Franklin Debt Funds Payment Is Here

Finally after almost one year since the Franklin debacle, there is some good news. I received 50% of my investment in Franklin Ultra Short Term fund. That is a sizable chunk of money. I am sure I have never seen as much in my bank account — ever. While it is a sigh of relief, I never so much as doubted that there will be problem in repayment. My only worry was how long it would take for Franklin to repay given the court cases. For once this case moved faster than typical court case duration in India. Anyway I hope by the time you read this, you would have received your payment too.


Now that you had your two mins of happiness, lets get back to business. There are a couple of problems with the event. First is the tax liability. Second is re-investment risk.


Pay your taxes

You will need to figure out your tax liability. You can log in to Franklin website to find your capital gains. Then you will have to calculate your taxes accounting for all sources of incomes. You can use this simple calculator to calculate your taxes. Choose yes to 115BAC if you want to use the new tax slabs. Then follow my guide to pay advance tax. Remember that the deadline for paying 100% advance tax for financial year 2020-21 is March 15, 2021.


Reinvestment risk

The other problem with the payment is reinvestment risk. So far I have been enjoying the nice 8% or so returns on the fund. Now I need to find some other investment avenue. But none of the safe and low volatility options can pay even 6% let alone 8%. I am in the process of figuring out some short-term funds to invest my payment.


Conclusion

Anyway, that is the story so far. We got 50% (from Franklin ultra short term fun). The rest of the 50% will take another 4 years to be paid out completely unless Franklin can figure out a way to sell some papers early. There is a possibility of receiving another 35% in the next financial year. So plan accordingly.


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