A Fixed Maturity Plan (FMP) is a closed-ended debt mutual fund with a fixed maturity date. The fund buys bonds and money market instruments that mature on or before that date, usually holds them to maturity, and pays investors out when the scheme closes. It looks like a fixed deposit, but it is not one: the return is not guaranteed and there is no deposit insurance.
This guide explains how FMPs work, what the rules say, how they are taxed for tax year 2026-27, and how they compare with the alternatives.
How an FMP Works
- New fund offer (NFO). The fund house launches the scheme for a short subscription window. The scheme information document states the maturity date, the asset-allocation ranges (for example how much can go into bonds versus money market instruments) and the credit evaluation policy.
- Investment. After the NFO closes, the fund buys debt instruments, such as certificates of deposit, commercial paper, corporate bonds and government securities, chosen to mature close to the scheme's own maturity date.
- Holding period. You cannot add money or redeem from the fund house before maturity. The units are listed on a stock exchange, so in principle you can sell them there, but trading is usually thin.
- Maturity. On the maturity date the scheme closes and the proceeds are paid to your bank account.
Because FMPs only accept money during the NFO, there is no SIP option.
No "indicative yield" is allowed
This is the most important rule for anyone considering an FMP. Since a SEBI circular of 19 January 2009, mutual funds and their distributors may not give any indicative portfolio or indicative yield for these schemes, in any communication. FMP scheme documents repeat this in plain words.
So if a distributor or relationship manager tells you an FMP "will give 7.5%", they are quoting a number the rules forbid. You may still be able to make a reasonable estimate yourself (see below), but nobody can promise or project a figure for you.
What Kind of Return to Expect
An FMP's return depends on the yields of the bonds it buys at launch, minus its expenses, and on every issuer paying in full. To get a sense of current yields, look at the portfolio yield to maturity (YTM) of similar open-ended funds. As of 31 August 2026:
- SBI and HDFC Banking & PSU debt funds had portfolio YTMs of 7.25% to 7.56%.
- Their corporate bond funds had YTMs of 7.58% to 7.61%.
These are yields of the bonds held, before the fund's expenses, and they change daily. They are a reference point, not an FMP's promised return.
For comparison, SBI's retail fixed deposit rates (with effect from 15 December 2025) were 6.40% for 2 years to less than 3 years and 6.30% for 3 years to less than 5 years.
For more on the open-ended alternatives, see our guides to Banking & PSU debt funds and corporate bond funds.
Illustrative example
Illustrative only; the 7.5% is an assumption, not a projection for any scheme. Suppose ₹10 lakh earns 7.5% a year after expenses for three years:
- Maturity value: ₹10,00,000 × 1.075³ = ₹12,42,297. Gain: ₹2,42,297.
- Tax at a 30% slab: ₹72,689, plus 4% cess (₹2,908) = ₹75,597.
- After tax you keep ₹11,66,700, about 5.27% a year.
You can compare this with an FD over the same period using the FD calculator.
How FMPs Are Taxed (Tax Year 2026-27)
FMPs invest almost entirely in debt, so they are "specified mutual funds" under section 76 of the Income-tax Act, 2025 (old section 50AA): funds with more than 65% in debt and money market instruments.
- Units bought on or after 1 April 2023: the gain is always short-term and taxed at your slab rate, however long you hold. There is no indexation.
- Units bought before 1 April 2023 and still running: these have now been held for more than two years, so the gain is long-term and taxed at 12.5% without indexation.
Add 4% cess and surcharge if it applies. Before April 2023, FMPs were popular mainly because longer holdings got the indexation benefit, which could cut the tax sharply. For new investments that advantage no longer exists.
One difference from a fixed deposit remains. FD interest is taxable every year as it accrues, even if it is paid only at maturity. An FMP is taxed when you redeem or it matures, so tax is paid once, at the end. Over a three-year FMP that defers tax but does not reduce it. Full details are in our mutual fund tax guide.
A Shrinking Category
AMFI's monthly data shows how much FMPs (which AMFI reports as "Fixed Term Plans") have shrunk in 2026:
| Month | Schemes | Assets |
|---|---|---|
| January 2026 | 71 | ₹14,761 Cr |
| April 2026 | 54 | ₹11,100 Cr |
| August 2026 | 31 | ₹5,450 Cr |
Source: AMFI monthly reports, close-ended Fixed Term Plans.
As older series mature, fewer new ones replace them. That means fewer NFOs to choose from and thinner trading in listed units.
Risks to Understand
- Credit risk. If an issuer in the portfolio defaults or is downgraded, the FMP cannot simply walk away; you are locked in with it. Lower-rated paper raises the potential return and the risk together.
- Liquidity risk. Exchange trading in FMP units is thin. You may find no buyer, or only one at a discount to NAV.
- Reinvestment. When the FMP matures you have to reinvest the money at whatever rates prevail then.
- No guarantee. Unlike a bank deposit, an FMP has no deposit insurance.
Holding bonds to maturity does reduce one risk: interest rate movements change the NAV along the way, but if the bonds are held to maturity and all pay in full, those swings largely wash out by the end.
What to Check Before Investing
- The scheme information document. Read the asset-allocation table (what proportion can go into which instruments and ratings) and the credit evaluation policy.
- The fund house's existing FMPs. Each FMP's actual portfolio is disclosed after allotment in monthly factsheets. Look at what the AMC's earlier series actually bought: credit ratings, issuers, concentration.
- Expense ratio. Under the SEBI (Mutual Funds) Regulations 2026, the cap on the base expense ratio for close-ended non-equity schemes is 0.80%. Check the actual TER of the scheme, and prefer the direct plan; our guide to direct vs regular plans explains the gap.
- Maturity date. Match it to when you need the money, with some margin before any fixed goal date.
- Anyone quoting a yield. Treat a promised or "indicative" return as a red flag.
When an FMP Can Fit, and the Alternatives
An FMP can suit someone who has a lump sum, a fixed date when they need it, is comfortable with debt-fund risk, and is sure they will not need the money earlier. For most other situations there are simpler options:
- Fixed deposits: fixed, known rate, deposit insurance up to the legal limit, and premature withdrawal (usually with a penalty). The FD calculator shows the maturity value at any rate.
- Open-ended debt funds such as Banking & PSU or corporate bond funds: you can invest or redeem on any business day, and the portfolio YTM is published every month. You can check any open-ended fund's past returns from AMFI NAVs in the mutual fund analyser.
- Target maturity funds: open-ended index funds or ETFs that hold bonds to a set date, similar to an FMP but with daily liquidity.
- Liquid and money market funds for money needed within months; see liquid fund vs savings account vs FD.
All the debt-fund options above are taxed the same way as a new FMP: at your slab rate.