate. The tax rate is less than 14.16 %, in contrast to the opportunity for growth. In the case of the latter, you will be taxed on the current record of the investor. The growth option is good for those in lower tax brackets or those non-taxable.

Remember, however, that both the non-convertible bonds and FMPs are listed in the exchange. This means that the problem needs to get out, in the meantime, you can leave it off because of the lack of a vibrant secondary market. In the case of the near future, the output is easier because you can pay a small penalty, and to do so.

Source: [business-standard]