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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 April 14, 2021 , 3432 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 2021

Some of the best short term debt funds include-

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2020 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹36.6615
↓ -0.01
₹7,6500.6210.78.211.15.47%1Y 9M 14D2Y 1M 20D
ICICI Prudential Short Term Fund Growth ₹45.9669
↓ 0.00
₹23,7150.52.29.58.210.65.11%1Y 7M 10D2Y 4M 24D
HDFC Short Term Debt Fund Growth ₹24.6397
↓ -0.01
₹17,3980.529.58.6115.62%2Y 2M 17D3Y 2D
UTI Short Term Income Fund Growth ₹23.5069
↓ 0.00
₹3,4490.61.78.73.510.54.92%1Y 3M 22D1Y 5M 6D
BNP Paribas Short Term Fund Growth ₹24.5701
↑ 0.00
₹4420.51.78.67.310.15.24%2Y 14D2Y 3M 26D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 16 Apr 21
*Above is list of best Short Duration funds having AUM/Net Assets above 100 Crore. Sorted on Last 1 Year Return.

1. 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 7.5% since its launch.  Ranked 18 in Short term Bond category.  Return for 2020 was 11.1% , 2019 was 8.5% and 2018 was 6.5% .

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 (16 Apr 21) ₹36.6615 ↓ -0.01   (-0.03 %)
Net Assets (Cr) ₹7,650 on 28 Feb 21
Category Debt - Short term Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderate
Expense Ratio 1.13
Sharpe Ratio 1.63
Information Ratio -0.12
Alpha Ratio 1.02
Min Investment 1,000
Min SIP Investment 1,000
Exit Load 0-90 Days (0.5%),90 Days and above(NIL)
Yield to Maturity 5.47%
Effective Maturity 2 Years 1 Month 20 Days
Modified Duration 1 Year 9 Months 14 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 16₹10,000
31 Mar 17₹10,943
31 Mar 18₹11,634
31 Mar 19₹12,462
31 Mar 20₹13,380
31 Mar 21₹14,746

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 ₹203,125.
Net Profit of ₹23,125
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 16 Apr 21

DurationReturns
1 Month 1.1%
3 Month 0.6%
6 Month 2%
1 Year 10.7%
3 Year 8.2%
5 Year 8%
10 Year
15 Year
Since launch 7.5%
Historical performance (Yearly) on absolute basis
YearReturns
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%
2011 9.5%
Fund Manager information for Aditya Birla Sun Life Short Term Opportunities Fund
NameSinceTenure
Kaustubh Gupta11 Sep 146.56 Yr.
Mohit Sharma6 Aug 200.65 Yr.

Data below for Aditya Birla Sun Life Short Term Opportunities Fund as on 28 Feb 21

Asset Allocation
Asset ClassValue
Cash17.08%
Debt82.92%
Debt Sector Allocation
SectorValue
Corporate54.67%
Government31.79%
Cash Equivalent13.54%
Credit Quality
RatingValue
A1.1%
AA20.19%
AAA78.57%
Below B0.13%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
8.60% Bihar SDL 2026
Sovereign Bonds | -
2%₹174 Cr15,887,000
Reliance Industries Limited
Debentures | -
2%₹165 Cr1,600
8.15% Govt Stock 2026
Sovereign Bonds | -
2%₹159 Cr14,500,000
State Bank Of India
Debentures | -
2%₹152 Cr1,500
National Bank For Agriculture And Rural Development
Debentures | -
2%₹150 Cr1,500
Rural Electrification Corporation Limited
Debentures | -
2%₹142 Cr1,400
Power Finance Corporation Limited
Debentures | -
2%₹124 Cr1,200
Cholamandalam Investment And Fin. Co. Ltd
Debentures | -
2%₹124 Cr1,250
Embassy Office Parks REIT
Debentures | -
2%₹124 Cr1,250
6.90% Oil Mktg Cos GOI Sb 2026
Domestic Bonds | -
1%₹106 Cr10,397,000

2. 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 8.1% since its launch.  Ranked 11 in Short term Bond category.  Return for 2020 was 10.6% , 2019 was 9.7% and 2018 was 5.8% .

