Is a G-Sec ETF completely safe because the government is behind it?

There is no meaningful credit risk — the Government of India will repay its bonds. But there is real price risk. A standard 10-year constant maturity G-Sec ETF can lose roughly 7% of its NAV for every 1% rise in interest rates. Safety of repayment is not the same as safety of price.

Conceptual · Article 2.1.3.3

Gilt & G-Sec ETFs.

Q: How is a G-Sec ETF taxed in India for FY 2025-26?

For units purchased on or after April 1, 2023, G-Sec ETFs are Specified Mutual Funds under Section 50AA: all capital gains are taxed at your income tax slab rate regardless of holding period — no LTCG benefit, no indexation. A 30% bracket investor pays an effective 31.2% including 4% cess.

Q: What happens to my G-Sec ETF when the RBI cuts interest rates?

When the RBI cuts rates, bond prices rise, so a G-Sec ETF's NAV typically increases. The longer the duration, the larger the NAV gain. This is why long-duration G-Sec ETFs are sometimes bought deliberately at the start of a rate-cutting cycle.

Q: Can I use a G-Sec ETF as an emergency fund?

Generally no, especially a long-duration one. A 10-year G-Sec ETF can fall 7% or more in a rising-rate environment. Emergency money belongs in a savings account or liquid fund. G-Sec ETFs are a medium-to-long-term allocation tool, not a cash equivalent.

Zero Default Risk. Full Duration Risk. Know the Difference.

Published as on 29 June 2026

A Gilt / G-Sec ETF is a stock-market listed fund that holds Government of India bonds — buy and sell units on the NSE or BSE through your demat account. It removes the risk that the government will not repay you (zero credit risk), but it does not remove the risk that your NAV moves up and down daily as interest rates change. A standard 10-year constant maturity ETF carries roughly 6.5–7.5 years of modified duration: a 1% rate rise can cut NAV ~7%. Post April 1, 2023, gains are taxed at your slab rate under Section 50AA — no LTCG benefit. Pure sovereign duration exposure, not an FD substitute.

Zero

Credit / Default Risk

~6.5–7.5 yr

Duration (10Y CMF)

Slab Rate

Tax (Post Apr 2023)

6.5–7.2%

Indicative 10Y Yield

Executive Summary · Page 2

Executive Summary · 6 Findings

A Gilt / G-Sec ETF is Government bonds packaged into an exchange-listed fund. It answers a precise question: how do I add pure sovereign exposure — with no risk that the issuer defaults — to my debt allocation? The catch most investors miss: zero credit risk does not mean zero price risk. The government will repay, but the daily NAV still swings with the RBI rate cycle.

Covers what a G-Sec ETF is and the problems it solves (access, diversification, liquidity), why government backing removes default risk but not interest-rate/duration risk, how duration drives NAV sensitivity, the two structural types (constant vs target maturity), how returns split into yield income plus price change, debt-fund taxation under Section 50AA (slab rate post April 1, 2023), comparison with FDs / target-maturity / Bharat Bond ETFs, three misconceptions, and the seven retail questions.

Key Findings

Government bonds in a listed fund. Zero credit risk.

A G-Sec is a Government Security — an IOU the Government of India issues to borrow. A Gilt / G-Sec ETF holds a basket of these, bought and sold on NSE/BSE through your demat account like a share. There is no meaningful default risk: the sovereign will repay. Unit prices range from as low as ~₹15 to over ₹1,000, so any budget can participate.

Zero default risk ≠ zero price risk.

When market rates rise, existing bond prices fall; when rates fall, prices rise. So the ETF's NAV moves every trading day even though the underlying bonds are fully backed by the Government of India. This is interest-rate risk (also called duration or price risk) — the single most misunderstood feature of these funds.

Duration is the lever. ~7 years on a 10Y ETF.

A standard 10-year constant maturity G-Sec ETF has a modified duration of roughly 6.5–7.5 years. Rule of thumb: a 1% rate move shifts NAV by about that percentage. A 1% rate rise on ₹1,00,000 at 7-year duration is roughly a ₹7,000 paper loss; a 1% cut is roughly a ₹7,000 gain. Long-duration funds (15–30Y) can run 12–15+ years duration and swing far more.

