What are the Best Mutual Funds in India?

Mutual funds effectively invest in the capital markets, combining equity, debt, and hybrid funds. However, identifying the right mutual funds can be challenging. This article aims to list the best mutual funds in equity, debt, and hybrid categories based on their 3-year average annual rolling returns. It will also explore the features, factors, and how to invest in these top mutual funds in India. 

Top 10 Best Mutual Funds to Invest in 2024 (Equity, Debt & Hybrid Funds)

Top 10 Equity Mutual Funds

Here is a list of the top 10 long term equity mutual funds.

Equity Mutual Funds	Sub Category	AUM (Rs. in cr.)	5Y CAGR (%)
Quant Small Cap Fund	Small Cap Fund	27,160.76	47.53
Bank of India Small Cap Fund	Small Cap Fund	1,613.36	39.43
Nippon India Small Cap Fund	Small Cap Fund	61,646.36	36.97
Quant Infrastructure Fund	Sectoral Fund - Infrastructure	3,585.30	36.58
Canara Rob Small Cap Fund	Small Cap Fund	12,451.67	35.97
Edelweiss Small Cap Fund	Small Cap Fund	4,373.58	35.18
Tata Small Cap Fund	Small Cap Fund	9,572.45	34.73
Motilal Oswal Midcap Fund	Mid Cap Fund	22,897.62	34.68
Invesco India Smallcap Fund	Small Cap Fund	5,842.20	34.49
Quant Mid Cap Fund	Mid Cap Fund	8,941.21	33.99

Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.

Note: The data on the list of best mutual funds in India is from 20th December 2024. It is derived from the Tickertape Mutual Funds Screener.

🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.

Top 10 Hybrid Mutual Funds

Here is a list of the best hybrid mutual funds.

Hybrid Mutual Funds	Sub Category	AUM (Rs. In cr.)	CAGR 5Y (%)
Quant Multi Asset Fund	Multi Asset Allocation Fund	3,152.60	29.02
Bank of India Mid & Small Cap Equity & Debt Fund	Aggressive Hybrid Fund	1,053.73	28.32
JM Aggressive Hybrid Fund	Aggressive Hybrid Fund	719.68	25.19
Quant Absolute Fund	Aggressive Hybrid Fund	2,250.71	24.48
ICICI Pru Equity & Debt Fund	Aggressive Hybrid Fund	40,089.04	21.77
ICICI Pru Multi-Asset Fund	Multi Asset Allocation Fund	50,987.95	21.17
Mahindra Manulife Aggressive Hybrid Fund	Aggressive Hybrid Fund	1,502.95	21.05
HDFC Balanced Advantage Fund	Balanced Advantage Fund	95,569.87	20.59
Edelweiss Aggressive Hybrid Fund	Aggressive Hybrid Fund	2,267.39	19.83
Kotak Equity Hybrid Fund	Aggressive Hybrid Fund	6,815.47	19.61

Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.

Note: The data on the list is from 20th December 2024. It is derived from the Tickertape Mutual Funds Screener.

🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.

Top 10 Debt Mutual Funds

Here is a list of top 10 debt mutual funds.

Debt Return MFs	Sub Category	AUM (Rs. in cr.)	CAGR 5Y
Aditya Birla SL Medium Term Plan	Medium Duration Fund	1,981.28	12.06
Bank of India Credit Risk Fund	Credit Risk Fund	114.92	10.79
JM Low Duration Fund	Low Duration Fund	231.17	9.62
Aditya Birla SL Credit Risk Fund	Credit Risk Fund	933.02	9.22
UTI Dynamic Bond Fund	Dynamic Bond Fund	554.96	9.06
Baroda BNP Paribas Credit Risk Fund	Credit Risk Fund	164.92	8.97
Bank of India Short Term Income Fund	Short Duration Fund	71.70	8.89
DSP Credit Risk Fund	Credit Risk Fund	188.05	8.83
ICICI Pru All Seasons Bond Fund	Dynamic Bond Fund	13,409.86	8.06
UTI Short Duration Fund	Short Duration Fund	2,639.72	8.04

Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.

