Is income earned from NCDs subject to capital gains tax or income tax?

-Name withheld on request

(Replied by Sanjeev Bajaj, Joint Chairman and Managing Director, Bajaj Capital.)

Maturity income from NCDs is taxed on account of long-term capital gains. The applicable tax is 20% with indexation.

my monthly salary is 40,000 and I am serving in the Indian Navy. I have completed my six years of service. I am looking forward to invest my accumulated fund which is till date 10 lakh, on which I am currently getting good interest rate. Do I need to continue with this fund? can you please suggest me some ways to invest this amount and also i can invest monthly 20,000?

, Rakesh Vaidya

It is advisable to invest a lump sum amount ( 10 lakh) in Dynamic Asset Allocation Funds as they have the flexibility to change the asset allocation between equity and debt based on their relative valuations and hence provide better risk-adjusted returns. You can split this amount equally between ICICI Pru Balanced Advantage Fund and Nippon India Balanced Advantage Fund.

for monthly investment 20,000, you can invest in equity-oriented mutual fund schemes as equity as an asset class gives better returns over a longer investment horizon. You can think of splitting your monthly SIP amount equally among Axis Growth Opportunity Fund, Kotak Emerging Equity Fund, IDFC Sterling Value Fund and UTI Flexi Cap Fund.

(Please send questions and thoughts to minmoney@livemint.com.)