Below is the key information for ICICI Prudential Short Term Fund

ICICI Prudential Short Term Fund
Growth
Launch Date 25 Oct 01
NAV (16 Apr 21) ₹45.9669 ↓ 0.00   (-0.01 %)
Net Assets (Cr) ₹23,715 on 28 Feb 21
Category Debt - Short term Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.15
Sharpe Ratio 1.6
Information Ratio -0.18
Alpha Ratio 0.38
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-7 Days (0.25%),7 Days and above(NIL)
Yield to Maturity 5.11%
Effective Maturity 2 Years 4 Months 24 Days
Modified Duration 1 Year 7 Months 10 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 16₹10,000
31 Mar 17₹11,024
31 Mar 18₹11,693
31 Mar 19₹12,477
31 Mar 20₹13,623
31 Mar 21₹14,817

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 16 Apr 21

DurationReturns
1 Month 0.9%
3 Month 0.5%
6 Month 2.2%
1 Year 9.5%
3 Year 8.2%
5 Year 8%
10 Year
15 Year
Since launch 8.1%
Historical performance (Yearly) on absolute basis
YearReturns
2020 10.6%
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%
Fund Manager information for ICICI Prudential Short Term Fund
NameSinceTenure
Manish Banthia19 Nov 0911.37 Yr.
Nikhil Kabra29 Dec 200.25 Yr.

Data below for ICICI Prudential Short Term Fund as on 28 Feb 21

Asset Allocation
Asset ClassValue
Cash24.83%
Debt75.17%
Debt Sector Allocation
SectorValue
Corporate44.22%
Government35.28%
Cash Equivalent19.8%
Securitized0.69%
Credit Quality
RatingValue
AA17.72%
AAA82.28%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.94% Govt Stock 2021
Sovereign Bonds | -
4%₹1,004 Cr99,333,300
182 DTB 19082021
Sovereign Bonds | -
4%₹984 Cr100,000,000
↑ 100,000,000
6.22% Govt Stock 2035
Sovereign Bonds | -
4%₹957 Cr101,000,000
↑ 22,000,000
National Bank For Agriculture And Rural Development
Debentures | -
4%₹898 Cr9,000
↑ 500
Pipeline Infrastructure Private Limited
Debentures | -
2%₹444 Cr4,129
Housing Development Finance Corporation Limited
Debentures | -
2%₹426 Cr4,096
↑ 250
6.79% Govt Stock 2027
Sovereign Bonds | -
2%₹422 Cr41,000,000
GOVT STOCK
Sovereign Bonds | -
2%₹383 Cr38,000,000
GOI Floating Rate Bond 2024
Sovereign Bonds | -
2%₹381 Cr38,500,000
Housing Development Finance Corporation Limited
Debentures | -
1%₹328 Cr3,250
↑ 2,750

3. 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 8.7% since its launch.  Ranked 30 in Short term Bond category.  Return for 2020 was 11% , 2019 was 9.7% and 2018 was 7% .

Below is the key information for HDFC Short Term Debt Fund

HDFC Short Term Debt Fund
Growth
Launch Date 25 Jun 10
NAV (16 Apr 21) ₹24.6397 ↓ -0.01   (-0.03 %)
Net Assets (Cr) ₹17,398 on 28 Feb 21
Category Debt - Short term Bond
AMC HDFC Asset Management Company Limited
Rating
Risk Moderately Low
Expense Ratio 0.4
Sharpe Ratio 1.4
Information Ratio 0.28
Alpha Ratio -0.14
Min Investment 5,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 5.62%
Effective Maturity 3 Years 2 Days
Modified Duration 2 Years 2 Months 17 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 16₹10,000
31 Mar 17₹10,889
31 Mar 18₹11,607
31 Mar 19₹12,494
31 Mar 20₹13,705
31 Mar 21₹14,871

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 16 Apr 21

DurationReturns
1 Month 1%
3 Month 0.5%
6 Month 2%
1 Year 9.5%
3 Year 8.6%
5 Year 8.2%
10 Year
15 Year
Since launch 8.7%
Historical performance (Yearly) on absolute basis
YearReturns
2020 11%
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%
Fund Manager information for HDFC Short Term Debt Fund
NameSinceTenure
Anil Bamboli25 Jun 1010.77 Yr.
Anand Laddha21 Oct 200.44 Yr.

