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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 September 25, 2020 , 2614 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 2020

Some of the best short term debt funds include-

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2019 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
HDFC Short Term Debt Fund Growth ₹23.9034
↓ 0.00
₹13,1542.15.910.88.69.76.26%2Y 9M3Y 9M
UTI Short Term Income Fund Growth ₹22.8947
↓ 0.00
₹1,9471.46.110.53.5-3.95.57%2Y 10M 6D3Y 5M 16D
ICICI Prudential Short Term Fund Growth ₹44.5421
↓ 0.00
₹17,2281.95.810.57.99.75.86%2Y 10M 6D4Y 18D
Axis Short Term Fund Growth ₹23.3167
₹9,3751.65.510.28.29.85.08%2Y 1M 6D2Y 8M 12D
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹35.5704
↑ 0.00
₹4,7693.37.41088.55.82%2Y 6M 4D3Y 1M 24D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 28 Sep 20
*Above is list of best Short Duration funds having AUM/Net Assets above 100 Crore. Sorted on Last 1 Year Return.

1. HDFC Short Term Debt Fund

(Erstwhile HDFC Short Term Opportunities Fund)

To generate regular income through investments in Debt/Money Market Instruments and Government Securities with maturities not exceeding 36 months.

HDFC Short Term Debt Fund is a Debt - Short term Bond fund was launched on 25 Jun 10. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8.9% since its launch.  Ranked 30 in Short term Bond category.  Return for 2019 was 9.7% , 2018 was 7% and 2017 was 6.5% .

Below is the key information for HDFC Short Term Debt Fund

HDFC Short Term Debt Fund
Growth
Launch Date 25 Jun 10
NAV (28 Sep 20) ₹23.9034 ↓ 0.00   (-0.02 %)
Net Assets (Cr) ₹13,154 on 31 Aug 20
Category Debt - Short term Bond
AMC HDFC Asset Management Company Limited
Rating
Risk Moderately Low
Expense Ratio 0.4
Sharpe Ratio 2.17
Information Ratio 0.47
Alpha Ratio -1.14
Min Investment 5,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 6.26%
Effective Maturity 3 Years 9 Months
Modified Duration 2 Years 9 Months

Growth of 10,000 investment over the years.

DateValue
31 Aug 15₹10,000
31 Aug 16₹10,913
31 Aug 17₹11,795
31 Aug 18₹12,444
31 Aug 19₹13,639
31 Aug 20₹15,098

HDFC 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 ₹206,148.
Net Profit of ₹26,148
Invest Now

Returns for HDFC 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 28 Sep 20

DurationReturns
1 Month 0.8%
3 Month 2.1%
6 Month 5.9%
1 Year 10.8%
3 Year 8.6%
5 Year 8.6%
10 Year
15 Year
Since launch 8.9%
Historical performance (Yearly) on absolute basis
YearReturns
2019 9.7%
2018 7%
2017 6.5%
2016 9.3%
2015 8.7%
2014 10.4%
2013 8.4%
2012 10.1%
2011 9.2%
2010
Fund Manager information for HDFC Short Term Debt Fund
NameSinceTenure
Anil Bamboli25 Jun 1010.19 Yr.
Chirag Dagli31 Jul 191.09 Yr.

Data below for HDFC Short Term Debt Fund as on 31 Aug 20

Asset Allocation
Asset ClassValue
Cash7.09%
Debt92.91%
Debt Sector Allocation
SectorValue
Corporate51.61%
Government39.18%
Cash Equivalent6.26%
Securitized2.95%
Credit Quality
RatingValue
A0.84%
AA14.15%
AAA84.96%
Below B0.04%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
5.77% GOI 2030
Sovereign Bonds | -
3%₹370 Cr38,000,000
↑ 35,000,000
Housing Development Finance Corporation Limited
Debentures | -
3%₹361 Cr3,500
↑ 1,000
7.32% Govt Stock 2024
Sovereign Bonds | -
3%₹354 Cr33,000,000
↑ 24,500,000
5.79% Govt Stock 2030
Sovereign Bonds | -
3%₹343 Cr35,000,000
Housing Development Finance Corporation Limited
Debentures | -
2%₹314 Cr3,000
State Bank of India
Debentures | -
2%₹296 Cr2,750
↑ 2,750
Indinfravit Trust
Debentures | -
2%₹293 Cr2,900
State Bank of India
Debentures | -
2%₹262 Cr2,500
↑ 2,500
Rural Electrification Corporation Limited
Debentures | -
2%₹258 Cr2,500
State Bank of India
Debentures | -
2%₹214 Cr2,100
↑ 2,100

2. 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 6.6% since its launch.  Ranked 10 in Short term Bond category.  Return for 2019 was -3.9% , 2018 was 6% and 2017 was 6.1% .

