Gilt Funds are debt mutual funds that invest exclusively in government securities (G-Secs) issued by the central and state governments. Backed by sovereign assurance, these funds carry negligible credit risk, making them one of the safest options within the debt mutual fund category.

Gilt funds generate returns through fixed interest income from government bonds and potential capital appreciation when interest rates fall. Fund managers actively manage the portfolio’s maturity and duration based on inflation trends, RBI policy decisions, and overall economic conditions.

1. Invest primarily in central and state government securities
2. Virtually zero default risk due to government backing
3. Returns are sensitive to interest rate movements
4. Suitable for investors seeking safety and stability
5. No lock-in period, offering easy liquidity

Gilt funds are ideal for conservative investors who prioritise capital safety and predictable income. They also work well during declining interest rate cycles, where bond prices tend to rise, improving returns.

Gilt funds suit investors with low risk appetite, short-to-medium-term goals, and those looking to protect capital while earning market-linked returns.

• High level of capital protection
• Steady income from government bonds
• Potential capital gains during falling interest rates
• Helps stabilise portfolios during market volatility
• Transparent and regulated investment structure

Despite their safety, gilt funds can experience short-term volatility due to interest rate changes. Returns may be lower compared to equity or high-yield debt funds, and inflation can reduce real returns over time.

Gilt funds are taxed as per standard debt mutual fund rules. Capital gains are taxed according to the investor’s applicable income tax slab rate, regardless of the holding period. Any income received is also taxed as per prevailing tax regulations.