Data below for HDFC Short Term Debt Fund as on 28 Feb 21

Asset Allocation
Asset ClassValue
Cash17.83%
Debt82.17%
Debt Sector Allocation
SectorValue
Corporate49.87%
Government32.8%
Cash Equivalent15.71%
Securitized1.62%
Credit Quality
RatingValue
AA18.17%
AAA81.83%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
5.77% GOI 2030
Sovereign Bonds | -
2%₹370 Cr38,500,000
↓ -41,000,000
Housing Development Finance Corporation Limited
Debentures | -
2%₹359 Cr3,500
6.79% Govt Stock 2027
Sovereign Bonds | -
2%₹314 Cr30,500,000
Housing Development Finance Corporation Limited
Debentures | -
2%₹311 Cr3,000
Indinfravit Trust
Debentures | -
2%₹293 Cr2,900
State Bank of India
Debentures | -
2%₹290 Cr2,750
State Bank Of India
Debentures | -
2%₹278 Cr2,800
State Bank of India
Debentures | -
1%₹260 Cr2,500
Rural Electrification Corporation Limited
Debentures | -
1%₹257 Cr2,500
Motherson Sumi Systems Limited
Debentures | -
1%₹250 Cr2,500

4. 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 6.5% since its launch.  Ranked 10 in Short term Bond category.  Return for 2020 was 10.5% , 2019 was -3.9% and 2018 was 6% .

Below is the key information for UTI Short Term Income Fund

UTI Short Term Income Fund
Growth
Launch Date 19 Sep 07
NAV (16 Apr 21) ₹23.5069 ↓ 0.00   (0.00 %)
Net Assets (Cr) ₹3,449 on 28 Feb 21
Category Debt - Short term Bond
AMC UTI Asset Management Company Ltd
Rating
Risk Moderate
Expense Ratio 0.82
Sharpe Ratio 1.46
Information Ratio -0.72
Alpha Ratio 0.06
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 4.92%
Effective Maturity 1 Year 5 Months 6 Days
Modified Duration 1 Year 3 Months 22 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 16₹10,000
31 Mar 17₹10,975
31 Mar 18₹11,627
31 Mar 19₹12,391
31 Mar 20₹11,908
31 Mar 21₹12,911

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 16 Apr 21

DurationReturns
1 Month 0.8%
3 Month 0.6%
6 Month 1.7%
1 Year 8.7%
3 Year 3.5%
5 Year 5.2%
10 Year
15 Year
Since launch 6.5%
Historical performance (Yearly) on absolute basis
YearReturns
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%
2011 10.7%
Fund Manager information for UTI Short Term Income Fund
NameSinceTenure
Sudhir Agarwal25 Oct 128.44 Yr.

Data below for UTI Short Term Income Fund as on 28 Feb 21

Asset Allocation
Asset ClassValue
Cash39.65%
Debt60.35%
Debt Sector Allocation
SectorValue
Corporate34.15%
Cash Equivalent33.31%
Government30.41%
Securitized2.14%
Credit Quality
RatingValue
AA11.53%
AAA88.47%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
91 DTB 29042021
Sovereign Bonds | -
6%₹199 Cr2,000,000,000
91 DTB 22042021
Sovereign Bonds | -
5%₹159 Cr1,600,000,000
Food Corporation of India
Debentures | -
5%₹158 Cr1,500
Bajaj Finance Limited
Debentures | -
3%₹109 Cr1,100
↑ 1,100
Housing and Urban Development Corporation Limited (Hudco)
Debentures | -
3%₹103 Cr1,000
Housing Development Finance Corporation Limited
Debentures | -
3%₹100 Cr1,000
Hindustan Petroleum Corporation Limited
Debentures | -
3%₹99 Cr1,000
364 DTB 17022022
Sovereign Bonds | -
3%₹97 Cr1,000,000,000
↑ 1,000,000,000
India Grid Trust
Unlisted bonds | -
2%₹74 Cr750
Cholamandalam Investment And Fin. Co. Ltd (Cholamandalam Dbs Finance Ltd)
Debentures | -
2%₹69 Cr700