Below is the key information for UTI Short Term Income Fund

UTI Short Term Income Fund
Growth
Launch Date 19 Sep 07
NAV (28 Sep 20) ₹22.8947 ↓ 0.00   (-0.02 %)
Net Assets (Cr) ₹1,947 on 31 Aug 20
Category Debt - Short term Bond
AMC UTI Asset Management Company Ltd
Rating
Risk Moderate
Expense Ratio 0.9
Sharpe Ratio 2.18
Information Ratio -0.72
Alpha Ratio -1.11
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 5.57%
Effective Maturity 3 Years 5 Months 16 Days
Modified Duration 2 Years 10 Months 6 Days

Growth of 10,000 investment over the years.

DateValue
31 Aug 15₹10,000
31 Aug 16₹10,956
31 Aug 17₹11,900
31 Aug 18₹12,450
31 Aug 19₹11,919
31 Aug 20₹13,158

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 28 Sep 20

DurationReturns
1 Month 0.7%
3 Month 1.4%
6 Month 6.1%
1 Year 10.5%
3 Year 3.5%
5 Year 5.6%
10 Year
15 Year
Since launch 6.6%
Historical performance (Yearly) on absolute basis
YearReturns
2019 -3.9%
2018 6%
2017 6.1%
2016 10.1%
2015 8.3%
2014 10.9%
2013 9%
2012 11.2%
2011 10.7%
2010 5.9%
Fund Manager information for UTI Short Term Income Fund
NameSinceTenure
Sudhir Agarwal25 Oct 127.86 Yr.

Data below for UTI Short Term Income Fund as on 31 Aug 20

Asset Allocation
Asset ClassValue
Cash9.77%
Debt90.23%
Debt Sector Allocation
SectorValue
Government65.77%
Corporate28.29%
Cash Equivalent5.94%
Credit Quality
RatingValue
AA9.72%
AAA90.28%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.68% Govt Stock 2023
Sovereign Bonds | -
10%₹189 Cr1,750,000,000
↑ 1,000,000,000
5.22% GOI 2025
Sovereign Bonds | -
8%₹148 Cr1,500,000,000
↑ 1,500,000,000
Housing and Urban Development Corporation Limited (Hudco)
Debentures | -
5%₹105 Cr1,000
↑ 1,000
Grasim Industries Limited
Debentures | -
5%₹101 Cr1,000
5.77% GOI 2030
Sovereign Bonds | -
5%₹93 Cr950,000,000
↓ -50,000,000
7.32% Govt Stock 2024
Sovereign Bonds | -
4%₹80 Cr750,000,000
↑ 250,000,000
6.18% Govt Stock 2024
Sovereign Bonds | -
3%₹67 Cr650,000,000
↓ -350,000,000
8.83% Govt Stock 2023
Sovereign Bonds | -
3%₹56 Cr500,000,000
Reliance Ports and Terminals Limited
Debentures | -
3%₹53 Cr500
↑ 500
7.16% Govt Stock 2023
Sovereign Bonds | -
3%₹53 Cr500,000,000

3. ICICI Prudential Short Term Fund

To generate income through investments in a range of debt and money market instruments of various maturities with a view to maximising income while maintaining the optimum balance of yield, safety and liquidity.

ICICI Prudential Short Term Fund is a Debt - Short term Bond fund was launched on 25 Oct 01. It is a fund with Moderate risk and has given a CAGR/Annualized return of 8.2% since its launch.  Ranked 11 in Short term Bond category.  Return for 2019 was 9.7% , 2018 was 5.8% and 2017 was 5.9% .

Below is the key information for ICICI Prudential Short Term Fund

ICICI Prudential Short Term Fund
Growth
Launch Date 25 Oct 01
NAV (28 Sep 20) ₹44.5421 ↓ 0.00   (0.00 %)
Net Assets (Cr) ₹17,228 on 31 Aug 20
Category Debt - Short term Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.24
Sharpe Ratio 2.12
Information Ratio -0.82
Alpha Ratio -1.28
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-7 Days (0.25%),7 Days and above(NIL)
Yield to Maturity 5.86%
Effective Maturity 4 Years 18 Days
Modified Duration 2 Years 10 Months 6 Days

Growth of 10,000 investment over the years.