Two structural types behave very differently.

Constant maturity ETFs always hold a target tenor (e.g. 10Y) — sensitivity never reduces, ideal for rate-cycle positioning. Target maturity ETFs hold bonds maturing around a set year — duration shrinks as the date nears, behaving like a fixed-maturity instrument by then. Confusing the two leads to mismatched expectations.

Taxed at slab rate post April 1, 2023 (Section 50AA).

G-Sec ETFs are debt-oriented (>65% in debt), treated as Specified Mutual Funds. For units bought on/after April 1, 2023, all gains are taxed at your income tax slab rate regardless of holding period — no LTCG benefit, no indexation. A 30% bracket investor pays an effective 31.2% (incl. 4% cess), whether held 6 months or 6 years.

Sovereign duration exposure — not an FD substitute.

The role is not to maximise income; it is to hold a position that can appreciate meaningfully if rates fall, with no issuer-default risk and a useful diversification benefit when equities are stressed. Post Finance Act 2023, the tax edge over an FD is gone for 20%/30% bracket investors — so use it for duration positioning and diversification, not yield-chasing.

At A Glance

Metric	Value	Detail
Holdings	Govt of India bonds	Sovereign only
Credit Risk	Zero	No default risk
Price Risk	High	Duration-driven
Duration (10Y CMF)	~6.5–7.5 yr	Modified duration
Min Investment	1 unit (~₹15–₹1,100)	Fund-dependent
Indicative 10Y Yield	6.5–7.2%*	RBI-policy linked
Tax (post Apr 2023)	Slab rate	Section 50AA
Best Use	Rate-cycle / goal	Not emergency fund

Exhibit 01: ₹1,00,000 in a 7-yr Duration 10Y ETF

RBI Rate Move	Approx NAV Impact	Value
+1.0% (rate rise)	−7%	~₹93,000
No change	Yield income only	~₹1,00,000 + coupon
−1.0% (rate cut)	+7%	~₹1,07,000

Illustrative, short-term price impact only, assuming ~7-year modified duration and rates moving in parallel. The underlying bonds remain perfectly sound and repayable in full regardless of NAV movement. Longer-duration funds swing more; target-maturity funds swing less as their maturity nears.

The Opening · Page 3

The Opening

A Gilt / G-Sec ETF holds a basket of Government of India bonds — the safest issuer in the country — packaged into a single exchange-listed unit. Instead of buying one government bond on RBI Retail Direct and managing it yourself, you buy units of a fund that already holds dozens of such bonds, professionally managed and priced every trading day. The short version: G-Sec ETF = Government bonds, packaged into a stock-market listed fund.

"The Government of India will almost certainly repay the bonds it issues — there is no meaningful default risk. But the price of that bond moves every single day. When rates rise, existing bond prices fall; when rates fall, they rise. Safety of repayment is not the same as safety of price."
The Credit-vs-Duration Frame

The mechanics. A simple example: you hold a government bond paying 7%. The RBI raises rates and new bonds pay 7.5%. No one will buy your 7% bond at the old price — so its price drops until its effective yield matches 7.5%. That price adjustment is interest-rate risk, and it affects every fixed-income instrument, G-Sec ETFs included. Duration measures how big that swing is: roughly, a 1% rate move shifts NAV by the fund's duration in years.

The FY 2025-26 context. India's 10-year G-Sec benchmark yield has historically ranged ~6.5–7.2% and remained in that band in early 2026 (indicative, RBI-policy linked). Critically, after the Finance Act 2023, gains on units bought on/after April 1, 2023 are taxed at your slab rate under Section 50AA — no LTCG benefit, no indexation. For 20%/30% bracket investors, the old tax advantage over a bank FD is gone.

The Honest Boundary: G-Sec ETFs are NOT an emergency fund (a 10Y ETF can fall 7%+ when rates rise). They are NOT an FD substitute with capital certainty — daily NAV moves are normal. They are NOT a way to chase the highest debt yield. They ARE the cleanest way to hold pure sovereign duration exposure: zero default risk, meaningful upside if rates fall, and a diversifier when equities are under stress.

