Gilt Mutual Funds

A gilt fund is a debt fund that must keep at least 80% of its total assets in government securities. State government bonds count.

A mutual fund is a pool of money from many people, invested by a professional manager under SEBI rules. A debt fund lends that money to governments, banks or companies by buying their bonds and similar paper. SEBI sorts funds into categories, labels for what each may hold.

SEBI's category names since February 2026 are Gilt Fund and 10-year Constant Maturity Gilt Fund. Existing schemes had until 26 August 2026 to match them.

SEBI's line for the Gilt Fund reads: “Minimum investment in G secs- 80% of total assets (across maturity)”. Across maturity means no limit on how soon or late the bonds fall due.

Government securities (G-secs) are those issued by the central government or a state government. States issue only bonds, which the RBI calls state development loans (SDLs). The centre also issues treasury bills (T-bills), which run for less than a year when first sold. T-bills count towards the 80%.

SEBI does not say what the other 20% may hold. Scheme documents allow other debt there, including money market instruments.

There is no lock-in, a period during which you cannot sell at all.

A 10-year constant maturity gilt fund keeps the 80% floor in G-secs and adds one rule: its portfolio's Macaulay duration must equal 10 years.

Macaulay duration is the average number of years until a bond's interest and principal (the sum lent) come back to you. Each payment is weighted by its value today.

SEBI's wording: at least 80% in G-secs “such that the Macaulay duration of the portfolio is equal to 10 years”. The line printed under each scheme's name says “constant maturity of 10 years”. Still, the rule is about duration, not maturity. SEBI does not say how close to 10 the fund must stay.

The ordinary Gilt Fund has no duration rule at all.

The fixed 10 years shows up in two of SEBI's risk labels.

• Riskometer, SEBI's six-level risk label, from Low to Very High. Its formula gives any duration above 4 years the top interest-rate score, 6. The 10-year type always scores 6.
• Potential Risk Class (PRC). This 3 × 3 grid places each debt scheme by the most interest-rate and credit risk it may take. With its duration fixed at 10 years, the 10-year type can sit only in Class III, the grid's highest interest-rate row. Only that row has no duration limit. Our short duration guide walks through the grid.

The fund list on this page includes both kinds of gilt fund.

SEBI's credit and liquidity scores for government paper are the lowest possible, so a gilt fund's riskometer is driven by interest-rate risk.

Every fund must show its riskometer, checked every month. A debt fund's level comes from three scores for its whole portfolio, averaged and then mapped to a level.

• Credit risk, the chance that a borrower pays late or does not pay back. G-secs and SDLs score 1, the floor.
• Liquidity risk, the chance that a fund cannot sell a holding quickly at a fair price. Government paper scores 1 again.
• Interest-rate risk, the chance that a change in interest rates changes the value of the bonds a fund holds. The score runs from 1, for half a year of duration or less, to 6 above 4 years.

One, six and one average a little under 2.7. SEBI files anything above 2 and up to 3 as Moderate. So Moderate is the ceiling for a pure G-sec portfolio. Most listed gilt funds read Moderate on 29 September 2026.

The RBI says government securities carry practically no risk of default. Even so, their prices move with interest rates, and a gilt fund's value can drop when rates go up. SEBI's investor website puts it plainly: “When interest rates rise, bond prices may fall, and vice versa.”

On the PRC grid, government paper takes a credit risk value of 13, the top of the scale. Higher values mean less credit risk. With 80% or more at 13, a gilt fund cannot sit in the grid's highest credit-risk column.

Unlike most debt funds, gilt funds do not have to keep 10% in liquid assets. Both kinds are exempt.

Overnight funds share the exemption. Liquid funds must hold 20%. Every other open-ended debt fund must keep at least 10% of net assets in cash, G-secs, T-bills and similar liquid assets.

Several of SEBI's other limits do not reach government securities either.

• Sector cap. A debt fund may put at most 20% of net assets into one sector. G-secs and T-bills sit outside that limit.
• One-borrower limit. SEBI caps how much a debt fund may lend to any one borrower. G-secs and T-bills are exempt.
• PRC maturity caps. In Class I, each holding may run at most 3 years to maturity; in Class II, 7. The caps do not apply to central and state government securities.

Suppose prices move and the fund slips under SEBI's minimum through no action of its own. It generally has 30 business days to fix it, extendable by up to 60.

Of the three, only a gilt fund has a rule about who it lends to. Only a long duration fund has a duration floor. A dynamic bond fund has neither.