Note: The data on the top mutual funds list is from 20th December 2024. It is derived from the Tickertape Mutual Funds Screener.

🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.

Overview of the Best Mutual Funds (Equity, Hybrid & Debt)

Equity Mutual Funds: An Overview

Here are brief overviews of the best equity mutual funds to invest, listed above: 

Quant Small Cap Fund

Quant Small Cap Fund is an equity mutual fund from Quant Mutual Fund. It is managed by Sanjeev Sharma, Vasav Sahgal, and Ankit A Pande. It has an AUM of Rs. 27,160.76 cr., and the fund’s NAV is Rs. 279.20. Over the past year, the fund has returned 24.57%, and its 3-yr CAGR is 29.36%. The minimum SIP investment is Rs. 1,000.

Bank of India Small Cap Fund

Bank of India Small Cap Fund is an open-ended equity mutual fund focusing on investing predominantly in small-cap companies, aiming to provide long-term capital appreciation. It has an AUM of Rs. 1,613.36 cr., and the fund’s NAV is Rs. 55.13. Over the past year, the fund has returned 34.69%, and its 5-yr CAGR is 39.43%. 

Nippon India Small Cap Fund

Nippon India Small Cap Fund is an equity mutual fund from Nippon India Mutual Fund, managed by Samir Rachh. The fund has an AUM of Rs. 61,646.36 cr., and the latest NAV is Rs. 195.41. Over the past year, the fund’s return was 28.78%, and its 5-yr CAGR is 36.97%. The minimum SIP investment amount for this fund is Rs. 100.

Quant Infrastructure Fund

Quant Infrastructure Fund is an equity mutual fund from Quant Mutual Fund. Vasav Sahgal and Ankit A. Pande manage it; the fund has an AUM of Rs. 3,585.30 cr. and a NAV of Rs. 42.44. Over the past year, the fund has returned 27.25%, and the fund’s 5-yr CAGR is 36.58%. The minimum SIP amount for investing is Rs. 1000.

Canara Rob Small Cap Fund

Canara Robeco Small Cap Fund, launched on 15th February 2019, is an open-ended equity mutual fund specialising in small-cap stocks. It has an AUM of Rs. 12,451.67 cr., and the fund’s NAV is Rs. 44.29. Over the past year, the fund has returned 26.51%, and its 5-yr CAGR is 35.97%.

Edelweiss Small Cap Fund

Edelweiss Small Cap Fund was launched on 14th Februrary 2019. It is managed by Bhavesh Jain and Abhishek Gupta. It has an AUM of Rs. 4,373.58 cr., and the fund’s NAV is Rs. 49.53. Over the past year, the fund has returned 28.54%, and its 5-yr CAGR is 35.18%.

Tata Small Cap Fund

Tata Small Cap Fund was launched on 12th November 2018. It is managed by Rahul Singh and Murthy Nagarajan. It has an AUM of Rs. 9,572.45 cr., and the fund’s NAV is Rs. 47.21. Over the past year, the fund has returned 35.14%, and its 5-yr CAGR is 34.73%.

Motilal Oswal Midcap Fund

Motilal Oswal Midcap Fund was launched on 24th February 2014. It is managed by Akash Singhania. It has an AUM of Rs. 22,897.62 cr., and the fund’s NAV is Rs. 125.63. Over the past year, the fund has returned 55.89%, and its 5-yr CAGR is 34.68%.

Invesco India Smallcap Fund

Invesco India Smallcap Fund was launched on 1st March 2007. It is managed by Pranav Dholakia and R. K. Gupta. It has an AUM of Rs. 5,842.20 cr., and the fund’s NAV is Rs. 47.12. Over the past year, the fund has returned 40.20%, and its 5-yr CAGR is 34.49%.

Quant Mid Cap Fund

Quant Mid Cap Fund was launched on 26th October 2020. It is managed by Kunal Vora and Sandeep Bhatnagar. It has an AUM of Rs. 8,941.21 cr., and the fund’s NAV is Rs. 242.15. Over the past year, the fund has returned 20.31%, and its 5-yr CAGR is 33.99%. 

