New LIC Mutual Fund's Short Term Debt Fund: Investment, SIP, maturity, income tax implication, other features explained

LIC Mutual Fund has launched an open-ended short-term debt fund scheme for investing in instruments of 'Macaulay duration' between one and three years. The company has also come out with a new fund offer called 'LIC MF Short Term Debt Fund' that will close on January 25. The Macaulay duration signifies the formula used by portfolio managers of the weighted average term-to-maturity of the cash flows from a bond. Below are the details that may help you decide whether you should invest or not:

Investment objective of the fund: The primary investment objective of the scheme is to generate returns commensurate with risk from a portfolio constituted of Debt securities and/or Money Market instruments. However, there can be no assurance that the investment objective of the scheme will be achieved.

Where the scheme will invest your money?
1. The corpus of the scheme will be invested in debt and money market instruments.

2. Money market securities include commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity up to one year, call or notice money, certi?cate of deposit, usance bills, Tri-party Repo etc.

3. Securities created and issued by the Central and State Governments and Reverse Repos in such Government Securities as may be permitted by RBI/SEBI.

4. Securities guaranteed by the Central and State Governments.

5. Debt obligations of domestic Government agencies and statutory bodies, which may or may not carry a Central/State Government guarantee.

6. Securitized Debt obligations.

7. The non-convertible part of convertible securities.

8. Any other like instruments as may be permitted by SEBI from time to time.

Tax Implications of investing in this fund
1. Long term capital gains (LTCG) tax @20% (plus surcharge, if applicable and cess) with indexation if units held for more than 36 months.

2. Short term capital gains (STCG) tax at the income tax slab rate if units are held for less than 36 months.

3. Investor does not pay any tax on dividends but a Dividend Distribution Tax (DDT) is deducted at source @29.12% ( 25% + 12% surcharge + 4% Health & education cess) for Individuals and @ 34.944% ( 30% + 12% surcharge + 4% Health & education cess) for any other person.

4. In case of an investor being NRI, LTCG tax are chargeable @ 10% (plus surcharge, if applicable and cess) without indexation relating to units redeemed from unlisted schemes.

Minimum Application Amount
Minimum of Rs 5,000 and in multiples of Rs 1 thereafter. For Systematic Investment Plan (SIP), the minimum amount is Rs 300 (Daily), Rs 1,000 (Monthly) & Rs 3,000 (Quarterly) & in multiples of Rupee 1 thereafter.

Fund options: Growth and Dividend
The Dividend option has the following facilities: (i) Dividend Reinvestment Facility (ii)  Dividend Pay-out Facility. Default Investment option is Growth Option. For the Dividend option, the default facility will be Dividend Reinvestment.

Minimum Redemption Amount
Minimum of Rs 500 & in multiples of Rupee 1 thereafter.

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Minimum Additional Amount (For subsequent investments under an existing folio): Rs 500 and in multiples of Rupee 1 thereafter.

Plans: Regular Plan & Direct Plan

Risk Meter: This product is suitable for investors who are seeking:
(i) Generation of reasonable returns over short to medium term
(ii) Investment in Debt securities and money market instruments
(iii) Risk - Moderate