Feature of Debt Products in Indian Financial Market

 

BasisPPFBank Fixed DepositsBank Recurring DepositsCompany DepositsCompany DebenturesDebt Mutual FundClosed-ended FMPs
ReturnsReturns are linked with Bond Yield, so it changes every year. For 2014-15 it is 8.70% per year.8.50% - 10.00% Per Year, normally .50% up for senior citizens.8.50% - 9.50% Per Year.9%-12% per year9%-12% per year8%-10% Per Year9%-10% Per Year.
SafetyHighly secured as it is backed by the government.Highly Secured as it is tightly regulated by RBI and insured upto Rs 1 lac by DICGC.Highly Secured as it is tightly regulated by RBI and insured upto Rs 1 lac by DICGC.Moderate to low depends upon the credit rating assigned to the deposit.Moderate to low depends upon the credit rating assigned to an issuer.Moderate because of the diversification as it reduces the default risk.High because diversification and fixed tenure reduces both the default & interest risk respectively.
LiquidityIt has a moderate liquidity where the tenure is of 15 year, however once can make the partial withdrawals after 6 years
or can take loan after 3 year.
It has high liquidity unless a tax-saving FD has been booked which has a lock-in of 5 year.It has high liquidity unless a bank has imposed a penalty on premature withdrawal. It has a low liquidity because pre-mature withdrawal could take some time.It has a moderate liquidity as listed as they are listed on exchange but chances are there that you need to sell them at discount.It has a high liquidity, redemption takes place in very short span of time.It has low liquidity as these are locked till maturity however one can trade on exchange also but might not be able to find the buyer because the volume are low.
FlexibilityPPF has a moderate flexibility where minimum investment can start with Rs 500 and maximum investment would be of Rs 1 lakh in a financial year.It has a high flexibility-minimum deposits starts with Rs 500 with no upper limit and above all an online transaction adds an ice on the cake.It has a high flexibility-minimum deposits starts with a small amount.It has a moderate to low flexibility as available in a fixed denomination.It has a moderate to low flexibility as available in a fixed denomination.It has a high flexibility like choice of investment amount, add-on investment with less paper work, online redemption facility.It has a moderate flexibility as minimum investment starts with 5000 and tenure could be from 1 month to 3 year.
TaxationPPF has EEE(Exempt-Exempt-Exempt) feature that means all of the investment or contribution,interest earned and maturity amount are tax free.Interest above Rs 10000 is taxable based on the tax bracket.There is no TDS but interest is fully taxable at normal ratesInterest is fully taxable based on the tax bracket.Capital Gains taxed at 10% and there is no indexation benefit.Taxed at normal rate if the holding period is less than an year else 10% flat or 20% with indexation.The tax implication depends upon the investment option i.e. Dividend or Growth, but generally taxed at normal rate if the holding period is less than an year else 10% flat or 20% with indexation.
Suitable ForPPF is best suitable for an investor who is looking to have an 80 c benefit on his investment and would like to have good amount of tax -free corpus on maturity with guaranteed returns.It is best suitable for a risk-free investor who is looking safety for his invested amount along with liquidity feature. It is best suitable for an investor who would like to have a predetermined amount within a specific period of time.It is best suitable for an investor who is ready to take some risk and would like to earn high return than Bank FDs. It is best suitable for the knowledgeable investor who can time the market and earn the capital gain on his investment. It is best suitable for an investor who is looking for a tax-efficient product along with the liquidity feature.It is best suitable for an investor who is looking for a tax-efficient product and would like to hold his investment till maturity.

 

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