Gilt Mutual Funds

• 
  IDBI Gilt Fund

  Debt | 1

  1.7%

  32.4%

  13.3%

  1Y

  3Y

  5Y
• 
  Edelweiss Govt Securities Fund

  Debt | 5

  4.3%

  6.8%

  8.2%

  1Y

  3Y

  5Y
• 
  ICICI Pru Gilt Fund

  Debt | 5

  6.3%

  6.7%

  8.4%

  1Y

  3Y

  5Y
• 
  Kotak Gilt – Invest Plan – Direct Growth

  Debt | 4

  5.2%

  6.3%

  8.4%

  1Y

  3Y

  5Y
• 
  Kotak Gilt Invest – PF & Trust Plan – Direct Growth

  Debt | 4

  5.2%

  6.3%

  8.4%

  1Y

  3Y

  5Y
• 
  SBI Magnum Gilt Fund

  Debt | 5

  5.7%

  6.1%

  8.3%

  1Y

  3Y

  5Y
• 
  Aditya Birla SL Govt Securities Fund

  Debt | 3

  3.6%

  6.0%

  8.0%

  1Y

  3Y

  5Y
• 
  DSP G-Sec Fund

  Debt | 4

  4.4%

  5.9%

  8.6%

  1Y

  3Y

  5Y
• 
  AXIS Gilt Fund

  Debt | 4

  4.0%

  5.9%

  7.9%

  1Y

  3Y

  5Y
• 
  Bandhan G Sec Fund

  Debt | 2

  2.5%

  5.8%

  8.5%

  1Y

  3Y

  5Y
• 
  Nippon India GSF – Dir-Defined Maturity Date

  Debt | 5

  4.4%

  5.5%

  8.3%

  1Y

  3Y

  5Y
• 
  Nippon India GSF – Dir-Auto Annual Reinvest

  Debt

  4.4%

  5.5%

  8.3%

  1Y

  3Y

  5Y
• 
  Nippon India GSF – Direct Growth

  Debt | 3

  4.4%

  5.5%

  8.3%

  1Y

  3Y

  5Y
• 
  HSBC Gilt Fund

  Debt | 3

  5.0%

  5.4%

  7.1%

  1Y

  3Y

  5Y
• 
  PGIM India Gilt Fund

  Debt | 3

  4.2%

  5.3%

  7.0%

  1Y

  3Y

  5Y
• 
  Canara Robeco Gilt Fund

  Debt | 3

  4.3%

  5.1%

  7.0%

  1Y

  3Y

  5Y
• 
  UTI-Gilt Fund

  Debt | 3

  5.0%

  5.0%

  7.3%

  1Y

  3Y

  5Y
• 
  HDFC Gilt Fund

  Debt | 2

  3.6%

  4.9%

  6.4%

  1Y

  3Y

  5Y
• 
  Baroda BNP Paribas Gilt Fund

  Debt | 2

  3.7%

  4.9%

  6.8%

  1Y

  3Y

  5Y
• 
  LIC MF G-Sec Fund

  Debt | 3

  3.3%

  4.9%

  7.7%

  1Y

  3Y

  5Y
• 
  Tata Gilt Securities Fund

  Debt | 2

  5.2%

  4.8%

  6.9%

  1Y

  3Y

  5Y
• 
  Invesco India Gilt Fund

  Debt | 1

  4.9%

  4.2%

  6.7%

  1Y

  3Y

  5Y
• 
  Franklin India G-Sec Fund

  Debt | 2

  3.5%

  4.1%

  6.3%

  1Y

  3Y

  5Y
• 
  Union Gilt Fund

  Debt

  -

  -

  -

  1Y

  3Y

  5Y
• 
  Quant Gilt Fund

  Debt

  -

  -

  -

  1Y

  3Y

  5Y

Who Should Invest in Gilt Mutual Funds?

Here is a list of investors who should invest in Gilt Funds:

• Investors who want a low-risk investment are content to leave their capital in Gilt funds for a long time. Investors planning for the long term: Like a savings account, fixed deposits, and recurring deposits, Gilt funds have a good track record of lower risk with higher returns than other investment options. Gilt funds can also be used as an additional source of income by topping up your monthly SIPs over long periods of time.
• Investors looking to protect their capital, especially in uncertain economic times or when the markets are volatile.
• Investors who have a large portfolio so as not to put a large percentage of their capital in one fund.
• Investors who like to diversify their portfolio.
• Investors looking for a portfolio that can be actively managed, with buy and sell decisions taken on a regular basis.
• Investors who have limited investment time and a set goal: Gilt funds have been one of the preferred investments for long-term goals. Therefore, they are an ideal choice for investors who want to invest on a regular basis. Being a debt instrument, you need not worry about the equity markets being volatile.
•  Investors who don't want to worry about issues like market timing: Gilt funds are an ideal option for investors that do not want to worry about timing the markets but rather would like an assured return.

