Low Duration Mutual Funds

SEBI, the markets regulator, gave the category a new name, and fund names had to follow. The category took that name on 26 February 2026. Existing funds had until 26 August 2026 to change theirs.

SEBI's name rule is one line: "the scheme name shall be the same as the scheme category". So funds once named "low duration" now carry a longer label. AMFI, the mutual fund industry body, lists one as "SBI Ultra Short to Short Term Fund" today.

The duration rule did not change. The portfolio's Macaulay duration must still stay between 6 and 12 months.

A mutual fund pools money from many people, and a professional manager invests it under SEBI rules. This one is a debt fund. It lends by buying bonds and similar paper from governments, banks and companies.

Three of SEBI's new names sound alike. In order, shortest band first:

• ultra short duration funds, 3 to 6 months: now Ultra Short Term Fund;
• low duration funds, 6 to 12 months: now the longer name above;
• short duration funds, 1 to 3 years: now Short Term Fund.

The low duration name sits between the other two, and so does its band. Fund names in the list on this page now use SEBI's words.

A low duration fund holds "Debt & Money Market instruments", in SEBI's words. The one condition is that "the Macaulay duration of the portfolio is between 6 months to 12 months".

Macaulay duration is the average time, in years, until you get a bond's payments back, weighted by what each payment is worth today. SEBI leaves the definition to each scheme's own document. It uses the figure to measure interest-rate risk, the chance that a change in rates alters what the fund's bonds are worth. A longer duration earns a higher risk score.

The 6-to-12-month band is an average across the portfolio. One bond may run past a year if the weighted average stays inside the band. Our debt funds page covers duration in more depth.

In the funds on this list at the end of August 2026, corporate bonds (loans to companies) were the biggest holding. Next came certificates of deposit, short IOUs from banks, and then commercial paper, short IOUs from companies. That was one month's mix, not a SEBI requirement.

SEBI's rule for this category is about duration only. It sets no minimum credit rating. A credit rating is an agency's opinion of how likely a borrower is to repay on time; AAA is the highest, and ratings can change.

The general debt fund rules still apply:

• at least 10% of net assets, the fund's total value, in cash, government securities (G-secs), treasury bills or short loans backed by G-secs;
• at most 20% of net assets in one sector, with bank certificates of deposit, G-secs, treasury bills and a few others left out;
• no InvITs (infrastructure investment trusts), a bar this category shares with ultra short duration, liquid, overnight and money market funds.

These are open-ended funds, so you can sell your units whenever you choose. No lock-in applies here, meaning a stretch when selling is barred.

Each band is a range for the portfolio's Macaulay duration. Ultra short runs 3 to 6 months, low 6 to 12 months, and short duration 1 to 3 years.

The band feeds the riskometer. That is the risk label SEBI makes every fund show, on six levels from Low to Very High, checked every month. For debt funds, its interest-rate part scores duration from 1 to 6:

• up to half a year scores 1, the whole range of an ultra short duration fund;
• over half a year and up to one year scores 2;
• over 1 year to 2 scores 3, and over 2 to 3 scores 4, the range of a short duration fund.

Inside its band, a low duration fund scores 2 out of 6, at most, on the interest-rate part of the riskometer. A fund at exactly 6 months would score 1.

Koshex's suggested horizons follow the bands. We suggest 3 to 6 months or more for ultra short duration, 6 to 12 months for low, 1 to 3 years for short. None of these is a SEBI rule.

On 29 September 2026, most listed ultra short duration funds read Low to Moderate. Most listed short duration funds read Moderate.

The value can move every day, because the fund's holdings are priced at the market. SEBI requires each debt holding to be valued at the average of prices from valuation agencies. So the NAV, the price of one unit, may go up or down on any day.

SEBI's investor website states the rate link plainly: if rates go up, bond prices may drop, and the reverse. The NAV follows the prices of what the fund owns. SEBI gives a longer duration a higher interest-rate score, and this band sits near the short end.

The riskometer weighs more than rates. SEBI scores the whole portfolio on three risks, averages them and maps the result to a level:

• credit risk, the chance a borrower pays late or does not pay back;
• interest-rate risk, 2 at most for this band;
• liquidity risk, the chance the fund cannot sell a holding quickly at a fair price. If this score beats the average, it is used instead.