Hybrid Mutual Funds: An Overview

Here are brief overviews of the hybrid type of mutual fund

Quant Multi Asset Fund

Quant Multi Asset Fund is a hybrid mutual fund scheme from Quant Mutual Fund. The fund is managed by Sanjeev Sharma, Vasav Sahgal, Ankit A Pande, and Varun Pattani. It has an AUM of Rs. 3,152.60 cr. and a NAV of Rs. 143.37. Over the last year, the fund returned 28.77%, with a 5-yr CAGR of 29.02%. The minimum SIP investment for this scheme is Rs. 1000.

Bank of India Mid & Small Cap Equity & Debt Fund

Bank of India Mid & Small Cap Equity & Debt Fund is a hybrid mutual fund managed by Alok Singh. It has an AUM of Rs. 1,053.73 cr. and a NAV of Rs. 42.41. Over the past year, the fund returned 28.94%, and its 5-yr CAGR is 28.32%. The minimum SIP investment for this fund is Rs. 1,000.

JM Aggressive Hybrid Fund

JM Aggressive Hybrid Fund is managed by Asit Bhandarkar, Chaitanya Choksi, and Gurvinder Singh Wasan from JM Financial Mutual Fund. It is a hybrid mutual fund and has an AUM of Rs. 719.68 cr. and an NAV of Rs. 139.48. Over the past year, the fund delivered a return of 29.59%, and its 5-yr CAGR is 25.19%. The minimum SIP investment amount for this fund is Rs. 100.

Quant Absolute Fund

Quant Absolute Fund is a hybrid mutual fund from Quant Mutual Fund. It is managed by Sanjeev Sharma, Vasav Sahgal, and Ankit A Pande. The fund’s AUM is Rs. 2,250.71 cr., with a NAV of Rs. 427.03. Over the past year, the fund has returned 13.11%, and its 5-yr CAGR is 24.48%. The minimum SIP amount to invest in this scheme is Rs. 1,000.

ICICI Pru Equity & Debt Fund

ICICI Prudential Equity & Debt Fund is a hybrid mutual fund managed by Manish Banthia, Akhil Kakkar, Sankaran Naren, Mittul Kalawadia, Sri Sharma, and Sharmila D’mello. The fund’s AUM stand at Rs. 40,089.04 cr., and its NAV is Rs. 399.95. Over the past year, the fund has delivered a return of 18.80%, and its 5-yr CAGR is 21.77%. Investors can start an SIP in this fund with a minimum amount of Rs. 100.

ICICI Pru Multi-Asset Fund

ICICI Prudential Multi Asset Fund is a hybrid mutual fund from ICICI Prudential Mutual Fund. This fund is managed by Manish Banthia, Akhil Kakkar, Ihab Dalwai, Sankaran Naren, Sri Sharma, Gaurav Chikane, and Sharmila D’mello. The fund has an AUM of Rs. 50,987.95 cr.. and a NAV of Rs. 757.91. Over the past year, the fund returned 17.84%, and has a 5-yr CAGR of 21.17%. The minimum SIP amount to invest in this scheme is Rs. 100.

Mahindra Manulife Aggressive Hybrid Fund

Mahindra Manulife Aggressive Hybrid Fund is a scheme offered by Mahindra Manulife Mutual Fund. It is managed by fund managers: Rahul Pal, Amit Garg, Fatema Pacha, and Manish Lodha. It currently has an AUM amounting to Rs. 1,502.95 cr.. and a NAV of Rs. 28.57. Over the past year, the scheme has shown a return performance of 23.34%, with a 5-yr CAGR of 21.05%. Investors can start investing in this scheme with a minimum SIP amount of Rs. 500.

HDFC Balanced Advantage Fund

HDFC Balanced Advantage Fund is a hybrid mutual fund from HDFC Mutual Fund. It is managed by Gopal Agrawal, Anil Bamboli, Arun Agarwal, Srinivasan Ramamurthy, and Nirman S. Morakhia. The fund has an AUM of Rs. 95,569.87 cr. and a NAV of Rs. 536.28. Over the past year, it returned 18.06%, with a 5-yr CAGR of 20.59%. The minimum SIP investment in this fund is Rs. 100.