Structure

Part I

What It Is, Why It Exists, Coupons & the Two Types

Part II

Interest-Rate Risk, Duration Math & Returns

Part III

Tax (Section 50AA), vs FD / Target Maturity / Bharat Bond

Part IV

The Verdict: Sovereign Duration, Used Correctly

Use If

✓ Want pure sovereign, zero-credit-risk debt

✓ Positioning for an RBI rate-cut cycle

✓ Goal aligned to a target-maturity year

✓ Comfortable with daily NAV swings

Do NOT Use If

✕ Need money in 6–12 months

✕ Want FD-like value certainty

✕ In 20%/30% slab seeking FD-beating post-tax return

✕ Chasing the highest debt yield

Part I

What a G-Sec ETF Is, Why It Exists, and the Two Structural Types

Government securities packaged into an exchange-listed fund; the access, diversification and liquidity problems it solves; how coupons are reinvested in the Growth option; and the critical difference between constant maturity and target maturity G-Sec ETFs.

Part I · Page 4

Three Problems It Solves

Problem	How the ETF Solves It
Accessibility	Buy units from ~₹15 each on the exchange
Diversification	Many bonds across maturities, not one
Liquidity	Sell on any trading day; no lock-in
Regulation	SEBI-regulated, run by AMCs

Does It Pay You Interest?

Coupons Reinvested in Growth Option

Government bonds pay a coupon every six months. In the Growth option, the ETF does not send this to your bank — it reinvests the coupon into the portfolio, so the NAV grows over time (incorporating both interest income and price movement).

The IDCW option may distribute income periodically (not guaranteed), taxed at slab rate when received. For most long-term investors the Growth option is cleaner — gains compound inside the fund, taxed only on sale.

A Note on Tracking Error

G-Sec ETFs track a government-bond index. In practice a small gap — tracking error — opens between the ETF and its benchmark, due to transaction costs, the timing of bond rollovers, and occasionally thin exchange liquidity. In well-managed funds it is small; when comparing two funds tracking similar benchmarks, lower tracking error is generally more efficient.

Example Tickers on NSE

Ticker	Fund
GSEC10YEAR	Nippon India ETF G-Sec 10Y (~₹15–₹20)
ICICIGI	ICICI Pru Nifty 10Y G-Sec ETF (~₹1,000–₹1,100)
SETFGSEC	SBI ETF 10Y G-Sec
MOTILAL5Y	Motilal Oswal 5Y G-Sec ETF (mid-duration)

The Two Types Compared

Feature	Constant Maturity	Target Maturity
Duration fixed?	Yes — always same	No — reduces over time
Maturity date?	No	Yes
Rate sensitivity	Stays high	Falls near maturity
Volatility	Persistent	Compresses near target
Good for	Rate-cycle positioning	Time-aligned goals

Type 1: Constant Maturity

Always maintains a target tenor — e.g. always holding 10-year bonds, selling them as they age and buying new 10Y bonds. Rate sensitivity does not reduce over time: hold it 5 years and it is just as sensitive as on day one. Best for investors deliberately positioning for an RBI rate-cut cycle, where a long-duration fund benefits from each cut.

Type 2: Target Maturity

Holds bonds all maturing around a target year (e.g. 2027 or 2032). As time passes, duration naturally shrinks; near the target the ETF behaves almost like a fixed-maturity investment. Volatility reduces as the date approaches — more predictable for investors redeeming close to the target year. The Motilal Oswal 5Y G-Sec ETF (MOTILAL5Y) is a mid-duration example.

The structural insight: the "safety" of a G-Sec ETF refers only to the issuer, never to the price path. A constant maturity 10Y fund and a target maturity 2027 fund both hold pure sovereign bonds — yet one stays volatile forever while the other settles down as its maturity nears. Match the structure to your purpose before you buy.

