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Short Term Debt Funds or Short Duration Funds | Best Short Term Plans

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Short Term Debt Funds or Short Duration Funds

Updated on January 17, 2022 , 4743 views

As the name suggests, Short term debt funds, also known as short duration funds, are typically Debt Mutual Funds that invest money for a short duration, usually less than 3 years. Also known as Short Term Income Funds, Short term debt funds invest in debt instruments and money market instruments that include Bank papers (also called Certificate of Deposits), government papers(G-secs) and commercial papers (CPs). This Mutual Fund scheme is suitable for investors who prioritise Capital preservation, but also wish to invest for a predominantly longer period to earn good returns over the long term (between 1-3 years). Investors who are willing to invest for a short duration of 1-3 years can look at short term bond funds. Short term debt products can benefit from the interest Accruals in the debt portfolio and from the tactical exposure to higher duration debt by the respective fund manager.

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Features of Short Duration (Short-Term) Debt Funds

Some of the prominent features of short term funds are:

Liquidity

The short term debt funds are highly liquid as the maturity period is short and the investments avenues allow liquidity. Usually, there are no entry and exit loads charged on these funds. However, some short term debt funds do charge an exit load if the exit is made in a few months. So, the investors are suggested to invest wisely considering all the parameters.

Returns

When it comes to investing in Mutual Funds, returns are what people actually look for. However, this should not be the only parameter while choosing a best short term Debt fund to invest. In the recent reports, RBI stated that the investors would earn better returns by Investing in short to mid-term funds that invest in instruments having a maturity between of one to five years. Generally, the fund managers handling such funds prefer investing in high credit rating securities. Thus, ensuring the least possibility of Default by the issuers providing safety to investors’ capital. Currently, short term debt funds with a maturity period of one-three years give annualised returns of 9-10% p.a. Investors should not just chase returns, but also look at the credit quality of the portfolio. If you are a conservative investor then it makes sense to ensure that give away some returns for the extra safety.

Interest Rate Risk

Given the short term nature of these funds, the returns are not much affected by Inflation and there is a lesser interest rate risk. Typically, short term debt funds generate income from the interest earned on short to medium term Bonds. This accrual income, meaning the accumulated interest, gets added to the Net Asset Value and becomes your final return. Since you know these funds provide steady income, therefore, the returns are less volatile as compared to other long-term income funds. Some short term funds do carry a bit of interest rate risk, this can be measured by a parameter called duration of the portfolio. One can even look at the average maturity of the portfolio. Both these parameters are available on the fact sheets of the scheme. Just remember a simple rule, higher the duration or maturity higher the interest rate risk! If interest rates fall, then this is positive, however, if rates rise, then the returns would be negatively impacted.

Investment Horizons

Short term debt funds do not invest in instruments that have a very long maturity as they try to maintain lower interest rate risk and offer better tax-adjusted returns. Since these funds provide stable returns in a time period of one to three years, investors should try to match the investment timeline with the average maturity of the fund. The instruments they invest in include money Market instruments like bonds, Commercial Paper and certificate of deposits etc.

Active Management Required

Being a short term investment, these funds do not require heavy active management by the fund manager. Once the portions of the portfolio are allotted, the need of actively managing (buying and selling units) the investments is lower, having said this the fund manager needs to ensure that interest rate views are incorporated and he/she is vigilant on the credit quality of the portfolio as well as new opportunities. Their aim to provide steady returns is achieved by ensuring regular active management of the fund.

Dividend Payout

Short term debt funds also offer an option of dividend payout. With this option, the investors can get dividends at regular interval mostly monthly and fortnightly. However, the dividends paid by these funds attract a DDT (Dividend Distribution Tax) of 25% for individual investors.

Benefits of Short Duration (Short-Term) Funds

  • The short term bond funds have a shorter maturity so they generally offer safe and stable returns.
  • The fluctuations in interest rates of the debt market have a marginal to the insignificant effect on the returns of short term debt funds.
  • Being sensitive to changing the interest rate, short term bond funds usually perform better than other funds who are affected by the market fluctuations.
  • The liquidity of these funds is high. So, the investors can easily withdraw their investment in case of emergencies.
  • Typically, most of the best short term debt funds do not charge any fee for withdrawal. So, there is minimal to no exit load.
  • Short term debt funds are tax efficient. The tax charged on the interest of these funds is much less than that of fixed bank deposits.

