Senior citizen investors are likely to shun mutual funds for traditional investments like bank deposits if the Reserve Bank of India hike rates soon, fear mutual fund advisors. These advisors say these investors are already spooked by the budget proposal to tax dividends on equity schemes and re-introduction of Long Term Capital Gains Tax on equity mutual fund schemes.
"The introduction of tax on long term capital gains will lower post-tax returns from equity mutual funds for the senior citizens. If RBI increases its policy rates, elderly investors will earn higher interest on their deposits with banks and may move back to their traditional favourite investment avenues," says Prashant Maurya, Partner, Citrine Financial Advisors.