HomeMoneySBI Fixed Maturity Plan (FMP) - Series 68 launched: 5 things to...

SBI Fixed Maturity Plan (FMP) – Series 68 launched: 5 things to know

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Launched by SBI Mutual Fund House, the SBI Fixed Maturity Plan (FMP) – Series 68 has a 1302-day maturity period. A mutual fund scheme with a predetermined duration called Fixed Maturity Plan (FMP) invests its assets in debt securities such as government securities, PSU, corporate bonds, and money market instruments that will mature over the course of the program’s tenure. In the case of SBI Fixed Maturity Plan – (FMP) – Series 68, the tenure that has been fixed is 1302 days and hence the scheme shall mature in April 2026. The issue began on September 15, 2022, and it will end on September 21, 2022.

What is SBI Fixed Maturity Plan (FMP) – Series 68?

 The duration of fixed maturity plans, a subcategory of debt funds with holdings predominantly in fixed-income securities, ranges from 30 days to 5 years of tenure. SBI Fixed Maturity Plan (FMP) – Series 68 has a fixed tenure of 1302 days and as the name suggests, investors can not withdraw their corpus prematurely.

Who should invest in an FMP?

Investors who are prepared to lock in their investment in a fixed income investment for a particular purpose might choose Fixed Maturity Plan (FMP), which has a fixed term. Fixed maturity plans provide investors with the choice of selecting a plan that fits their personal finance goals and is recognized for offering better post-tax returns with minimal interest rate risk.

The holding strategy of FMP

FMPs invest in debt securities such as commercial papers (CP), certificate of deposits (CD), corporate bonds, money market instruments, government securities (G-Secs), T-Bills (Treasury Bills), repo and reverse repo instruments, non-convertible debentures (NCD) cash-equivalent investments, which has small credit risk, default risk, and liquidity risk. FMPs have less interest rate risk vulnerability since the fund maintains the securities until they mature, allowing them to produce reasonably steady returns during a period of declining interest rates.

Benefits of investing in SBI Fixed Maturity Plan (FMP)

SBI Mutual Fund has mentioned on its website that “FMPs are least exposed to interest rate risk because the fund manager will normally hold the instruments till their maturity. Also, FMPs generally invest in securities with higher credit quality so that credit and liquidity risks are minimized.”

With a specified maturity period, FMPs provide long-term capital gains tax provisions, particularly indexation benefits, applicable to capital gains, thereby resulting in a reduced rate of taxation. Under FMPs, an investment that has been kept for more than 36 months is considered a long-term investment. Therefore, the tax liability for any gains made is 20% (plus surcharge) with indexation. Additionally, the advantage of investing improves with the investor’s tax threshold. Therefore, with indexation, the tax obligation for any gains made is 20% (plus surcharge). The benefit of investing also doubles with the investor’s tax bracket, which enables them to lower their overall tax burden on gain.

How to invest in SBI Fixed Maturity Plan (FMP)?

Interested investors can visit (www.sbimf.com) to apply for the scheme. But before investing they should read the scheme’s related documents such as Key Information Memorandum (KIM), Scheme Information Document (SID) and Statement of Additional Information (SAI) carefully.

 

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