Top Short Duration (Short-Term) Debt Funds 2022

Some of the best short term debt funds include-

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2021 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Franklin India Short Term Income Plan - Retail Plan Growth ₹4,436.13
↑ 0.69
₹5481.311.814.44.2150%2Y 8M 22D
Sundaram Short Term Debt Fund Growth ₹36.3802
↑ 0.01
₹3620.811.412.85.3 4.52%1Y 2M 13D1Y 7M 3D
UTI Short Term Income Fund Growth ₹25.4123
↑ 0.00
₹3,7130.66.58.84.78.44.83%1Y 29D2Y 3M 4D
Nippon India Short Term Fund Growth ₹42.4106
↑ 0.00
₹9,6920.71.94.87.64.45.39%1Y 9M 25D2Y 4M 6D
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹37.9211
↑ 0.00
₹9,4490.61.94.27.63.85.48%1Y 9M 4D2Y 5M 5D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 19 Jan 22
*Above is list of best Short Duration funds having AUM/Net Assets above 100 Crore. Sorted on Last 1 Year Return.

1. Franklin India Short Term Income Plan - Retail Plan

The objective of the Scheme is to provide investors stable returns by investing in fixed income securities.

Franklin India Short Term Income Plan - Retail Plan is a Debt - Short term Bond fund was launched on 31 Jan 02. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.7% since its launch.  Ranked 19 in Short term Bond category.  Return for 2021 was 15% , 2020 was -5.3% and 2019 was 4.2% .

Below is the key information for Franklin India Short Term Income Plan - Retail Plan

Franklin India Short Term Income Plan - Retail Plan
Growth
Launch Date 31 Jan 02
NAV (19 Jan 22) ₹4,436.13 ↑ 0.69   (0.02 %)
Net Assets (Cr) ₹548 on 31 Dec 21
Category Debt - Short term Bond
AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd
Rating
Risk Moderate
Expense Ratio 1.5
Sharpe Ratio 1.19
Information Ratio -0.49
Alpha Ratio 11.63
Min Investment 5,000
Min SIP Investment 500
Exit Load 0-1 Years (0.5%),1 Years and above(NIL)
Yield to Maturity 0%
Effective Maturity 2 Years 8 Months 22 Days
Modified Duration

Growth of 10,000 investment over the years.

DateValue
31 Dec 16₹10,000
31 Dec 17₹10,862
31 Dec 18₹11,816
31 Dec 19₹12,316
31 Dec 20₹11,658
31 Dec 21₹13,408

Franklin India Short Term Income Plan - Retail Plan SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹197,169.
Net Profit of ₹17,169
Invest Now

Purchase not allowed

Returns for Franklin India Short Term Income Plan - Retail Plan

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Jan 22

DurationReturns
1 Month 0.1%
3 Month 1.3%
6 Month 11.8%
1 Year 14.4%
3 Year 4.2%
5 Year 5.9%
10 Year
15 Year
Since launch 7.7%
Historical performance (Yearly) on absolute basis
YearReturns
2021 15%
2020 -5.3%
2019 4.2%
2018 8.8%
2017 8.6%
2016 8.3%
2015 9.1%
2014 11.7%
2013 9%
2012 10%
Fund Manager information for Franklin India Short Term Income Plan - Retail Plan
NameSinceTenure
Santosh Kamath24 Jun 165.44 Yr.
Kunal Agrawal24 Jun 165.44 Yr.

