Debt Mutual Funds Investment

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What is Debt Mutual Fund Scheme and How does debt mutual funds work?

Debt Mutual Funds mainly invest in a blend of debt or fixed income securities, for example, Treasury Bills, Government Securities, Corporate Bonds, Money Market instruments and other debt securities of various time horizons. For the most part, under the debt securities maturity period is fixed and rate of interest also is fixed.

There are more types of Mutual Funds that invest in different securities, depending on the investor risk profile.

The profits of a debt mutual fund contains:

  • Rate of Interest income
  • Capital Gains/devaluation in the value of the security because of changes in market elements

Debt securities are additionally assigned ‘credit rating’, which evaluates the capacity of the guarantor of the securities/bonds to pay back their debt, over a certain timeframe. These ratings are issued by independent rating organizations, for example, CARE, CRISIL, FITCH, Brickwork and ICRA. Ratings are one among different criteria utilized by Fund houses to assess the credit worthiness of guarantors of fixed (settled) income securities.

There is an extensive variety of fixed income or Debt Mutual Funds accessible to suit the requirements of various investors, in light of their:

  • Investment horizon
  • Ability Investor risk

Types of Debt Mutual Funds

There are various types of Debt Mutual Funds Schemes may invest in different fixed (settled) income securities of various time horizons. A portion of the debt based and mixed category items which will have both debt and equity portions, are as per the following:

  • Liquid Funds / Money Market Funds
  • Ultra Short Term Funds
  • Floating Rate Funds
  • Short Term & Medium Term Income Funds
  • Income Funds, Gilt Funds and other dynamically managed debt funds

– Income funds

– Gilt Funds

– Dynamic Bond Funds

  • Corporate Bond Funds
  • Close Ended Debt Funds

– Fixed Maturity Plans (FMPs)

  • Hybrid Funds

– Monthly Income Plans (MIPs)

  • Capital Protection Oriented Funds
  • Multiple Yield Funds

Advantage of Debt Mutual Fund

  • Time horizon
  • Tax efficient
  • Regular cash flows
  • Diversification
  • Convenience to Investors

List of Debt Funds

Top and Best Debt Mutual Funds in India for year of 2018

Best Liquid Debt Funds top rated average of 3 years 8.5% returns (up to mid of 2018)

Axis Liquid fund

HDFC Liquid Fund

Birla Sunlife Cash Plus funds

Best Ultra-Short Term Debt Mutual Funds top rated average of 3 years 8.75% returns (up to mid of 2018)

L&T Ultra Short Term Fund

Axis Banking Debt Fund

IDFC Banking Debt Fund

Best Short-Term Debt MFs top rated average of 3 years 9.5% returns (up to mid of 2018)

Birla Sunlife Short-term fund

Axis Short term fund

HDFC Short Term fund

Franklin Low Duration Fund

L&T Short Term opportunities Fund

Top & Best Dynamic Debt Funds top rated average of 3 years 11.5% returns (up to mid of 2018)

TATA Dynamic bond

HDFC High Interest Dynamic Bond Fund

Birla Sun life Dynamic Bond Fund

ICICI Pru Dynamic Bond Fund

Best Gilt Funds top rated average of 3 years 12.5% returns (up to mid of 2018)

SBI Magnum Gilt Fund

IDFC’s G-Sec Fund

L&T Gilt funds

HDFC Gilt Fund

The most effective method to pick or choose a Debt Mutual Fund

Ask yourself the following inquiries

Before deciding in which Debt mutual fund item to invest, it’s important that you answer the following inquiries:

  1. (1) What is exactly my investment objective or goal?
  2. (2) What is my investment possibility?
  3. (3) How much possibility to take the risk myself?

Realize the Market Environment

Remember that you should likewise consider different market factors, for example,

  1. (1) Would interest rates ascend in the close term?
  2. (2) How are the interest rates liable to move throughout the following couple of years?

As you will most likely be unable to answer these inquiries yourself, you should look for guidance from your ARN Mutual Fund Advisor or distributor with information accessible on the Market Reports area on our site.

Current Asset Allocation need to be Evaluate

It is additionally important for you to consider your global asset allocation, the proportion of equity to debt in your total investment portfolio, although get clarification where to invest. And Maintaining a decent stability amongst equity and debt investments is basic to give security and the possibility to growth in the long run.

Which Type of fund that suits your requirements

Subject to how you been answered the inquiries above listed, you could look for help from your Mutual Fund Authorized Advisor or distributor to choose a fitting fund to coordinate your needs. Tap on the link beneath to comprehend what points you have to consider before investing in a Debt Mutual Fund.

Taxation on Debt Mutual Funds Schemes in India

Debt funds includes Liquid Fund, dynamic security, short-term, income accumulation, ultra short-term and gilt funds. It additionally contains all debt oriented funds as Monthly Income Plan (MIPs) and hybrid other funds which is not participating in equity. International funds and gold funds additionally take after an indistinguishable taxation from debt funds.

Under these funds Short term is a holding time of under three years. Long term holding is a period more than three years. You are taxed at your slab rate under short term capital gains. That is, in case you’re in the 20% tax section, you pay 20% capital gains as tax. If you are coming in the 10% tax section, you to pay 10% tax on your gained capital gain.

Scheduled long term capital gains, your tax is may 20% of the gain with cost indexation profits. Indexation is the technique by which your cost is balanced for inflation. What this does is to viably lessen your total gain, as your cost goes up and along these lines decreases your taxable benefit.

In equity mutual funds scheme don’t endure or suffer tax on dividend, but the debt funds will be done the tax! You no need to pay this type of tax which is called Dividend Tistribution Tax (DDT). The AMC directly deducts it from your NAV value of the fund and dispatches it directly. So you get dividend net of Dividend Tistribution Tax (DDT).

The Dividend Tistribution Tax (DDT) rate for individuals at exhibit is 28.84% including additional charge and cess. Paid out from your NAV which is dividends, your NAV drops post such dividend payout or again want to reinvestment. Henceforth, the capital gains assuming any when you offer your units under this choice will appear lower. In any case, the fact remains that you paid tax on the dividend, which is nothing yet part of your benefit.

To know the important is whether it is appropriate for you to settle on dividend option in debt, based on investor tax profile or slab.


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