Features of Gilt Mutual Funds:

• Gilt funds have features like those of fixed deposits and recurring deposits. However, unlike fixed deposits or recurring deposits, gilts do not pay the interest during the period between the date of subscription and maturity.
• The interest on gilts is levied tax-free when invested for a minimum period (five years) and a maximum period (ten years). The interest rate paid by the government on gilts varies from year to year from 1% up to 7%. Gilt fund returns are also subject to inflation so that investors get more income every year as prices continue to rise. This increase in yield means that gilt funds tend to outpace fixed deposit returns over a certain period of time.
• Payment of interest on gilt funds is made at maturity.
• During the life of a gilt, the value of the security held by an investor typically varies from -10% to +15%. The total return over a period will depend on the interest rate paid by the government and other factors such as market volatility.
• Gilt funds are also known as variable and inflation-linked securities.

Factors to consider while investing in Gilt Funds

Here is a list of factors you can consider before investing in Gilt funds.

Risk

Before selecting a gilt fund for investments, you must consider your risk appetite and associated risk. Gilt funds are liquid instruments that come with minimal risk. This is because these funds are floated in the market by the Government. The Government tries its best to fulfil the obligations of the funds. While there are no credit risks, gilt funds come with interest rate risks. 

When the interest rates increase for the funds, the NAV tends to fall sharply, impacting the fund’s performance. 

Returns

Returns are another factor that you must consider before picking a gilt fund for investment. The interest rates of a gilt fund can go up to 12%. However, the interest income is not guaranteed, and the rate keeps fluctuating. Therefore, you should try to invest in gilt funds when the interest rates are coming down.

The best thing about investing in gilt funds is that during an economic slump, it delivers decent returns, sometimes even greater than equity funds.

Cost

Gilt funds come with an expense ratio. You need to pay an annual fee to compensate the fund managers. You must check a gilt fund’s operating cost before investing in it. As per SEBI, the cost cannot go beyond 2.25%. However, it might change depending on the investment strategy deployed by the fund manager. 

Horizon of Investments

Most gilt funds are medium and long-term funds. On average, the maturity period of a gilt fund varies from 3 years to 5 years. Therefore, these funds might not be ideal if you are looking for short-term gains. You must have a horizon of 3 to 5 years to invest in these funds.

Financial Goals

You need to set your financial goals before investing in gilt funds. If you are looking for high returns, equity funds would be your better choice. However, if you want a wealth gain over the medium term, you can invest in gilt funds. You can bank on the interest rate volatility and hope the market will favour you. Also, if safe investments are your priority, you must invest in a gilt fund.

Taxes

Taxes have a significant impact on your capital gains. The tax rate depends on the duration for which you hold the security. Gilt funds promise short-term capital gains, so you must pay the taxes accordingly. Also, if you hold the fund for more than three years, a long-term capital gains tax of 20% will be applicable.

Taxability of Gilt Funds

• Gilt funds are considered capital asset that is not liable to income tax. This means that investors need not file any tax returns every year on their investment in gilts.
• The interest earned on gilt funds is also tax-free if invested for a minimum period of five years and a maximum period of 10 years. Moreover, the interest earned on gilt funds remains exempt from Income-tax (I-T) when the investment is held for a period of five or more years.
• If an investor does not invest in Gilt funds for a minimum of five years, then such earnings are considered other income and subject to tax at the applicable rate.
• The redemption value of Gilt funds is not included in the income of the investor and hence is not liable to I-T. However, if an individual invests in a gilt fund for less than five years, but the fund maintains an average maturity of more than five years, then such earnings are subject to tax at the applicable rate.

Risks Involved With Gilt Funds

1) Gilt funds carry risks similar to that of corporate securities. These include the risk of default and interest rate risks.

2) Gilt funds are subjected to taxation by the Income Tax Act. Investors would be eligible for deduction under section 80C or any other applicable sections up to 50% of their total income, thus making it cost-effective in the long run.

3) Gilt funds are subjected to capital gains tax if they are sold before maturity. They can be sold before the maturity date only if one incurs a loss on them, whereas there is a lock-in period of 3 years from the date of allotment, which prohibits early withdrawal.

4) Gilt funds are susceptible to interest rate movements in the economy. Therefore, a rise in the interest rates would lead to a fall in the value of gilts. However, the impact can be less when compared to corporate bonds since the Government of India backs these funds.

5) From time to time, some other risks can result from a change of economic environments created by falling stock markets and other macro factors, which affect gilt fund investments as well.