Data below for Franklin India Short Term Income Plan - Retail Plan as on 31 Dec 21

Asset Allocation
Asset ClassValue
Cash3.06%
Debt96.94%
Debt Sector Allocation
SectorValue
Corporate96.94%
Cash Equivalent3.06%
Credit Quality
RatingValue
A100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Andhra Pradesh Capital Region Development Authority
Debentures | -
44%₹242 Cr11,135
Andhra Pradesh Capital Region Development Authority
Debentures | -
42%₹228 Cr10,675
Andhra Pradesh Capital Region Development Authority
Debentures | -
8%₹47 Cr2,125
Dcb Bank Limited
Debentures | -
3%₹14 Cr1,400
SBI Overnight Fund Dir Gr
Investment Fund | -
0%₹1 Cr1,870
↓ -521,023
Rivaaz TRade Ventures Private Limited
Debentures | -
0%₹0 Cr1,000
Rivaaz TRade Ventures Private Limited
Debentures | -
0%₹0 Cr800
Nufuture Digital (India) Limited
Debentures | -
0%₹0 Cr500
Rivaaz TRade Ventures Private Limited
Debentures | -
0%₹0 Cr375
Rivaaz TRade Ventures Private Limited
Debentures | -
0%₹0 Cr350

2. Sundaram Short Term Debt Fund

(Erstwhile Sundaram Select Debt Short Term Asset Fund)

To earn regular income by investing primarily in fixed income securities, which may be paid as dividend or reinvested at the option of the investor. A secondary objective is to attempt to keep the value of its units reasonably stable.

Sundaram Short Term Debt Fund is a Debt - Short term Bond fund was launched on 5 Sep 02. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 6.9% since its launch.  Ranked 56 in Short term Bond category. .

Below is the key information for Sundaram Short Term Debt Fund

Sundaram Short Term Debt Fund
Growth
Launch Date 5 Sep 02
NAV (31 Dec 21) ₹36.3802 ↑ 0.01   (0.03 %)
Net Assets (Cr) ₹362 on 30 Nov 21
Category Debt - Short term Bond
AMC Sundaram Asset Management Company Ltd
Rating
Risk Moderately Low
Expense Ratio 0.96
Sharpe Ratio 0.98
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 250
Exit Load NIL
Yield to Maturity 4.52%
Effective Maturity 1 Year 7 Months 3 Days
Modified Duration 1 Year 2 Months 13 Days

Growth of 10,000 investment over the years.

DateValue
31 Dec 16₹10,000
31 Dec 17₹10,563
31 Dec 18₹11,221
31 Dec 19₹10,646
31 Dec 20₹11,624

Sundaram Short Term Debt Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹197,169.
Net Profit of ₹17,169
Invest Now

Returns for Sundaram Short Term Debt Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Jan 22

DurationReturns
1 Month 0.2%
3 Month 0.8%
6 Month 11.4%
1 Year 12.8%
3 Year 5.3%
5 Year 5.6%
10 Year
15 Year
Since launch 6.9%
Historical performance (Yearly) on absolute basis
YearReturns
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Fund Manager information for Sundaram Short Term Debt Fund
NameSinceTenure
Dwijendra Srivastava1 Jun 129.51 Yr.
Sandeep Agarwal1 Jun 129.51 Yr.

Data below for Sundaram Short Term Debt Fund as on 30 Nov 21

Asset Allocation
Asset ClassValue
Cash37.63%
Debt62.37%
Debt Sector Allocation
SectorValue
Government42.74%
Cash Equivalent31.66%
Corporate25.6%
Credit Quality
RatingValue
AA5.1%
AAA94.9%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
India (Republic of)
Sovereign Bonds | -
7%₹25 Cr2,500,000
↑ 2,500,000
National Bank For Agriculture And Rural Development
Debentures | -
6%₹20 Cr200
5.22% Govt Stock 2025
Sovereign Bonds | -
6%₹20 Cr2,000,000
Sikka Ports & Terminals Limited
Debentures | -
5%₹16 Cr150
Export Import Bank Of India
Debentures | -
5%₹15 Cr150
Piramal Capital & Housing Finance Limited
Debentures | -
4%₹14 Cr163,476
Power Finance Corporation Ltd.
Debentures | -
3%₹10 Cr100
Housing Development Finance Corporation Ltd
Debentures | -
3%₹10 Cr100
Housing And Urban Development Corporation Limited
Debentures | -
3%₹10 Cr100
Housing Development Finance Corporation Ltd
Debentures | -
3%₹10 Cr100

3. UTI Short Term Income Fund

To generate steady and reasonable income with low risk and high level of liquidity from a portfolio of money market securities and high quality debt.

