Gilt Funds: Invest in Government Securities Online

What is a Gilt Fund ?

A Gilt Fund is a type of debt mutual fund that primarily invests in the bonds and debt instruments issued by the government. Since the fund invests in government securities, it has minimal risks.

Advantages of Gilt Funds

Good returns

These funds have the potential to generate attractive returns on your investment which helps in growing your corpus with added stability.

Investment in government securities

Since the portfolio is primarily made up of government securities, you get exposure to some of the most stable debt instruments

Low credit risk

Since the government backs the securities, the credit risk is negligible. Government securities have a proven track record of repayment and do not tend to default.

Taxation Based on Holding Period

Returns taxed as Short-Term Capital Gains (at your income tax rate) if held under 36 months, and as Long-Term Capital Gains (at your applicable income tax bracket) if held for 36 months or more.

Gilt Funds Returns Calculator

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Understanding Gilt Funds

Table of Contents

What are Gilt Funds?What are the features of Gilt Funds?Things to keep in mind when investing in Gilt Funds What are the types of risks that Gilt Funds face?What is the tax implication of Gilt Funds?What are the payout options?

What are Gilt Funds?

A type of open-ended debt mutual fund, a Gilt Fund invests at least 80% of its portfolio in bonds and debt instruments issued by the government. These funds offer stable and attractive returns with limited credit risks.

What are the features of Gilt Funds?

Offers stable returns on investment with minimal credit risk
Get exposure to government securities of varying maturities
There’s no capping on the maximum investment amount
You can get better returns compared to fixed deposits
The funds aim to grow the portfolio through interest earned and also through the rise in the price of the underlying securities

Things to keep in mind when investing in Gilt Funds

Check the expense ratio of such schemes. A high ratio eats into the fund’s returns and should be avoided

Compare Gilt Funds on their returns. A fund with the highest return is better

Gilt Funds are better for medium to long-term investment avenue. Invest in these funds with time on hand

Invest in Gilt Funds based on your financial goals

What are the types of risks that Gilt Funds face?

Interest rate risk

Risk of rising interest rates, which reduces the value of debt instruments
Inflation risk

Risk of inflation reducing the returns from the debt fund
Liquidity risk

Risk of not being able to trade in debt instruments

What is the tax implication of Gilt Funds?

Returns earned are taxed at your income tax slab rates
Dividends earned, if any, are taxed at your income tax slab rates

What are the payout options?

Dividend option

Earn dividends on your investment at regular intervals
Growth option

Accumulate the returns over the investment tenure and get a lump sum amount on redemption

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FAQs On Gilt Funds

Gilt Funds are a type of debt mutual funds that invest majorly in government securities. The risk of non-payment of interest or principal is none with Gilt Funds. However, they do get affected by interest rate movements.

While choosing a Gilt Fund, you need to consider your financial goals and their timelines, taxation, expense ratio, and risk-return ratio.

Gilt Funds are required to invest a minimum of 80% of their portfolios in government-issued debt instruments.

Gilt Funds majorly carry interest rate risk. The other important risk they carry is duration risk or the higher risk that comes with longer holding duration.

Gilt Funds have delivered 8.64% p.a. returns on an average.