Advantages of Gilt Funds

1) High Liquidity: Compared to Debt instruments like Treasury Bills and Fixed Deposits, Gilt funds offer better liquidity than similar duration instruments. In addition, since gilts do not represent interest payments at the time of maturity, they are highly liquid investments.

2) Tax Exempt: Gilt funds are exempt from tax, whereas T-Bills are taxable. Thus, even if one has higher tax liability on their income, the gilt funds can invest in tax-saving assets, like fixed deposits and recurring deposits.

Nascent India offers a range of debt instruments, like Gilt funds. We have detailed the salient features of a few schemes listed in this article:

3) Interest rate: Gilt funds are typically fixed-term instruments with a maturity period of 10 years or more. An investment in gilt funds is usually made for a fixed-term period of 10 years or more.

4) Maturity Period: The maturity period depends on the term lengths offered by the state governments and some other issues related to coupon rates, Gilt funds return, etc.

Best Gilt Funds

There are several gilt funds available for investments. You need to read about them carefully and then make a choice. Here are some of the best-gilt funds with a reasonable growth rate and excellent investment potential: 

Edelweiss Government Securities Fund Direct-Growth

The Edelweiss Government Securities Fund Direct-Growth fund is a gilt fund with consistent returns. The fund’s assets under management (AUM) stand at INR 107 Crores as of 16th August 2022. The fund comes with moderate risk and is relatively stable compared to the other funds in the category. The Government of India and the Kerala State Government have a significant share of the holdings. The debt is allocated to the Sovereign and other debts. The fund’s expense ratio is 0.69% and has a stamp duty of 0.005%.

• Minimum investment: INR 5,000 if a lump sum payment is made, INR 500 for SIPs
• Fund’s performance: In the last year, the returns on the fund have been 3.7%. It has provided an annualized return of 6.8% in the last three years. Every five years, the investment grows by 20.04%. Currently, the Net asset value of the fund is INR 20.80. 

SBI Magnum Gilt Fund Direct-Growth

The Magnum Gilt Fund by SBI is a debt fund with a low to moderate risk. The size of the fund is INR 3,539.18 crores. The fund’s major holdings are with the Reserve bank of India and the Government of India. The fund’s assets are invested in the financial and sovereign sectors. This gilt fund has an expense ratio of 0.46%, and the tax applicable will depend on your income slab if you sell it before three years. However, the tax reduces substantially if you hold the fund beyond three years. Dinesh Ahuja has been the fund manager of this gilt fund since 2013.

• Minimum investment: INR 5,000 if a lump sum investment is made, INR 500 for SIPs.
• Fund’s performance: The 1-year return for the fund has been 3.1%. The annualized returns for three years are 6.3% for the fund. If you keep investing in the fund for five years, your investments will yield a return of 18.48%. The performance has remained good in the debt funds category.

ICICI Prudential Gilt Fund Direct Plan-Growth

The Prudential Gilt Fund by ICICI has an AUM of INR 2,360 crores as on 16th August 2022. The best thing about investing in this gilt fund is that the risk ranges between low to moderate. It is one of the best-performing funds in the category. The current NAV of the fund is INR 86.28. Almost all the holdings of the fund are with the Government of India. Also, the sector of investments is Sovereign.

The annualized returns of this fund are higher than its category average. The expense ratio of the plan is 0.56%. The tax will depend on your income slab if you liquidate the fund before three years. However, if you hold it for more than three years, a flat rate of 20% will be applicable. 

• Minimum investment: INR 5,000 for a lump sum, INR 1,000 for SIPs
• Fund’s performance: The fund performs better than the other funds in the same category. The one-year annualized return of this fund is 3.8%. The 3-year annualized return stands at 6.9%. Even the five-year annualized return rate is 6.8%. Hence, your money will increase by 18.75% in the next five years. 

DSP Government Securities Direct Plan-Growth

With an AUM of INR 404 crores as on 16th August 2022, this gilt fund by DSP is a good investment if you are looking for a medium to long-term wealth accumulation. The risk associated with the fund ranges between low to moderate. The NAV of the fund as on 16th August 2022 is INR 80.43. The fund yields an annualized return of 3.2%, and the three-year annualized return of the fund is 6.8%. This increases o 7.4% if you are considering 5-year annualized returns. 

Most of the holdings are either with the Government of India or the Reserve bank of India. The investments are made in the Sovereign and the financial sector. The fund’s expense ratio is 0.54%, and regular tax rates apply to short-term gains.

• Minimum investment: INR 500 for both lump sum and SIPs
• Fund’s performance: The fund has given an annualized return of 6.82% in the last three years. The return in the last five years has been 7.42%. 

IDFC Government Securities Investment Plan Direct-Growth

The Government Securities Investment Plan by IDFC has an AUM of INR 1,387 crores as on 16th August 2022. This debt fund comes with moderate risk and has a NAV of INR 30.31. All the holdings of the fund are with the Government of India. The fund reps its returns from the sovereign sector.

