HDFC Credit Risk Debt Fund - Direct Plan

Suitability

"Credit risk funds invest mainly in bonds which are rated AA or below by credit rating agencies. The lower rating indicates a higher possibility of these bonds defaulting on repayment of investors' money. Therefore, these funds are the riskiest among debt fund categories. But they compensate for this additional risk with a higher return potential as these bonds offer better rates of interest than the highest rated bonds.

However, retail investors can avoid these funds altogether. There are far too many kinds of debt funds with a highly nuanced classification based on the type or duration of bonds they can invest in. We believe that so many fund categories add to complexity which is easily avoidable. Retail investors can simply invest in Liquid funds for an investment horizon of up to one year and Short Duration funds for the fixed income allocation (which should be 100 per cent for an investment horizon of up to three years) in their longer-term portfolios."

Taxation

Capital Gains Taxation

• If investment is made on or after 1 April 2023: Entire amount of gain is added to the investors' income and taxed according to the applicable slab rate.
• If investment is made before 1 April 2023:
  
• Sold within 3 years from the date of investment: Gains are added to the investors' income and taxed according to the applicable slab rate.
• Sold after 3 years from the date of investment: Gains are taxed at the rate of 20% after providing the benefit of inflation indexation.
• No tax is to be paid as long as you continue to hold the units.

Dividend Taxation

• Dividends are added to the income of the investors and taxed according to their respective tax slabs. Further, if an investor's dividend income exceeds Rs 5,000 in a financial year, the fund house also deducts a TDS of 10% before distributing the dividend.