UTI Short Term Income Fund is a Debt - Short term Bond fund was launched on 19 Sep 07. It is a fund with Moderate risk and has given a CAGR/Annualized return of 6.7% since its launch.  Ranked 10 in Short term Bond category.  Return for 2021 was 8.4% , 2020 was 10.5% and 2019 was -3.9% .

Below is the key information for UTI Short Term Income Fund

UTI Short Term Income Fund
Growth
Launch Date 19 Sep 07
NAV (19 Jan 22) ₹25.4123 ↑ 0.00   (0.01 %)
Net Assets (Cr) ₹3,713 on 31 Dec 21
Category Debt - Short term Bond
AMC UTI Asset Management Company Ltd
Rating
Risk Moderate
Expense Ratio 0.93
Sharpe Ratio 1.06
Information Ratio -0.45
Alpha Ratio 4.44
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 4.83%
Effective Maturity 2 Years 3 Months 4 Days
Modified Duration 1 Year 29 Days

Growth of 10,000 investment over the years.

DateValue
31 Dec 16₹10,000
31 Dec 17₹10,607
31 Dec 18₹11,244
31 Dec 19₹10,804
31 Dec 20₹11,936
31 Dec 21₹12,936

UTI Short Term Income Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹197,169.
Net Profit of ₹17,169
Invest Now

Returns for UTI Short Term Income Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Jan 22

DurationReturns
1 Month 0.2%
3 Month 0.6%
6 Month 6.5%
1 Year 8.8%
3 Year 4.7%
5 Year 5.2%
10 Year
15 Year
Since launch 6.7%
Historical performance (Yearly) on absolute basis
YearReturns
2021 8.4%
2020 10.5%
2019 -3.9%
2018 6%
2017 6.1%
2016 10.1%
2015 8.3%
2014 10.9%
2013 9%
2012 11.2%
Fund Manager information for UTI Short Term Income Fund
NameSinceTenure
Sudhir Agarwal25 Oct 129.11 Yr.

Data below for UTI Short Term Income Fund as on 31 Dec 21

Asset Allocation
Asset ClassValue
Cash22.74%
Debt77.26%
Debt Sector Allocation
SectorValue
Government43.77%
Corporate31.45%
Cash Equivalent22.74%
Securitized2.03%
Credit Quality
RatingValue
AA15.75%
AAA84.25%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
4.62% Govt Stock 2033
Sovereign Bonds | -
8%₹291 Cr2,900,000,000
91 DTB 20012022
Sovereign Bonds | -
7%₹249 Cr2,500,000,000
↑ 2,500,000,000
6.1% Govt Stock 2031
Sovereign Bonds | -
5%₹196 Cr2,000,000,000
↑ 2,000,000,000
Axis Finance Limited
Debentures | -
4%₹160 Cr1,600
National Bank For Agriculture And Rural Development
Debentures | -
4%₹150 Cr1,500
Housing Development Finance Corporation Ltd
Debentures | -
3%₹125 Cr1,250
Housing And Urban Development Corporation Limited
Debentures | -
3%₹102 Cr1,000
Hindustan Petroleum Corporation Limited
Debentures | -
3%₹100 Cr1,000
08.24 Tn SDL 2025sep
Sovereign Bonds | -
2%₹86 Cr800,000,000
Ncd India Grid Trust
Unlisted bonds | -
2%₹76 Cr750
↑ 750

4. Nippon India Short Term Fund

The primary investment objective of the scheme is to generate stable returns for investors with a short term investment horizon by investing in fixed income securitites of a short term maturity.

Nippon India Short Term Fund is a Debt - Short term Bond fund was launched on 18 Dec 02. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.9% since its launch.  Ranked 17 in Short term Bond category.  Return for 2021 was 4.4% , 2020 was 9.5% and 2019 was 9.4% .

