SBI ETF 10 Year Gilt

Suitability:

This is a fund that invests mainly in bonds issued by the government of India which will mature in 10 years or more. These bonds do not carry any risk of default since the repayment of investors' money is backed by the government. But they are prone to sharper ups and downs because of changes in interest rates.

Like most other debt fund categories, we believe that retail investors can avoid this one as well. In our opinion, debt funds make sense for retail investors only if they are investing for 3 years or less. For that kind of investment horizon, Liquid Debt funds and Short Term debt funds are much more suitable.

Taxability of earnings:

Capital gains

• If the mutual fund units are sold after 3 years from the date of investment, gains are taxed at the rate of 20% after providing the benefit of inflation indexation.
• If the mutual fund units are sold within 3 years from the date of investment, entire amount of gain is added to the investors' income and taxed according to the applicable slab rate.
• No tax is to be paid as long as you continue to hold the units.

Dividends

• Dividends paid by the mutual fund scheme are taxed at the rate of 25% (effectively 29.12%, including surcharge and cess). This is known as Dividend Distribution Tax (DDT).Though the investor does not pay this tax directly, it is deducted from the dividend income before passing on to the investor.