Part II

Interest-Rate Risk, the Duration Math, and How Returns Actually Work

Why government backing removes default risk but not price risk, how modified duration translates rate moves into NAV swings, why long-duration funds are a different risk category, and how total return splits into yield income plus price change.

Part II · Page 6

The Duration See-Saw

Rule of Thumb

If interest rates change by 1%, a fund's NAV moves by roughly its modified duration (in years). The longer the lever, the bigger the swing.

Standard 10Y constant maturity ETF: modified duration ~6.5–7.5 years → a 1% rate rise cuts NAV ~6.5–7.5%.

Worked Example — ₹1,00,000, 7-yr Duration

RBI raises rates 1%: value falls to ~₹93,000 — a ₹7,000 paper loss — even though the bonds are perfectly sound and repayable in full.

RBI cuts rates 1%: value rises to ~₹1,07,000 — a ₹7,000 paper gain.

Long-Duration Is a Different Category

Funds holding 15–30 year G-Secs can carry modified duration above 12–15 years and swing far more dramatically with rate moves. They are not a more aggressive version of a 10Y fund — they are a distinct risk category and should be treated as such.

Duration by Fund Type

Fund	Approx Duration	NAV per +1%
5Y target maturity	~lower	Smaller fall
10Y constant maturity	~6.5–7.5 yr	~−7%
Long-duration (15–30Y)	12–15+ yr	−12% to −15%+

How Returns Work

Two Sources of Return

1. Yield income: coupons from the underlying bonds, reinvested into NAV (Growth option). India's 10Y G-Sec yield has ranged ~6.5–7.2% in recent years and in early 2026 (indicative, RBI-policy linked).

2. Price change: as rates move, NAV moves. Rates fall → NAV rises (adds to return). Rates rise → NAV falls (subtracts). There is no guaranteed return.

Target Maturity & Indicative YTM

For a target maturity ETF, if you hold close to the target year and rates do not move dramatically, your return approximates the yield at which you bought — often described as an "indicative yield to maturity." This is an expected return, not a guaranteed outcome.

What an RBI Rate Cut Does

When the RBI cuts rates, bond prices rise, so the ETF's NAV typically increases — often as cuts are anticipated, not just announced. The longer the duration, the larger the NAV gain from a given cut. This is why long-duration G-Sec ETFs are sometimes bought deliberately at the start of a rate-cutting cycle.

Yield Income vs Price Change

Component	Predictability
Yield income	Relatively predictable
Price change	Can dominate short-term
Total return	Not guaranteed

The honest truth: over short periods, price movement can completely swamp the steady yield income. A fund yielding ~7% can still post a negative one-year return if rates jump. The longer your horizon — or the closer a target-maturity fund sits to its date — the more the predictable yield component dominates and the price noise fades.

Part III

Taxation Under Section 50AA, and Comparison with FD / Target Maturity / Bharat Bond

Why the post-April 1, 2023 framework taxes G-Sec ETF gains at your slab rate (no LTCG benefit, no indexation), the transitional rules for older holdings, and where G-Sec ETFs sit against bank FDs, direct G-Secs, PPF and Bharat Bond ETFs.

Part III · Page 8

Tax — Section 50AA (FY 2025-26)

Units Bought On/After April 1, 2023

All capital gains — regardless of holding period — taxed at your income tax slab rate. No LTCG benefit, no indexation, no special flat rate.

Example: Invest ₹5,00,000 (Aug 2024), sell for ₹6,20,000 (Mar 2027). Gain ₹1,20,000 → in 30% slab, tax ₹37,440 (30% + 4% cess). Same slab rate whether held 6 months or 6 years.

Transitional Rules — Older Holdings

Purchase	Sale / Holding	Tax
On/after 1 Apr 2023	Any	Slab rate
Before 1 Apr 2023	After 23 Jul 2024, >24 mo	12.5%, no indexation
Before 1 Apr 2023	After 23 Jul 2024, ≤24 mo	Slab rate
Before 1 Apr 2023	Before 23 Jul 2024, >36 mo	20% with indexation

Dividends (IDCW Option)

Taxed at slab rate under "Income from Other Sources." The AMC deducts 10% TDS if total IDCW from that AMC exceeds ₹5,000 in a financial year.