The Sharpe Ratio of the fund is 0.77, and it has constantly generated more returns than the benchmark fund. The fund’s expense ratio is 0.62%, taxed like a regular gilt fund. Suyash Choudhary has managed the fund since 2013.

• Minimum investment: INR 5,000 for a lump sum, INR 1,000 for SIP
• Fund’s performance: The fund has performed better than its benchmark fund, i.e., CRISIL Dynamic Gilt Index. The annualized return of the gilt fund for the past year is 2.2%. The 3-year and 5-year annualized return rates are 6.5% and 7.4%, respectively. In five years, your money will grow by 19.23%. 

Axis Gilt Fund Direct Plan-Growth

The Axis Gilt Fund is one of the best debt funds. It comes with moderate risk and gives stable returns in the long run. This gilt fund has assets worth INR 123.36 Crores under it. The current NAV of the fund is INR 21.59. The fund has yielded a 3.1% annualized return in the last year. The annualized return rate for the last five years is 6.8%. The Government of India, the Reserve Bank of India, and the Haryana State have major holdings in the fund.

The earnings of the fund come from the Sovereign and the financial sector. The fund has an alpha of 1.98, which is considered quite good.

• Minimum investment: INR 5,000 for a lump sum and INR 1,000 for SIP
• Fund’s performance: The fund has been almost consistent for years now. Your money will grow by 18.48% in 5 years if you invest in this gilt fund. The annualized 3-year return of 6.41% and the 5-year return of 6.76% are considered good in the category.

Aditya Birla Sun Life Government Securities Fund Direct Plan-Growth

Aditya Birla Sun Life has some of the best mutual funds. The Government Securities Fund is one of them. The assets under management for this fund are INR 1,213 crores as on 16th August 2022. You can invest in this gilt fund if you have a moderate risk appetite. The current NAV is INR 69.69. This gilt fund increases wealth accumulation by 18.39% in 5 years.

The Government of India, Tamil Nadu State, Maharashtra State, Gujarat State, Rajasthan State, Madhya Pradesh State, and Karnataka State have the fund’s major holdings. The sector where the fund is invested is sovereign and others.

• Minimum investment: INR 1,000 for both lump sum and SIP
• Fund’s performance: This debt category fund has generated an annualized 3-year return of 6.24% and an annualized 5-year return of 6.84%.

LIC MF Government Securities Fund Direct-Growth

The Government Securities Mutual Fund has a moderate risk and a high alpha. In the last three years, it has generated more returns than its benchmark fund, i.e., the NIFTY All Duration G-Sec Index.

However, the AUM of the fund is INR 55 crores, which is relatively less than the other funds in the category. The expense ratio stands at 0.76%, which is relatively high compared to the peer funds. The Government of India, the Haryana State, and the Reserve Bank of India have significant holdings in this gilt fund.

• Minimum investment: INR 10,000 for a lump sum, INR 1,000 for SIP
• Fund’s performance: The mutual debt fund has generated annualized returns of 5.61% and 6.73% for 3 and 5 years, respectively. 

Kotak Gilt Investment PF & Trust Direct Growth

Kotak has stable gilt funds, and the Investment PF and Trust Growth fund are among them. The fund’s risk ranges from moderate to high but guarantees stable returns. The NAV is INR 88.21 as on 16th August 2022, and the AUM is INR 1674,29 crores. All the holdings of the fund are with the Government of India. Hence, the investments are earned from the sovereign sector. 

The expense ratio is 0.4%, and long-term capital gains taxes are applicable on the interest earned if the fund is held for more than three years.

• Minimum investment: INR 5,000 for a lump sum investment, INR 1,000 for SIP
• Fund’s performance: The one-year annualized return of the fund is 0.04% higher than the category average. Also, the three-year annualized return for the fund is 6.2%. The investments will see a growth of 18.25% in 5 years.

Nippon India Gilt Securities Fund Direct-Growth

The Nippon India Gilt Securities Fund has an AUM of INR 1,138 crores as on 16th August 2022. The debt fund has a moderate risk associated with it. The NAV is INR 33.94, and your initial investment will grow by 17.48% in the next five years. The Government of India, Haryana State, Tamil Nadu State, Gujarat State, and Karnataka State have significant holdings in the fund.

The fund’s expense ratio is 0.6%, and the returns are lower than the category average. 

• Minimum investment: INR 5,000 for lump sum investments, INR 100 for SIP
• Fund’s performance: The fund has an annualized one-year return of 2.2%. The annualized 3-year return is 5.7%. The performance of the fund is stable. However, it is slightly lower than the category average.