Debt Mutual fund

POSTED BY Siddhesh Ayre ON September 20, 2011 5:10 pm COMMENTS (2)


I would like to know about following points –

  1. What are the types of debt mutual funds?
  2. Why should one invest in debt funds instead of bonds(like recent issues by India Infoline) directly?
  3. On which basis should one decide to invest in the various types of debt funds?
  4. What are the tax implications for the same?


2 replies on this article “Debt Mutual fund”

  1. Abhishek says:

    Hi Siddhesh,

    1) Usually Debt Mutual Funds are classified as per the maturity profile (Long Term and Short Term).
    Long Term – Income Fund, Long Term G Sec Funds etc
    Short Term – Liquid Funds, Ultra Short Term/Liquid Plus and Short Term
    The above are broad categories of 100% debt. Even a Hybrid MIP, Fund Of Funds, Gold ETFs fall under Debt Funds.. for taxation purposes

    2) Tax Implication and diversification of credit risk are main reasons

    3) Time horizon and risk appetite to bear interest rate volatility will decide which debt fund is suitable for you.

    4) On the Taxation part for Individuals, there are 2 types only. Difference is the Dividend Distribution Tax (DDT).
    – Liquid Fund – 27% DDT
    – Other Debt Funds – 13.5% DDT (includes MIPs, Gold etf, Fund of Funds)
    STCG (less than 1 year) will be added to your income. LTCG (more than 1 year) 10% without indexation and 20% with indexation, whichever is lower


    1. Hi Abhishek,

      Thank you for the reply.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.