Low to Moderate covers averages over 1 and up to 2. Moderate covers those over 2 and up to 3. Most listed low duration funds read Low to Moderate on 29 September 2026; the rest read Moderate.

The level is re-checked monthly. If it changes, investors must hear about it by email or SMS.

Koshex holds AMFI registration ARN-154632 as a distributor, an intermediary that helps people buy and look after their funds. We keep an eye on what you hold and tell you when a fund's risk level, category or ranking moves.

Often, yes: Koshex suggests low duration funds for money you plan to use in 6 to 12 months. The horizon mirrors the band, but it is our suggestion, not a SEBI rule.

A few rules decide how fast the money reaches you:

• No same-day payout. SEBI allows its Instant Access Facility only in overnight and liquid funds.
• Up to 3 working days. Selling units back to the fund is called redemption. The fund must pay you within 3 working days.
• No SEBI-set exit load. An exit load is a fee some funds charge if you sell within a set time after buying. SEBI's graded load is a liquid-fund rule. Here a fund may set its own in its scheme document, and many set none.

Allow for those 3 working days before the date the money is due. For cash you may need within days, same-day access exists only in liquid funds and overnight funds.

Koshex helps you choose a fund that suits your goal and timeline. Your date comes first in that conversation.

Gains on units bought on or after 1 April 2023 are taxed at your slab rate, the rate on your normal income. How long you held them does not matter. The rule is section 76 of the Income-tax Act, 2025.

That section treats this fund as a Specified Mutual Fund, since more than 65% of it is in debt and money market instruments. Gains on such newer units always count as short-term capital gains, whatever the holding period, the time from purchase to sale.

Older units keep the old line. Units bought before 1 April 2023 and sold within 24 months give a short-term gain, taxed at your slab rate. Held longer, the gain is long-term, taxed at 12.5% without indexation (no inflation adjustment to your cost).

Here is an assumed gain, not a forecast. Suppose you bought units in November 2025 and sell them in September 2026 for ₹23,000 more than you paid. They date from after 1 April 2023, so the whole gain is taxed at your slab rate. Cess adds 4% to the tax. We assume no surcharge, the extra charge that starts once total income passes ₹50 lakh.

• Top slab 20%, no surcharge: ₹4,600 in tax plus ₹184 cess, so ₹4,784.
• Top slab 30%, no surcharge: ₹6,900 in tax plus ₹276 cess, so ₹7,176.

There is no TDS, tax taken out before money reaches you, when a resident redeems.

IDCW is not tax-free. It is a payout from the fund's income or gains, and the NAV falls by the amount paid. The payout is added to your income and taxed at your slab rate. When one fund house's IDCW to you passes ₹10,000 in a tax year, 10% TDS applies to the full payout. That TDS is credited against your tax for the year. The growth option pays nothing out.

Read the 3-year and 5-year CAGR first, with the riskometer, expense ratio and AUM beside them. There are 28 listed low duration funds, and the table shows the top 10 for the ranking you pick. 19 have a 3-year record, so only these are ranked on 3-year return and counted in the averages.

The figures are for the regular plan, the version bought through a distributor such as Koshex.

• CAGR is the average yearly growth rate over a period, as if the fund grew at the same pace every year. The category averages, over funds with a 3-year record, are 6.5% for 3 years and 6.5% for 5. Both look backwards.
• Riskometer. Low to Moderate and Moderate funds sit side by side here, so read the label next to the return.
• Expense ratio. This is the fund's yearly fee as a share of your money, taken out of the fund's value.
• AUM, assets under management: the current value of the money a fund manages. The listed funds hold ₹1,15,476 Cr in all.

The list also includes a few index funds that track short-term debt indices of a similar duration. SEBI puts index funds in a category of their own, so they follow an index rather than this band.

Two things sit outside the table. One is the Potential Risk Class (PRC) cell. SEBI's PRC grid has 9 cells, each setting the most interest-rate and credit risk a debt fund may take. The fund house picks the cell as a ceiling, shown in bold near the scheme name on the application form. The other is the exit load, in the scheme document.

A lumpsum is one larger payment at a single time. A SIP puts in a fixed sum at regular intervals, usually monthly. The choice depends on how your money arrives.