Edelweiss Aggressive Hybrid Fund

Edelweiss Aggressive Hybrid Fund is a hybrid mutual fund by Edelweiss Mutual Fund. It is managed by fund managers Dhawal Dalal, Bharat Lahoti, and Bhavesh Jain. It has an AUM worth Rs. 2,267.39 cr., with a NAV of Rs. 69.61. Over the past year, the fund has shown a return performance of 22.36%, and its 5-yr CAGR stands at 19.83%. Investors can start investing in this scheme with a minimum SIP amount of Rs. 100.

Kotak Equity Hybrid Fund

Kotak Equity Hybrid Fund is a hybrid mutual  fund that was launched on 1st January 2013. It is managed by Harish Krishnan and Deepak Agrawal. As of now, the scheme has an AUM worth Rs. 6,815.47 cr., and a NAV of Rs. 71.16. Over the past year, the scheme has shown a return performance of 24.34%, and its 5-yr CAGR stands at 19.61%. The SIP amount required for investing in this scheme is Rs. 500.

Debt Mutual Funds: An Overview

Aditya Birla SL Medium Term Plan

Aditya Birla Sun Life Medium Term Fund is part of Aditya Birla Sun Life Mutual Fund’s debt schemes. It is managed by fund managers Mohit Sharma and Sunaina da Cunha. The fund has an AUM of Rs. 1,981.28 cr. and a NAV of Rs. 40.18. The fund has shown a return of 11.05% over the last year and a 5-yr CAGR of 12.06%. Investors can start investing with a minimum SIP amount of Rs. 1,000 in this scheme.

Bank of India Credit Risk Fund

Bank of India Credit Risk Fund is managed by Alok Singh. It is a debt mutual fund under the Bank of India Mutual Fund. It currently has an AUM worth Rs. 114.92 cr. with a NAV of Rs. 11.76. Over the past year, the fund has yielded returns of 6.73%, and its 5-yr CAGR stands at 10.79%. The fund has an expense ratio of 1.19%.

JM Low Duration Fund

JM Low Duration Fund is a debt mutual fund designed to provide optimal returns by investing in a portfolio of short- to medium-term debt and money market instruments. The fund has an AUM of Rs. 231.17 cr. and a NAV of Rs. 21.97. The fund has shown a return of 7.61% over the last year and a 5-yr CAGR of 9.62%. 

Aditya Birla SL Credit Risk Fund

Aditya Birla Sun Life (ABSL) Credit Risk Fund is an open-ended debt mutual fund offered by Aditya Birla Sun Life AMC. The fund was launched on April 23, 2014. The fund has an AUM of Rs. 933.02 cr. and a NAV of Rs. 22.36. The fund has shown a return of 12.65% over the last year and a 5-yr CAGR of 9.22%. 

UTI Dynamic Bond Fund

UTI Dynamic Bond Fund is managed by Sudhir Agrawal at UTI Mutual Fund. It holds Rs. 554.96 cr. in assets and a NAV of Rs. 32.07. Over the past year, it delivered a return of 9.44%, and has a 5-yr CAGR of 9.06%. Investors can start with a minimum SIP investment of Rs. 500 in this scheme.

Baroda BNP Paribas Credit Risk Fund

Baroda BNP Paribas Credit Risk Fund is a debt mutual fund by Baroda BNP Paribas Mutual Fund. It is managed by fund managers Prashant R Pimple and Mayank Prakash and currently holds assets worth Rs. 164.92 cr. and a NAV of Rs. 23.26. Over the past year, the fund has yielded a return of 8.94%, and its 5-yr CAGR stands at 8.97%. The minimum SIP investment amount for this scheme is Rs. 500.

