HDFC Ultra Short Term Fund - Direct Plan

Suitability

"Ultra-short Duration debt funds predominantly invest in bonds maturing in three to six months. They aim to earn slightly better returns over liquid funds but with a marginally higher degree of volatility.

They are suitable to park the amount you have set aside to meet any emergency needs or any surplus money that you don't need for the next six months up to 1-1.5 years. Investors who want to avoid the complexity of wading through the very finely classified categories of debt funds can simply give these funds a miss and stick to liquid funds for this investing need. But those, who want slightly better returns and can withstand a little more volatility, can consider ultra-short duration funds.

The risk of incurring a loss in these funds over the said timeframe is low but they do not guarantee returns or safety of capital. Remember, they are geared to earn slightly better returns than what you can get from a bank account or a short duration fixed deposit, but are not suitable to build wealth in the long run."

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.