I held a joint fixed deposit (FD) with my father, the primary account holder, with a PSU bank. The FD was taken in his name in order to benefit from additional interest granted to the elderly. After my father died recently, the bank said the FD had to be closed because it was a senior citizens FD and could not be sued in my name. The FD was due to mature in 2025. The bank said I could create a new FD, but the prevailing interest rate will apply. What is the best option for me now?

— Name masked on request

We are sorry to learn of your father’s death. A target maturity debt index fund may be the most suitable alternative to consider as a substitute for a bank deposit, as returns can be locked in through the use of these schemes, and they are also very tax efficient. because of the benefits of indexation on long-term capital gains.

It is ideal to hold these target-maturity debt index funds to maturity, so that the interest rate volatility that is currently being seen, due to high inflation, can be mitigated. You can consider either a target maturity debt program with exposure to pure government securities, or a combination of government securities and public sector bonds, within the category.

My sister is getting married in 13 months. All my family members, including me, want to participate in the wedding. What kind of instruments would you suggest we park our money in so that we can get it back in 13 months with interest or appreciation?

Since our job profiles vary (we recently started working, and some of us work in start-ups and others in government jobs) and we can save limited money each month.

— Name masked on request

Since you have a short-term holding period, it’s essential to stay away from investing in volatile assets like stocks.

To this end, we suggest a combination of ultra-short funds with the high credit quality of the underlying bonds and arbitrage funds. Arbitrage funds essentially take advantage of the spreads between the spot market and the futures market and manage a fully hedged portfolio.

These funds also come with a tax arbitrage compared to traditional fixed income instruments, as they are taxed like stocks at a long-term capital gains tax rate of 10% if held for more than 12 months.

Vishal Dhawan is a certified financial planner and founder of Plan Ahead Wealth Advisors, a SEBI-registered investment advisory firm.

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