Below is the key information for Nippon India Short Term Fund

Nippon India Short Term Fund
Growth
Launch Date 18 Dec 02
NAV (19 Jan 22) ₹42.4106 ↑ 0.00   (0.01 %)
Net Assets (Cr) ₹9,692 on 31 Dec 21
Category Debt - Short term Bond
AMC Nippon Life Asset Management Ltd.
Rating
Risk Moderately Low
Expense Ratio 1.15
Sharpe Ratio 0.71
Information Ratio -0.72
Alpha Ratio 0.15
Min Investment 5,000
Min SIP Investment 100
Exit Load NIL
Yield to Maturity 5.39%
Effective Maturity 2 Years 4 Months 6 Days
Modified Duration 1 Year 9 Months 25 Days

Growth of 10,000 investment over the years.

DateValue
31 Dec 16₹10,000
31 Dec 17₹10,569
31 Dec 18₹11,152
31 Dec 19₹12,195
31 Dec 20₹13,350
31 Dec 21₹13,940

Nippon India Short Term Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for Nippon India Short Term Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Jan 22

DurationReturns
1 Month 0.1%
3 Month 0.7%
6 Month 1.9%
1 Year 4.8%
3 Year 7.6%
5 Year 6.7%
10 Year
15 Year
Since launch 7.9%
Historical performance (Yearly) on absolute basis
YearReturns
2021 4.4%
2020 9.5%
2019 9.4%
2018 5.5%
2017 5.7%
2016 9.8%
2015 8.1%
2014 11.3%
2013 7.5%
2012 9.8%
Fund Manager information for Nippon India Short Term Fund
NameSinceTenure
Vivek Sharma1 Feb 201.83 Yr.
Kinjal Desai25 May 183.52 Yr.
Sushil Budhia31 Mar 210.67 Yr.

Data below for Nippon India Short Term Fund as on 31 Dec 21

Asset Allocation
Asset ClassValue
Cash18.07%
Debt81.93%
Debt Sector Allocation
SectorValue
Corporate59.17%
Government25.79%
Cash Equivalent11.74%
Securitized3.3%
Credit Quality
RatingValue
AA11.06%
AAA88.94%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
5.63% Govt Stock 2026
Sovereign Bonds | -
4%₹349 Cr35,000,000
↑ 20,000,000
State Bank Of India
Debentures | -
3%₹333 Cr3,300
5.22% Govt Stock 2025
Sovereign Bonds | -
3%₹319 Cr32,042,400
Muthoot Finance Limited
Debentures | -
3%₹281 Cr2,748,618
National Bank For Agriculture And Rural Development
Debentures | -
2%₹239 Cr2,300
India Infradebt Limited
Debentures | -
2%₹232 Cr2,195
India Grid Trust
Debentures | -
2%₹215 Cr2,100
ICICI Prudential Life Insurance Company Limited
Debentures | -
2%₹211 Cr2,100
Embassy Office Parks Reit
Debentures | -
2%₹176 Cr1,750
Housing Development Finance Corporation Ltd
Debentures | -
2%₹176 Cr1,750

5. Aditya Birla Sun Life Short Term Opportunities Fund

An Open ended Income scheme with the objective to generate regular income by investing primarily in investment grade fixed income securities / money market instruments with short to medium term maturities and across the credit spectrum within the universe of investment grade rating.

Aditya Birla Sun Life Short Term Opportunities Fund is a Debt - Short term Bond fund was launched on 9 May 03. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.4% since its launch.  Ranked 18 in Short term Bond category.  Return for 2021 was 3.8% , 2020 was 11.1% and 2019 was 8.5% .

Below is the key information for Aditya Birla Sun Life Short Term Opportunities Fund

Aditya Birla Sun Life Short Term Opportunities Fund
Growth
Launch Date 9 May 03
NAV (19 Jan 22) ₹37.9211 ↑ 0.00   (0.01 %)
Net Assets (Cr) ₹9,449 on 31 Dec 21
Category Debt - Short term Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderate
Expense Ratio 1.09
Sharpe Ratio 0.25
Information Ratio -0.26
Alpha Ratio -0.41
Min Investment 1,000
Min SIP Investment 1,000
Exit Load 0-90 Days (0.5%),90 Days and above(NIL)
Yield to Maturity 5.48%
Effective Maturity 2 Years 5 Months 5 Days
Modified Duration 1 Year 9 Months 4 Days

Growth of 10,000 investment over the years.

