Regular Savings Plans (RSP) : Best of Both Worlds

Posted By: Admin

Those  who are retired  or about to and worried about getting a regular income ?  or  home makers in need of an additional income or anybody who needs a second source of income  can look into this type of fund. Cheer up investor’s Regular savings plan is the option we have in mutual funds.  It combines the benefits of a Fixed Deposit of reasonable safety with a small exposure to Equity to ensure that you get a slightly higher return than traditional  Fixed Deposits without taking high risks. 

Regular Savings Plan (RSP)  

Regular Savings plan is a Debt-oriented hybrid mutual fund where 70 to 80% of the allocation is into debt instruments & money market instruments like Government Bonds, Debentures, Certificate of deposit, and Treasury bills etc., the balance 20 to 30% exposure will be in equity shares. Predominantly the equity portion will invest in Large & mid-caps. Due to the high debt exposure & low equity exposure this fund comes under the risk profile of conservative to moderate. Those who want to take a small portion of equity exposure considering the risk factor in the equity market can invest in these funds. When compared to fixed deposit & post office monthly income schemes this fund can  offer higher returns, although not guaranteed. These funds offer high liquidity & there is no lock in period. There might be exit loads if redemption is requested before 365 days. However it is highly recommended that investors look at a 3 year timeline for these investments  esp due to the tax benefits for staying invested for that period.  

Past Performance - 



Past Performance %

Fund Name

1-Year Return

3-Year Return

5-Year Return

7-Year Return

10-Year Return

ICICI Prudential Regular Savings Fund






HDFC Hybrid Debt Fund






SBI Debt Hybrid Fund






Kotak Debt Hybrid Fund - Regular Plan






Canara Robeco Conservative Hybrid Fund - Regular Plan







Types of Regular Savings plan (RSP)

Two types of earnings are available in RSP. One is Growth oriented, where the earnings will reflect in your capital appreciation. Second is Dividend oriented, dividends are paid to the investors from the distributable surplus. We would recommend you to stick to the growth option due to taxation reasons.

Taxation - 

Since it is a debt oriented fund, if the investor redeems before 3 years, it is considered as short term capital gain which will get added to the income tax slab. If the investor redeems after 3 years then it is considered as long term capital gain, which will be taxed at 20.8% (Added cess) with indexation benefit. So a 3 year investment is a more tax efficient option. 


Investors like retirees, home makers who don’t  want to take high risk but want better than Fixed Deposits rates can consider these funds for a 3 year horizon. 

BY Narayanan


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