Edelweiss AMC on Monday launched a passively managed low-cost debt index fund ‘NIFTY PSU Bond Plus SDL Index Fund – 2026’. The New Fund Supply (NFO) will shut on March 16.

Since it’s an index fund it is going to put money into the constituents of NIFTY PSU Bond Plus SDL 50:50 Index. In easier phrases, your cash will go into AAA-rated PSU bonds similar to PFC, REC and IRFC in addition to State Growth Loans (SDL) in equal proportion. Publicity to any single firm’s bonds or loans could be capped at 15 per cent of the corpus. Subsequently, there might be a quarterly rebalancing and overview of the index constituents.

The fund comes with a goal maturity of April 30, 2026. A goal maturity fund has a specified maturity date that aligns with the expiry date of the bonds it has in its portfolio. This helps such funds present predictive and secure returns.

The tax story

Since it’s a debt fund, long-term capital positive aspects might be taxed at 20 per cent with indexation when you maintain it for greater than three years, whereas short-term capital positive aspects as per your revenue tax slab charge. Indexation helps regulate shopping for worth of your funding with inflation, thus reducing your tax legal responsibility. Based on index profit illustration by Edelweiss, the post-tax returns — when you maintain it until maturity — will quantity to five.9 per cent.

Do you have to make investments?

Once you put money into a debt fund you’ve gotten a comparatively short-term horizon in thoughts. That stated, this isn’t an alternative to short-term debt funds.

“With rates of interest anticipated to go up, locking right into a decrease charge in a goal maturity fund could not work. This fund must be thought-about solely by very conservative buyers who need clear visibility of returns. In any other case, desire a short-term debt fund,” says Mrin Agarwal, founder, Finsafe India.

When you’ve got a long-term horizon of three to 5 years and don’t wish to take threat, the Edelweiss NFO could be just right for you. “Rate of interest motion is debatable. So, in case you have a particular five-year aim in thoughts, that is an environment friendly solution to make investments for it within the gentle of security, liquidity and returns whether or not these are excessive or low. In any case, 5.9 per cent post-tax returns are usually not a foul start line,” says Radhika Gupta, CEO, Edelweiss AMC.

Minimal one can make investments Rs 5,000 in NIFTY PSU Bond Plus SDL Index Fund – 2026. There’s an exit load of 0.15 per cent when you exit earlier than 30 days.

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