DateValue
31 Dec 16₹10,000
31 Dec 17₹10,560
31 Dec 18₹11,247
31 Dec 19₹12,203
31 Dec 20₹13,553
31 Dec 21₹14,073

Aditya Birla Sun Life Short Term Opportunities Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for Aditya Birla Sun Life Short Term Opportunities Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Jan 22

DurationReturns
1 Month 0.1%
3 Month 0.6%
6 Month 1.9%
1 Year 4.2%
3 Year 7.6%
5 Year 6.9%
10 Year
15 Year
Since launch 7.4%
Historical performance (Yearly) on absolute basis
YearReturns
2021 3.8%
2020 11.1%
2019 8.5%
2018 6.5%
2017 5.6%
2016 11.3%
2015 8.4%
2014 11.3%
2013 10.1%
2012 11.1%
Fund Manager information for Aditya Birla Sun Life Short Term Opportunities Fund
NameSinceTenure
Kaustubh Gupta11 Sep 147.23 Yr.
Mohit Sharma6 Aug 201.32 Yr.

Data below for Aditya Birla Sun Life Short Term Opportunities Fund as on 31 Dec 21

Asset Allocation
Asset ClassValue
Cash23.08%
Debt76.92%
Debt Sector Allocation
SectorValue
Corporate45.36%
Government33.41%
Cash Equivalent19.48%
Securitized1.75%
Credit Quality
RatingValue
A0.66%
AA11.76%
AAA87.48%
Below B0.09%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
National Bank For Agriculture And Rural Development
Debentures | -
4%₹429 Cr4,200
5.63% Govt Stock 2026
Sovereign Bonds | -
4%₹419 Cr42,000,000
↑ 3,000,000
6.1% Govt Stock 2031
Sovereign Bonds | -
2%₹250 Cr25,500,000
↑ 6,500,000
Reliance Industries Limited
Debentures | -
2%₹215 Cr2,100
L&T Finance Limited
Debentures | -
2%₹200 Cr1,950
4.62% Govt Stock 2033
Sovereign Bonds | -
2%₹186 Cr18,500,000
08.60 BR Sdl 2026
Sovereign Bonds | -
2%₹175 Cr15,887,000
8.15% Govt Stock 2026
Sovereign Bonds | -
2%₹159 Cr14,500,000
State Bank Of India
Debentures | -
1%₹155 Cr1,454
08.92 MP Sdl 2022
Sovereign Bonds | -
1%₹154 Cr15,000,000

Short Term Debt Fund Taxation

Tax implication on debt funds is computed in the following manner-

Short Term Capital Gains

If the holding period of a debt investment is less than 36 months, then it is classified as a short-term investment and these are taxed as per individual's tax slab.

Long Term Capital Gains

If the holding period of debt investment is more than 36 months, then it is classified as a long-term investment and is taxed at 20% with an indexation benefit.

Capital Gains Investment Holding Gains Taxation
Short Term Capital Gains Less than 36 months As per individual's tax slab
Long Term Capital Gains More than 36 months 20% with indexation benefits

Risks Involved with Short Term Mutual Funds

Alike all the financial securities, Short term debt funds have certain flaws as well. Some of the risks accompanying these funds include-

Risk-In-Short-Term-Debt-Funds

Risk of Rising Inflation

Short term debt funds are ideal having a short term financial goal of one to three years and not for long term. So, the investors who are looking for long term investments should invest in Equity Funds, which offers the benefits of rising inflation while yielding good returns.

Risk of Changing Interest Rates

The change in interest rate in the Economy has a little effect on short term debt funds, though the impact is very marginal. As the tenure of duration is short, the impact of interest rate changes in insignificant. However, investors should always look at the duration or maturity of the fund before making any conclusions. A high duration/maturity exposes the Fund to interest rate risk.

Risk of Credit

Usually, short term debt funds invest in instruments that have a high credit rating and have a safe track record. However, there are times when the asset managing company that is managing the fund defaults, the investor has to take the challenge of managing the risk on his own. So, the investors must keep this in mind and invest wisely. Hence, it is always advisable to look a getting into a fund with a good quality portfolio.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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