Debt mutual funds invest in bonds of companies who need funds for business as a loan or invest in securities issued by the Government. Debt MF’s return predetermined interest rate which the mutual fund earns and then passes on to the investors either through dividends or by way of growth in the value of the investment.
Debt mutual funds is good to keep your emergency funds. Investors who are not looking for aggressive return and minimal risk investment, debt mutual funds is best investment. Debt mutual funds returns are better than fixed deposit. Debt mutual funds can be withdrawn at any point of time. There is no lock-in period.
DEBT MUTUAL FUNDS RETURNS ARE BETTER THAN FIXED DEPOSIT.
Debt mutual funds gain is taxed based on your income tax slab. If your yearly earning is below 6 lakhs(4.5 lakhs + 1.5 lakhs in 80C), you can invest in debt mutual fund for short term. The return calculated based on your income tax slab. So it may not required to pay the tax if your gain is less than 50000 from debt mutual funds.
Debt mutual funds is good to keep your emergency funds or can be used keep money for short term
Below different types of the funds in debt mutual funds category based on investment horizon,
Gilt Funds – For short horizon of less than 6 months
Liquid funds – For time horizon of upto 1 year.
Ultra Short term funds – For time horizon of 1 to 2 years.
Short term funds – For time horizon of 2 to 3 years.
Tax on Debt mutual fund gain:
Investment |
Returns |
Investment horizon |
Tax on Returns with yearly income of Rs.6 lakhs |
| Bank Fixed Deposit | 6% to 7% |
No restriction on investment horizon. |
Nil |
| Debt mutual funds | 7 % to 11% | Less than 3 years | Nil |
Top Debt mutual funds:
RELIANCE GILT SECURITIES GROWTH DIRECT PLAN
ICICI PRUDENTIAL ALL SEASONS BOND GROWTH DIRECT PLAN
ADITYA BIRLA SUN LIFE GOVERNMENT SECURITIES GROWTH DIRECT PLAN
SBI MAGNUM MEDIUM DURATION GROWTH DIRECT PLAN
FRANKLIN INDIA DYNAMIC ACCRUAL GROWTH DIRECT PLAN
L&T Short Term Bond Fund – Direct – Growth
Franklin India Ultra Short Bond Fund – Direct – Growth
Aditya Birla Sun Life Short Term Opportunities Fund – Direct – Growth
Withdraw money from mutual funds:
Just login to the mutual funds portal or mutual fund aggregator portals. Click on redeem the mutual funds, it would redeem the mutual funds and transfer money to your bank account. Once the redemption is complete, funds are transferred to the designated bank account of the investor, within 3 business days after the redemption was created.