All 17 debt fund categories in India, from overnight to gilt
SEBI sorts most debt funds by duration. Here are all 17, including ten with new names and the debt sectoral fund, with the India tax for FY 2026-27 and the view abroad.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on November 5, 2026.
SEBI sorts debt funds mainly by duration, roughly how long a bond portfolio takes to pay back its money. The Seventeen-Rung Debt Ladder below lists every rung, with old names. It recommends nothing.
- Ten names differ from SEBI's 2017 list, which had no debt Sectoral fund.
- Each debt fund also sits in a 3 by 3 risk grid: interest-rate risk I to III, credit risk A to C.
- India, FY 2026-27: usually a specified fund (over 65% in debt and money market), taxed at slab rates and never long term for units bought from 1 April 2023.
- U.S.: usually a PFIC, the practitioner view.
What SEBI requires
| Category (old name) | Rule (duration unless stated) |
|---|---|
| Overnight | 1-day securities |
| Liquid | Maturity up to 91 days |
| Ultra Short Term (Ultra Short Duration) | 3 to 6 months |
| Ultra Short to Short Term (Low Duration) | 6 to 12 months |
| Money Market | Instruments up to 1 year |
| Short Term (Short Duration) | 1 to 3 years |
| Medium Term (Medium Duration) | 3 to 4 years |
| Medium to Long Term (Medium to Long Duration) | 4 to 7 years |
| Long Term (Long Duration) | Over 7 years |
| Dynamic Term (Dynamic Bond) | Any duration |
| Corporate Bond | 80% in AA+ and above |
| Credit Risk | 65% in AA and below |
| Banking and PSU Debt (Banking and PSU) | 80% in bank, PSU and municipal debt |
| Gilt | 80% in government securities |
| 10 year Constant Maturity Gilt (Gilt, 10 year constant duration) | 80% G-secs, 10 years |
| Floating Interest Rates (Floater) | 65% in floating-rate instruments |
| Sectoral, debt | 80% in AA+ debt of one sector |
How India taxes it (FY 2026-27)
| Units bought | Long term after | Rate |
|---|---|---|
| On or after 1 April 2023 | Never | Slab rate, no indexation |
| Earlier | 24 months (12 if listed) | 12.5%, no indexation |
NRI tax deducted: a flat 30% on short-term gains, 12.5% on long-term gains, plus surcharge and 4% cess. Invented example: an NRI sells units bought in May 2024 at a Rs 1,50,000 gain. Rs 46,800 is deducted, but if that is the only Indian income no tax is due, and it comes back only through an Indian return.
Abroad in short
- USA: reported like other Indian schemes. Form 8621 has a small-holding relief (USD 25,000 of PFIC stock at year-end, USD 50,000 joint) if there is no election, excess distribution or gain.
- Canada: no PFIC regime; Form T1135 applies above CAD 100,000 of total foreign cost.
- UK: likely a bond fund, so payouts are taxed as interest; none is on HMRC's list of 2 November 2026, so a gain is taxed as income. Germany: no partial exemption. France: 31.4% flat tax on 2026 payouts and gains.
Our checklist
The Seventeen-Rung Debt Ladder, per holding:
- The category, and any old name on older papers.
- The purchase date of every lot, before or after 1 April 2023.
- The risk-grid cell and tax deducted on each redemption.
Mistakes people make
- Expecting indexation or a 3-year long-term test. Indexation stopped for transfers from 23 July 2024.
- Treating the 30% deducted as final tax.
Re-check rates each April.
Common questions
Are debt fund gains ever long term?
Yes, for units bought before 1 April 2023 and held over 24 months (12 if listed). Later units never are.
Why do my old papers show other names?
SEBI's 2017 list used names such as Low Duration. The table shows both.
Can NRIs buy a credit risk fund?
SEBI sets no investor limit, and India's foreign exchange rules set none for NRIs and OCIs. Some fund houses decline U.S. and Canada residents.
Official sources
- SEBI: Master Circular for Mutual Funds, 20 March 2026
- SEBI: Categorization and rationalization of mutual fund schemes, 26 February 2026
- Income Tax Department: Income-tax Act 2025, section 76
- Income Tax Department: TDS rates for tax year 2026-27
- IRS: About Form 8621
- HMRC: Approved offshore reporting funds
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