Bank of India Short Term Income Fund

Bank of India Short Term Income Fund is managed by Mithraem Bharucha. It is a debt mutual fund scheme under Bank of India Mutual Fund. It has an AUM worth Rs. 71.70 cr., and a NAV of Rs. 27.81. Over the past year, the scheme has shown a return of 9.55%, and its 5-yr CAGR stands at 8.89%. The minimum SIP investment amount for this scheme is Rs. 1000.

UTI Credit Risk Fund

UTI Credit Risk Fund is a debt mutual fund by UTI Mutual Fund. It is managed by Ritesh Nambiar and has an AUM worth Rs. 389.99 cr and a NAV of Rs. 17.65. Over the past year, it delivered a return of 7.45%, and its 3-year CAGR stands at 11.72%. The minimum SIP investment amount for this scheme is Rs. 500.

DSP Credit Risk Fund

DSP Credit Risk Fund is managed by DSP Mutual Fund. It is a debt mutual fund scheme and is overseen by fund managers Laukik Bagwe and Vivekanand Ramakrishnan. The scheme currently has an AUM worth Rs. 188.05 cr. and a NAV of Rs. 45.58. Over the past year, DSP Credit Risk Fund has delivered a return of 8.47%, with a 5-yr CAGR of 8.83%.

ICICI Pru All Seasons Bond Fund

ICICI Pru All Seasons Bond Fund is an open-ended debt mutual fund offered by ICICI Prudential Asset Management Company. The fund is currently managed by experienced professionals Rahul Goswami and Manish Banthia. The scheme currently has an AUM worth Rs. 13,409.86 cr. and a NAV of Rs. 37.96. Over the past year, ICICI Pru All Seasons Bond Fund has delivered a return of 8.80%, with a 5-yr CAGR of 8.06%.

UTI Short Duration Fund

UTI Short Duration Fund is an open-ended short-duration debt mutual fund offered by UTI Asset Management Company. The fund was launched on 16th September 2010, and is currently managed by seasoned fund managers Sunil Patil and Anurag Mittal. The scheme currently has an AUM worth Rs. 2,639.72 cr. and a NAV of Rs. 32.23. Over the past year, UTI Short Duration Fund has delivered a return of 8.28%, with a 5-yr CAGR of 8.04%.

What are the Best Mutual Funds?

Mutual funds are categorised by their underlying assets: equity, debt, or hybrid. Equity mutual funds, debt mutual funds, and hybrid funds have unique risk profiles and investment goals. Choose a mutual fund based on your investment goals, risk tolerance, and horizon.

Equity mutual funds might be suitable for long-term goals, such as retirement savings in 20 years. Equity funds include sub-categories like large-cap, mid-cap, and small-cap funds, each offering different risk levels. Large-cap funds focus on financially strong market leaders and are generally more resilient during economic downturns than small-cap funds, which invest in smaller companies and carry higher risks. For short-term goals, equity funds might be too volatile. In such cases, debt mutual funds, which are less volatile, could be a better choice. So, it all comes down to you as an investor and your investment objectives. Funds that suit the investors’ investment goals and risk tolerance emerge as the best mutual funds for that particular investor.

Features of the Best Mutual Funds

Here are a few key features that the best mutual funds may exhibit:

• Diversification: Mutual funds spread investments across multiple securities and asset categories, lowering risk compared to direct equity investing.
• Professional Management: Experienced fund managers actively manage mutual funds, ensuring they monitor and adjust investments to meet objectives.
• Transparency: Each mutual fund provides a Scheme Information Document detailing holdings and fund manager information. Investors can track their portfolio’s mutual fund performance with daily NAV updates.
• Liquidity: Investors can redeem investments on any business day and typically receive funds in 1-3 days. Some funds, like ELSS, have specific lock-in periods.
• Tax Efficiency: ELSS investments qualify for tax benefits under section 80C, and longer-term mutual fund investments can also be tax-efficient.
• Cost-effectiveness: Mutual funds, including the top 10 mutual funds to invest in 2024, pool investments, enabling access to diverse portfolios at lower costs than individual investments. This structure benefits from economies of scale, reducing expenses like brokerage fees.
• Returns: While not guaranteed and subject to market fluctuations, equity mutual funds historically offer potential for double-digit annual returns over the long term. Debt funds can also provide higher mutual fund returns than traditional bank deposits.
• Regulation: SEBI regulates India’s mutual fund industry, ensuring adherence to stringent regulations that protect investors, manage risks, ensure liquidity, and maintain fair valuation practices.

