The banking and PSU debt mutual funds are open-ended debt schemes predominantly investing in debt instruments of banks, public sector undertakings and public financial institutions. These schemes generally invest in instruments with reasonably high liquidity and low average maturity.
These schemes are ideal for investors looking for higher returns than bank deposits, with some risk. In the current market situation, these schemes can do very well like the other bond funds.
The minimum investment varies from scheme to scheme. It could range between Rs.100/ – to Rs.5,000/ -.
> If an investor has made an investment in a debt mutual fund and withdraws the amount before 3 years of investment, Short Term Capital Gains Tax would be levied, as per the income tax slab of the investor.
> If an investor withdraws the investment including capital gains post 3 years of investment, 20% Long Term Capital Gains Tax of 20% is levied, with the benefit of indexation.