State DL of 5 year duration or FD or Short Term Debt Fund which is better?

Personal finance
1

State development loan Bond (RJ 2026) with 6.4% yield or Fixed deposit of 6.2% or short term fund with 8% expected returns.
Which is the best option in terms of considering tax as well?
Investment period - 5 years

2

Can you mention the name of the bank or is it any NBFC ? I want to know who offers 6.2% interest!

This is just indicative not the actual yield. you’ll get to know the actual yield after the auction.

3

@TradeXMaster Bajaj Finance giving 6.5% returns for 36-60 month duration. Came to know from ETMoney

4

couple points to ponder, for making decision:

  1. Taxation - each one is taxed differently. for direct SDL and FD, taxation at slab, for short term MF - indexation can reduce the taxes
  2. Safety - SDL would be highest rated, short term fund would vary based on holding and can be holding really bad bonds in it
  3. Predictability - Yields are fixed in 1 & 2, 3rd is just expected. If there is adverse interest rate movement (rate rises) - actual yield on short term fund could be less
  4. Liquidity - getting out of 1 & 2 would be difficult, if you need money in interim. Short term MF would be easier to liquidate (assuming Franklin like scenario does not happen)

Hope this helps in making decision

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5

Thanks @Akash_Shah. Nicely differentiated and explained

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6

Savings Bank account interest rate.
RBL offers interest rate on tired basis upto 1 lack 4.25% above 1 lack 5.75 and over 10 lacks at 6%

Equitas small finance bank offers
Up to ₹ 1 lakh 3.50%
Above ₹ 1 lakh 7.00%

Ujjivan Small finance bank
Up to 1 lakh 4.00%|
1 lack to 25L - 7%

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