Saving solutions comprise of debt mutual funds. These funds invest in fixed income instruments such as government and corporate bonds as well money market instruments.
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Saving Solutions aim to protect your capital while providing stable, tax-efficient returns. The primary intent of our saving solution is to help investors with short investment tenure preserve their money.
Unlike conventional saving instruments, our saving solution schemes seek to provide tax efficient returns with potential liquidity & low risk. The schemes under this solution seek to invest your funds in government-backed securities, AAA corporate bonds, fixed-income products, money market instruments etc.
Short term Fund: Schemes whose average maturity over the last 6 months is between one year and 4-5 years.
Ultra short term: Schemes whose average maturity is less than one year, but which are not liquid schemes.
Liquid: Schemes which do not invest in securities with a residual maturity of more than 91 days.
Gilt (medium and long term): Schemes which invest in government securities and can vary their average maturity.
Gilt (short term): Schemes which invest in government securities whose average maturity over the last six months is between one year and 4.5 years.
Arbitrage: Schemes which seek returns from arbitrage opportunities between equity and derivatives and invest in debt when no arbitrage is possible.
Income: Schemes which can vary their average maturity widely as per the declared objectives; these invest in government securities, money markets, bonds etc.
Saving solutions comprise of debt mutual funds. These funds invest in fixed income instruments such as government and corporate bonds as well money market instruments.
If you are looking for an investment avenue that can help you earn returns at a lower risk and with a lower time frame than equity, then these funds can be the solution for you. They are suited for investors who are looking for relatively fixed returns at lower levels of risk and high liquidity.
By and large, these funds are best suited for investing for short to medium. This can range from 1 day to a year for short term and up to 3-5 years for medium term, depending on thetype of specific debt fund.
Yes, these funds do have scope for capital appreciation. This is possible when interest rates fluctuate in the market. To illustrate, suppose a Debt fund has invested in a bond which has a fixed 9% coupon rate for 3 years, if the interest rate falls in the market – then newer bonds issued would be at lower coupon rate. This would result in a rise in price of the bond which carries a higher rate than the market coupon rate.
Debt funds are less volatile than equity-based funds, yet they do carry some degree of interest rate risk and credit risk. Interest rate risk is the risk associated with reduction in price of debt securities due to changes in market interest rates. Credit risk indicates risk of default of principal repayment – this is impacted by credit quality of the investment.
Gilt funds, which are a type of debt funds investing entirely in government securities. As these are backed and guaranteed by the government, they do not carry any risk of default of principal repayment i.e.: no credit risk. They still however may carry limited interest risk.
Pursuant to amendment to the Finance Bill 2023, any capital gains earned on investments made on or after 1 April 2023, will be added to the investor's income and taxed at the applicable income tax slab rates (plus any applicable surcharge and cess), regardless of the investment holding period.
Please note that investments made on or before March 31, 2023 and held for more than 36 months will be eligible for indexation benefit in taxation. Gains on such investments will be taxed at a rate of 20% (plus applicable surcharge and cess) after taking into account the indexation benefit.