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Short Duration Fund

Short term funds are debt funds that buy the debt securities of companies for a period of 1 to 3 years. These funds mostly take exposure only in quality companies that have a proven record of repaying their loans on time as well as have sufficient cash flows from their business operations to justify the borrowing.

Benefits of Investing in Short Duration Funds:

Less Volatile:

Unlike equity funds, they fluctuate less in a bear market and thus carry less risks and more stability.

Liquidity:

They are highly liquid and easily convertible to cash, thus in times of emergency these bonds can be used for cash requirements.

Suitability:

Investors who want to invest for 1-3 years and are looking for alternatives to bank deposits.

Minimum Investment:

The minimum investment varies from scheme to scheme. It could range between Rs.100/ – to Rs.5,000/ -.

Taxability:

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.

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