How to Identify the Best Mutual Funds?

Here are some additional tips for identifying the best mutual funds:

• Track Record: Assess the fund’s performance over the last three to five years, particularly during market downturns. Top-performing funds consistently outperform their benchmarks and peers.
• Financial Ratios: Evaluate ratios like alpha and beta to gauge performance against peers. Alpha indicates the manager’s added returns compared to the benchmark, while the Sharpe ratio measures risk-adjusted returns.
• Expense Ratio: Analyse the fee charged by fund houses, deducted from returns. A lower expense ratio enhances investor returns, ensuring costs are reasonable and compliant with regulatory limits.
• Fund History and Manager Performance: Consider the fund’s longevity and manager’s track record. Long-term performance data and a skilled fund manager are crucial indicators of potential returns.

These parameters help in making informed investment decisions aligned with financial objectives and risk tolerance. However, it is important to remember that past performance does not guarantee future results.

How to Invest in the Best Mutual Funds in India?

You can easily invest in mutual funds by following these steps:

• To invest in India mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
• The next step would be to research and identify the best MF to invest in which aligns with your investment thesis. You can easily select and learn more about the best mutual funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With 50+ pre-loaded filters, it helps you to create a comprehensive list by giving insights about the fund’s performance. Try it now!
• Once you have selected the best funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund name in the search bar and hit enter. You can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!

Who Should Invest in Mutual Funds?

Mutual funds with good returns can offer a valuable investment opportunity for everyone. They provide a structured approach to achieving financial goals, each with specific objectives. Before investing, ensure your goals align with those of the chosen fund. Investing through Systematic Investment Plans (SIPs) allows you to start with small amounts, such as Rs 100 per month, eliminating the need for a lump sum upfront. Most other investments do not offer this option. Like all investments, mutual funds, including the top 10 mutual funds to buy, carry risks that vary based on the assets involved. It’s essential to understand and accept these risks before investing, as no investment is entirely risk-free, including deposits.

Taxation on Mutual Funds as per the Union Budget for 2024-25

The taxation on capital gains from your mutual fund investments is based on their holding periods and asset allocation. A few revisions were made to the tax rates, depending on their types, in the Union Budget 2024-25. It may be important to learn about these revisions when considering the best mutual funds for investment. These changes include:

Equity Mutual Funds

• Short-Term Capital Gains (STCG): The gains from equity mutual funds held for less than 12 months are now taxed at 20%. This is an increase from the previous tax rate of 15%.
• Long-Term Capital Gains (LTCG): For equity mutual funds held for over a period of over 12 months, gains are classified as long-term capital gains. The new budget introduces these key changes to the LTCG:

1. Tax-Free Limit: The capital gains up to Rs. 1.25 lakh per year are tax-free. This is an increase from the previous limit of Rs. 1 lakh.
2. Tax Rate: The gains exceeding Rs. 1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
3. Indexation: The benefit of indexation, which allowed investors to adjust the purchase price for inflation, has been removed for all asset classes, including equity mutual funds.

Indexation was a method that allowed investors to adjust the purchase price of assets for inflation. This adjustment reduced taxable profits when selling assets like property or gold. Previously, these long-term capital gains were taxed at 20%. The new rule imposes a flat 12.5% tax on all long-term capital gains but eliminates any indexation benefits.

