Mutual funds are investment pooling entities that pool the capital of different investors and invest the money in a variety of investment options such as company stocks, bonds, shares etc. Securities and Exchange Board of India (SEBI) regulates mutual funds in India. Investing in mutual funds is considered as the easiest way of increasing wealth. A mutual fund can be viewed as both an investment and an actual company. Here it needs to be noted that returns gained from mutual fund investments are liable for taxation. The returns are taxed under ‘Income from Capital Gains’ header. In this text, you will get a complete understanding of taxation of mutual funds in India.<\/p>\n\n\n\n
Mutual funds in India<\/a><\/strong> are classified into different categories based on their structure, investment objectives and risk.<\/p>\n\n\n\n Open-ended funds<\/strong>:\nThese type of mutual funds does not have a fixed maturity period. Such mutual\nfunds have no restrictions as far as the number of units that can be traded or\nthe time period is concerned.<\/p>\n\n\n\n Closed-ended funds<\/strong>:\nThe maturity period of these mutual funds is fixed. The capital that is to be\ninvested in close-ended mutual funds is fixed beforehand, and hence it is not\nviable to sell more than the pre-agreed number of units. Such funds have\nrelatively low liquidity.<\/p>\n\n\n\n Equity funds<\/strong>: Equity funds<\/a> are the most preferred investment options among the investors. These types of funds generally make investments in stocks of companies. Though equity funds are categorized as high risk, these funds also have a potential of high returns. Historically equity funds have outperformed all asset classes in the long term. The return from equity funds depends upon the performance of shares in stock market<\/a>.<\/p>\n\n\n\n Debt funds<\/strong>: These\ntype of funds aim at generating regular income for investors by investing in\nbonds, corporate debentures etc with fixed interest rate and maturity date.\nInvestors looking for a small but regular income with minimal risks should\ninvest in these funds.<\/p>\n\n\n\n Money Market Funds<\/a>:<\/strong> Investors typically use these types of funds to invest in high quality, short-term debt instruments, cash and cash equivalents. These funds are considered extremely low risk on the investment spectrum.<\/p>\n\n\n\nMutual Funds based on their structure<\/h3>\n\n\n\n
Mutual Funds based on nature of investments<\/h2>\n\n\n\n
Different Types of Mutual Funds<\/h2>\n\n\n\n