5. BNP Paribas Short Term Fund

(Erstwhile BNP Paribas Short Term Income Fund)

The primary objective of the Scheme is to provide income consistent with the prudent risk from a portfolio comprising various debt and money market instruments. However, there can be no assurance that the investment objective of the Scheme will be achieved. The Scheme / Plan(s) do not guarantee / indicate any returns.

BNP Paribas Short Term Fund is a Debt - Short term Bond fund was launched on 13 Sep 04. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 5.6% since its launch.  Ranked 41 in Short term Bond category.  Return for 2020 was 10.1% , 2019 was 6.9% and 2018 was 6.6% .

Below is the key information for BNP Paribas Short Term Fund

BNP Paribas Short Term Fund
Growth
Launch Date 13 Sep 04
NAV (16 Apr 21) ₹24.5701 ↑ 0.00   (0.00 %)
Net Assets (Cr) ₹442 on 28 Feb 21
Category Debt - Short term Bond
AMC BNP Paribas Asset Mgmt India Pvt. Ltd
Rating
Risk Moderately Low
Expense Ratio 1.22
Sharpe Ratio 1.07
Information Ratio -0.76
Alpha Ratio -1.01
Min Investment 5,000
Min SIP Investment 300
Exit Load NIL
Yield to Maturity 5.24%
Effective Maturity 2 Years 3 Months 26 Days
Modified Duration 2 Years 14 Days

Growth of 10,000 investment over the years.

DateValue
31 Mar 16₹10,000
31 Mar 17₹10,852
31 Mar 18₹11,550
31 Mar 19₹12,379
31 Mar 20₹13,186
31 Mar 21₹14,260

BNP Paribas 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 ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for BNP Paribas 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 16 Apr 21

DurationReturns
1 Month 0.9%
3 Month 0.5%
6 Month 1.7%
1 Year 8.6%
3 Year 7.3%
5 Year 7.3%
10 Year
15 Year
Since launch 5.6%
Historical performance (Yearly) on absolute basis
YearReturns
2020 10.1%
2019 6.9%
2018 6.6%
2017 5.9%
2016 9.3%
2015 8.1%
2014 10%
2013 7.9%
2012 9.8%
2011 8.8%
Fund Manager information for BNP Paribas Short Term Fund
NameSinceTenure
Mayank Prakash21 Sep 155.53 Yr.
Vikram Pamnani27 Dec 173.26 Yr.

Data below for BNP Paribas Short Term Fund as on 28 Feb 21

Asset Allocation
Asset ClassValue
Cash14.19%
Debt85.81%
Debt Sector Allocation
SectorValue
Corporate47.02%
Government38.8%
Cash Equivalent14.19%
Credit Quality
RatingValue
AA15.51%
AAA84.49%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.32% Govt Stock 2024
Sovereign Bonds | -
12%₹53 Cr5,000,000
↑ 5,000,000
Oil& Natural Gas Corporation Limited
Debentures | -
9%₹39 Cr400
Indian Railway Finance Corporation Limited
Debentures | -
7%₹32 Cr300
Reliance Industries Limited
Debentures | -
7%₹31 Cr300
↑ 300
6.18% Govt Stock 2024
Sovereign Bonds | -
7%₹31 Cr3,000,000
↓ -1,000,000
Reliance Utilities and Power Private Limited
Debentures | -
6%₹27 Cr250
Muthoot Finance Limited
Debentures | -
6%₹25 Cr250,000
Cholamandalam Investment And Fin. Co. Ltd (Cholamandalam Dbs Finance Ltd)
Debentures | -
6%₹25 Cr250
Housing Development Finance Corporation Limited
Debentures | -
5%₹20 Cr200
↓ -100
6.30% Govt Stock 2023
Sovereign Bonds | -
3%₹15 Cr1,500,000
↑ 1,000,000

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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