DateValue
31 Aug 15₹10,000
31 Aug 16₹11,022
31 Aug 17₹12,006
31 Aug 18₹12,459
31 Aug 19₹13,636
31 Aug 20₹15,033

ICICI Prudential 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 ₹206,148.
Net Profit of ₹26,148
Invest Now

Returns for ICICI Prudential 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 28 Sep 20

DurationReturns
1 Month 0.7%
3 Month 1.9%
6 Month 5.8%
1 Year 10.5%
3 Year 7.9%
5 Year 8.5%
10 Year
15 Year
Since launch 8.2%
Historical performance (Yearly) on absolute basis
YearReturns
2019 9.7%
2018 5.8%
2017 5.9%
2016 11.1%
2015 8%
2014 11.6%
2013 7.2%
2012 9.5%
2011 8.7%
2010 4.4%
Fund Manager information for ICICI Prudential Short Term Fund
NameSinceTenure
Manish Banthia19 Nov 0910.79 Yr.

Data below for ICICI Prudential Short Term Fund as on 31 Aug 20

Asset Allocation
Asset ClassValue
Cash9.5%
Debt90.5%
Debt Sector Allocation
SectorValue
Corporate45.99%
Government43.71%
Cash Equivalent9.35%
Securitized0.95%
Credit Quality
RatingValue
AA17.32%
AAA82.68%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.32% Govt Stock 2024
Sovereign Bonds | -
5%₹884 Cr82,500,000
↓ -6,500,000
7.57% Govt Stock 2033
Sovereign Bonds | -
5%₹835 Cr76,603,900
↓ -5,000,000
6.19% Govt Stock 2034
Sovereign Bonds | -
4%₹718 Cr73,600,000
↑ 14,500,000
5.77% GOI 2030
Sovereign Bonds | -
4%₹609 Cr62,500,000
↑ 62,500,000
6.79% Govt Stock 2027
Sovereign Bonds | -
3%₹482 Cr46,500,000
LIC Housing Finance Limited
Debentures | -
3%₹469 Cr4,474
↑ 4,474
Pipeline Infrastructure Private Limited
Debentures | -
3%₹442 Cr4,129
↑ 4,129
7.59% Govt Stock 2026
Sovereign Bonds | -
2%₹373 Cr34,500,000
7.00% Govt Stock 2021
Sovereign Bonds | -
1%₹253 Cr25,000,000
Reliance Utilities and Power Private Limited
Debentures | -
1%₹250 Cr2,250
↑ 2,250

4. Axis Short Term Fund

To generate stable returns with a low risk strategy while maintaining liquidity through a portfolio comprising of debt and money market instruments. However, there can be no assurance that the investment objective of the scheme will be achieved.

Axis Short Term Fund is a Debt - Short term Bond fund was launched on 22 Jan 10. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8.2% since its launch.  Ranked 26 in Short term Bond category.  Return for 2019 was 9.8% , 2018 was 6.3% and 2017 was 5.9% .

Below is the key information for Axis Short Term Fund

Axis Short Term Fund
Growth
Launch Date 22 Jan 10
NAV (28 Sep 20) ₹23.3167
Net Assets (Cr) ₹9,375 on 31 Aug 20
Category Debt - Short term Bond
AMC Axis Asset Management Company Limited
Rating
Risk Moderately Low
Expense Ratio 0.92
Sharpe Ratio 2.31
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 1,000
Exit Load NIL
Yield to Maturity 5.08%
Effective Maturity 2 Years 8 Months 12 Days
Modified Duration 2 Years 1 Month 6 Days

Growth of 10,000 investment over the years.

DateValue
31 Aug 15₹10,000
31 Aug 16₹10,907
31 Aug 17₹11,791
31 Aug 18₹12,328
31 Aug 19₹13,544
31 Aug 20₹14,907

Axis 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 ₹206,148.
Net Profit of ₹26,148
Invest Now

Returns for Axis 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 28 Sep 20

DurationReturns
1 Month 0.6%
3 Month 1.6%
6 Month 5.5%
1 Year 10.2%
3 Year 8.2%
5 Year 8.3%
10 Year
15 Year
Since launch 8.2%
Historical performance (Yearly) on absolute basis
YearReturns
2019 9.8%
2018 6.3%
2017 5.9%
2016 9.6%
2015 8.1%
2014 10%
2013 7.3%
2012 10.1%
2011 9.2%
2010
Fund Manager information for Axis Short Term Fund
NameSinceTenure
Devang Shah5 Nov 127.83 Yr.