Capital Gains Tax	Holding Period	Old Rate	New Rate
Short-Term Capital Gains (STCG)	Less than 12 months	15%	20%
Long-Term Capital Gains (LTCG)	More than 12 months	10%	12.50%

Debt Mutual Funds

• Short-Term Capital Gains (STCG): If you sell your debt fund units within a period of 36 months, the gains are classified as short-term capital gains. The STCG will be taxed according to your income tax slab rate.
• Long-Term Capital Gains (LTCG): For debt funds held for a period over 36 months, the gains are classified as long-term capital gains. The new budget outlines a few changes on the LTCG for debt funds, including:

1. Tax Rate: A flat 12.5% tax rate applies to these gains.
2. No Indexation Benefit: The previous benefit of adjusting the purchase price for inflation is removed. Now, the entire gain after three years is taxable at 12.5%.

• Change in Holding Period for Specified Mutual Funds: Previously, debt mutual funds with a holding period of over 36 months were taxed based on the investor’s tax slab, classified as Long-Term Capital Gains (LTCG). Now, for specified mutual funds where over 65% of the investment is in debt, the holding period for taxation has been reduced to over 24 months. These funds will still be taxed according to the investor’s tax slab as either LTCG or STCG. 

Capital Gains Tax	Holding Period	Old Rate	New Rate
Short-Term Capital Gains (STCG)	Less than 36 months	Taxed according to your income tax slab	Taxed according to your income tax slab
Long-Term Capital Gains (LTCG)	More than 36 months	10%	12.50%

Hybrid Mutual Funds

Short-Term Capital Gains (STCG)

The tax on short-term capital gains depends on the fund’s asset allocation when it comes to hybrid mutual funds. Here is a breakdown of STCG tax rates according to their asset allocation in hybrid funds:

• Equity-Oriented Hybrid Funds (more than 65% in equity): The gains from units sold within 12 months are taxed at 20%.
• Debt-Oriented Hybrid Funds (less than 65% in equity): The gains from units sold within three years are taxed according to your income tax slab.

Long-Term Capital Gains (LTCG)

The capital gains tax on hybrid mutual funds that extend the specified period (12 or 36 months) is known as the long-term capital gain tax. The tax treatment under this condition is as follows:

• Equity-Oriented Hybrid Funds: The gains from units held for over a period of 12 months are taxed at 12.5%. The gains up to Rs. 1.25 lakh are tax-free.
• Debt-Oriented Hybrid Funds: The gains from units held for over a period of 36 months are taxed at 12.5% without indexation benefits. This means the entire gain is taxed at this rate, without adjustment for inflation.

Type of Hybrid  Fund	Short-Term Capital Gains (STCG)	Long-Term Capital Gains (LTCG)	Indexation Benefit
Equity-Oriented Hybrid Funds	20% for holdings less than 1 year	12.5% for holdings over 1 year, with gains up to Rs. 1.25 lakh tax-free	Not available
Debt-Oriented Hybrid Funds	Taxed as per income tax slab for holdings less than 3 years	12.5% for holdings over 3 years	Not available

Note: Mutual fund schemes where neither the equity nor debt orientation exceeds 65% will now be classified as long-term investments after 24 months. The previous holding period for these funds was 36 months. These will be taxed at the revised LTCG tax rate of 12.5%.

Advantages of Investing in the Best Mutual Funds

Investing in the best mutual funds can offer several key benefits, including:

• Expert Money Management: Mutual funds are managed by experienced fund managers supported by teams of analysts. They select high-performing instruments for the fund’s portfolio, eliminating the need for individual market expertise.
• Regular Small Investments: With systematic investment plans (SIPs), you can invest small fixed sums, starting from as low as Rs 100 regularly. This allows you to begin investing without requiring a large initial capital.
• Diversification: Mutual funds spread investments across multiple securities, offering investors a diversified portfolio without needing to manage individual investments.
• Liquidity: Most mutual funds investments are open-ended, allowing investors to redeem their units at any time. This ensures liquidity and easy access to funds.
• Regulation: Mutual funds in India are regulated by SEBI, RBI, and AMFI, ensuring investor protection and safety of investments.
• Tax Benefits: Tax-saving mutual funds like ELSS offer deductions under Section 80C of the Income Tax Act, 1961, allowing investors to save up to Rs 46,800 annually in taxes.

Risk Possessed by Best Mutual Funds

The best performing mutual funds pose varying levels of risk, with the highest risk associated with those primarily investing in company shares across different market sizes. These funds are strongly influenced by market movements.