• Gilt fund. At least 80% in central and state government securities. No duration band, except for the 10-year type, pinned at 10.
• Long duration fund (SEBI now: Long Term Fund). Portfolio Macaulay duration above 7 years, with no ceiling. No rule on who it lends to, or how likely they are to repay.
• Dynamic bond fund (SEBI now: Dynamic Term Fund). SEBI's whole rule is “Investment across duration”. No band, and no rule on borrowers.

All listed long duration funds read Moderate on 29 September 2026. Most listed dynamic bond funds read Moderate that day, and the rest Moderately High or Low to Moderate.

Koshex suggests 5 years or more for a gilt fund, and 10 for the constant maturity type. For long duration we suggest 7 years or more, and 3 or more for dynamic bond. These are our views, not SEBI rules.

Any gilt fund unit bought on or after 1 April 2023 is taxed at your slab rate, however long you keep it. Older units kept over 24 months pay 12.5% without indexation.

Under section 76 of the Income-tax Act, 2025, a gilt fund is a Specified Mutual Fund. That is because more than 65% of it sits in debt and money market instruments. Gains on its newer units always count as a short-term capital gain, taxed at your slab rate, the rate on your normal income. The holding period, the time from buying a unit to selling it, does not matter for them.

An older unit held 24 months or less is also taxed at your slab rate. After that, the gain is a long-term capital gain at 12.5%, with no indexation, so the cost gets no lift for inflation.

A SIP invests a fixed amount at regular intervals, usually monthly. Each instalment buys units at that day's NAV, the price of one unit, and has its own holding period. So one SIP can hold lots under both rules.

An illustration, not a forecast. Say you began a monthly SIP in January 2022 and sell everything in September 2026, with an assumed gain of ₹92,000. Cess adds 4% to the tax. We assume no surcharge, an extra charge on the tax once total income passes ₹50 lakh.

• January 2022 to March 2023 instalments, each held over 24 months: assumed gain ₹29,000. At 12.5% that is ₹3,625, plus ₹145 cess, so ₹3,770.
• Instalments from April 2023, at a 20% top slab: assumed gain ₹63,000 gives ₹12,600, plus ₹504 cess, so ₹13,104. Total: ₹16,874.
• Same instalments at a 30% top slab: ₹18,900, plus ₹756 cess, so ₹19,656. Total: ₹23,426.

A switch to another scheme counts as a sale and a fresh purchase, so older units switched out lose their 12.5% route.

A resident who redeems pays no TDS, tax deducted at source before money reaches you. IDCW is a payout from the fund's income or gains; the NAV drops by the amount paid. IDCW is taxed at your slab rate. Once your IDCW from one fund house passes ₹10,000 in a tax year, 10% TDS is cut from the whole amount. TDS is credited against your tax for the year.

First check which kind a fund is. Scheme names must follow the category, so the name tells you.

There are 25 listed gilt funds. 24 have a 3-year record, and only those are ranked on 3-year return and counted in the averages. The AUM, 1-year and 5-year tabs rank every listed fund with that figure. The table shows the top 10.

Across both kinds, the average 3-year CAGR was 4.1%. CAGR is the average yearly growth rate over a period, as if the fund had grown at the same pace every year. The 5-year average was 5.2%. Both are past figures.

Also read:

• Riskometer and PRC cell. The cell is printed in bold near the scheme name on the application form and scheme document.
• Duration and yield. Factsheets usually show Macaulay duration and yield to maturity (YTM). YTM is the return the bonds would give if held until they fall due, at today's prices.
• Holdings. At the end of August 2026, ordinary gilt funds on this list held mostly central government bonds. Cash, SDLs and T-bills came next. The 10-year funds held almost nothing else but central government bonds. Those were the funds' choices, not SEBI rules.
• Expense ratio, the fund's yearly fee, as a percentage of your money, taken out of the fund's value.
• AUM (assets under management), the current value of what a fund manages. The listed gilt funds hold ₹32,969 Cr between them.
• Exit load, a fee some funds charge if you sell within a set time. No SEBI rule sets one here. Each scheme document states its own, if any, and some gilt funds charge none.

A sum you plan to draw when you retire, about eight years from now, is the kind of timeline our 5-years-or-more suggestion fits.

Through Koshex you buy the regular plan. That is the version bought through a distributor like us (AMFI registration ARN-154632), who helps you choose and stays with you afterwards. We help you pick a gilt fund that suits your goal and timeline. Later, we review your holdings and flag it if a fund's category, risk level or ranking shifts.