Data below for Axis Short Term Fund as on 31 Aug 20

Asset Allocation
Asset ClassValue
Cash13.13%
Debt86.87%
Debt Sector Allocation
SectorValue
Corporate48.36%
Government39.18%
Cash Equivalent10.45%
Securitized2.01%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Food Corporation of India
Debentures | -
6%₹599 Cr5,550
↑ 5,550
7.42% MH SDL 2022
Sovereign Bonds | -
5%₹504 Cr48,247,500
↑ 48,247,500
5.77% GOI 2030
Sovereign Bonds | -
4%₹356 Cr36,500,000
↑ 36,500,000
Reliance Industries Limited
Debentures | -
4%₹342 Cr3,250
↑ 2,000
Housing Development Finance Corporation Limited
Debentures | -
2%₹214 Cr2,080
↓ -650
6.19% Govt Stock 2034
Sovereign Bonds | -
2%₹193 Cr19,780,300
↓ -500,000
Mahindra & Mahindra Financial Services Limited
Debentures | -
2%₹188 Cr1,850
↑ 1,850
Tata Capital Financial Services Limited
Debentures | -
2%₹186 Cr1,500
↑ 1,500
India Grid Trust
Debentures | -
2%₹179 Cr1,740
↑ 1,740
8.83% Govt Stock 2023
Sovereign Bonds | -
2%₹173 Cr15,525,000

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 7.6% since its launch.  Ranked 18 in Short term Bond category.  Return for 2019 was 8.5% , 2018 was 6.5% and 2017 was 5.6% .

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 (28 Sep 20) ₹35.5704 ↑ 0.00   (0.00 %)
Net Assets (Cr) ₹4,769 on 31 Aug 20
Category Debt - Short term Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderate
Expense Ratio 1.16
Sharpe Ratio 1.31
Information Ratio -0.59
Alpha Ratio -3.34
Min Investment 1,000
Min SIP Investment 1,000
Exit Load 0-90 Days (0.5%),90 Days and above(NIL)
Yield to Maturity 5.82%
Effective Maturity 3 Years 1 Month 24 Days
Modified Duration 2 Years 6 Months 4 Days

Growth of 10,000 investment over the years.

DateValue
31 Aug 15₹10,000
31 Aug 16₹11,064
31 Aug 17₹11,937
31 Aug 18₹12,434
31 Aug 19₹13,638
31 Aug 20₹14,880

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 ₹206,148.
Net Profit of ₹26,148
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 28 Sep 20

DurationReturns
1 Month 1.5%
3 Month 3.3%
6 Month 7.4%
1 Year 10%
3 Year 8%
5 Year 8.5%
10 Year
15 Year
Since launch 7.6%
Historical performance (Yearly) on absolute basis
YearReturns
2019 8.5%
2018 6.5%
2017 5.6%
2016 11.3%
2015 8.4%
2014 11.3%
2013 10.1%
2012 11.1%
2011 9.5%
2010 6%
Fund Manager information for Aditya Birla Sun Life Short Term Opportunities Fund
NameSinceTenure
Kaustubh Gupta11 Sep 145.98 Yr.
Mohit Sharma6 Aug 200.07 Yr.

Data below for Aditya Birla Sun Life Short Term Opportunities Fund as on 31 Aug 20

Asset Allocation
Asset ClassValue
Cash10.33%
Debt89.67%
Debt Sector Allocation
SectorValue
Corporate53.13%
Government38.08%
Cash Equivalent8.8%
Credit Quality
RatingValue
A2.21%
AA7.95%
AAA89.84%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Rural Electrification Corporation Limited
Debentures | -
3%₹143 Cr1,400
5.79% Govt Stock 2030
Sovereign Bonds | -
3%₹137 Cr14,000,000
↑ 4,000,000
5.77% GOI 2030
Sovereign Bonds | -
3%₹136 Cr14,000,000
↑ 14,000,000
7.32% Govt Stock 2024
Sovereign Bonds | -
3%₹134 Cr12,500,000
↑ 2,500,000
7.27% Govt Stock 2026
Sovereign Bonds | -
2%₹107 Cr10,000,000
HDB Financial Services Limited
Debentures | -
2%₹106 Cr850
6.79% Govt Stock 2027
Sovereign Bonds | -
2%₹104 Cr10,000,000
↑ 4,000,000
Power Finance Corporation Limited
Debentures | -
2%₹100 Cr1,000
↑ 1,000
National Bank For Agriculture and Rural Development
Debentures | -
2%₹98 Cr950
↑ 950
Reliance Industries Limited
Debentures | -
2%₹94 Cr900

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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