Types of risks associated with equity funds include:

• Market Risk: Potential losses due to market underperformance influenced by factors like natural disasters, viral outbreaks, and political unrest.
• Concentration Risk: Investing heavily in a single company or sector can amplify losses if adverse developments occur.
• Interest Rate Risk: Fluctuations in interest rates can impact security prices negatively during the investment period.
• Liquidity Risk: Difficulty in selling securities without significant loss if buyers are scarce.
• Credit Risk: The possibility that issuers may fail to pay interest or repay principal as promised, assessed through credit ratings.

Factors to Consider Before Investing in the Best Mutual Funds

Here are a few factors investors can consider before investing in the top performing mutual funds in India:

• Define Your Investment Goals: Determine what you aim to achieve. This guides you in selecting a mutual fund that aligns with your goals and risk tolerance.
• Assess Your Investment Horizon: Evaluate how long you plan to invest. Long-term investments can offer better returns on mutual funds with reduced risks. However, this is not guaranteed and investors must do their own research and/or consult a financial advisor before investing.
• Review Past Performance: Analyse the fund’s historical performance against benchmarks and similar funds to gauge potential future returns.
• Evaluate Fund Manager Experience: Assess fund managers’ track record and qualifications. Consistent performance and management style are crucial considerations.
• Understand Net Asset Value (NAV): NAV reflects the fund’s unit market value. Higher NAV funds may be costlier but could offer more stable investments.
• Determine Your Risk Tolerance: Mutual funds carry varying levels of risk. Ensure you’re comfortable with the risks associated with your chosen funds.
• Know Exit Loads: Some funds impose charges, known as exit loads, for early withdrawals. Understand these terms to avoid unexpected costs.

To Wrap It Up…

Investing in the best mutual funds may offer several advantages, as listed above. Mutual funds are convenient and accessible for wealth creation, helping to build a diversified investment mutual fund portfolio and manage risks while aiming for higher returns. However, it’s crucial to remember that mutual funds involve market risks, so your investment decisions should align with your risk tolerance and financial goals. Consulting a financial advisor can provide valuable guidance in making informed investment choices.

Most Popular Mutual Funds:

As an investor to have a diversified mutual funds portfolio, you might also like to know more about these different types of funds for investing –

Large Cap Mutual Funds	Mutual Fund Bulk Deals	SBI Mutual Funds for SIP	SBI MF for Long Term SIP	Sectoral Mutual Funds	Short Term Mutual Funds	Tax Saving Mutual Funds	Mid Cap Mutual Funds
Small Cap Mutual Funds	Pharma Mutual Funds	80c Mutual Funds	1 Year Mutual Funds	International Mutual Funds	Tata Mutual Funds	Mutual Fund Portfolio	Best Mutual Funds
High Risk Mutual Funds	Micro Cap Mutual Funds	AMCs	MNC Mutual Funds	Equity Mutual Funds	Overnight Funds	ICICI Pru Mutual Funds	HDFC Mutual Funds
Best Investment Plans	Fixed Income Mutual Funds	Penny Stock Mutual Funds	Retirement Mutual Funds	Floater Rate Funds	Aggressive Hybrid Funds	Multi Asset Allocation Funds	Children’s Funds
Medium Duration Funds	Debt Funds	Corporate Bonds	Ultra Short Term Funds	Value Funds	Contra Funds	Focused Funds	Funds of Funds
Money Market Funds	Arbitrage Funds	Gold Mutual Funds	Books on Mutual Funds	Best Mutual Funds for SIP	SBI Mutual Funds	Low Risk Mutual Funds	Dividend Paying Funds
Long Term Mutual Funds	Banking Mutual Funds	Gilt Funds	Mutual Funds for 10 Years	Monthly Income Mutual Funds	Nifty 50 Index Funds	Lumpsum Investment Funds	Blue Chip Mutual Funds
Low Expense Ratio Funds

Frequently Asked Questions (FAQs) on the Best Mutual Funds