Key Takeaway for New Investors

Buy a G-Sec ETF today and gains are always taxed at your slab rate. A G-Sec ETF no longer offers any tax advantage over a bank FD for 20% or 30% bracket investors — one of the most important Finance Act 2023 changes that many investors still miss.

vs Other Safe Investments

Investment	Credit Risk	Volatility
Bank FD	Low (bank-dependent)	None
Direct G-Sec (to maturity)	None	None if held
G-Sec ETF — Constant Mat.	None	High (duration)
G-Sec ETF — Target Mat.	None	Falls over time
PPF	None	None (lock-in)

Tax & Yield Side-by-Side

Investment	Tax (New)	Indic. Yield
Bank FD	Slab rate	~6.8–7.3%*
Direct G-Sec	Slab rate	~6.5–7.2%*
G-Sec ETF	Slab rate	Yield + price
PPF	Tax-free	7.1%*

*Indicative, subject to change. FD rates for major scheduled commercial banks (SBI, HDFC Bank, ICICI Bank), 1–3 yr tenures, early 2026; senior citizens typically +0.50%. PPF subject to quarterly government revision.

G-Sec ETF vs Bharat Bond ETF

Bharat Bond ETFs hold AAA-rated bonds of Central Public Sector Enterprises (NABARD, PFC, REC) — government-owned companies, technically credit instruments with implicit backing. G-Sec ETFs hold bonds issued directly by the Government of India — zero credit risk, the absolute sovereign floor. Bharat Bond may offer marginally higher yields for that technical difference.

The honest truth: for a new investor in the 20%/30% bracket, the post-tax return of a G-Sec ETF is broadly comparable to an FD — with added daily volatility. So the case for it is not tax or yield; it is the combination of zero credit risk, exchange liquidity without penalty, and meaningful upside if you are positioning for falling rates. If certainty is your priority, the FD is simpler.

Part IV

The Verdict

Sovereign safety of repayment. Not safety of price.

Part IV: The Verdict · Page 10

30-Second Summary

A Gilt / G-Sec ETF holds Government of India bonds in an exchange-listed fund — zero credit risk, full interest-rate risk. A standard 10-year constant maturity ETF carries ~6.5–7.5 years of modified duration, so a 1% rate move shifts NAV roughly 7%. Returns come from yield income (10Y benchmark ~6.5–7.2%, RBI-linked) plus price change. Constant maturity stays volatile; target maturity settles down as its date nears.

Post Finance Act 2023, units bought on/after April 1, 2023 are taxed at your slab rate under Section 50AA — no LTCG benefit, no indexation — erasing the old tax edge over FDs for 20%/30% bracket investors. Use a G-Sec ETF for pure sovereign duration exposure: rate-cycle positioning, goal-aligned target-maturity allocation, and diversification against equity stress. Do not use it as an emergency fund, an FD substitute, or a yield-chasing tool.

"Government backing answers one question only — will I be repaid? Yes. It says nothing about the other question — what will my units be worth next month? That depends entirely on the RBI's rate cycle and the fund's duration. The investor who treats a long-duration G-Sec ETF as a safe parking spot has confused the safety of the issuer with the safety of the price. Liquidity is not stability."
The Final Orientation

The Bottom Line: Use G-Sec ETFs for sovereign duration exposure — zero default risk, real price risk. Pick the structure for your purpose: constant maturity (e.g. GSEC10YEAR, ICICIGI, SETFGSEC) for rate-cycle positioning; target maturity (e.g. MOTILAL5Y) for a goal aligned to its year. Accept daily NAV swings; never use it for money needed in 6–12 months. Remember the tax reality: for new units, gains are taxed at slab rate, the same as an FD. If value certainty matters most, an FD is simpler; if you value flexibility and want upside from falling rates, a G-Sec ETF has merit. Verify current tickers and scheme details on NSE before investing.

ADWIZR · June 2026

Decision Rules

Use Correctly As

✓ Pure sovereign duration sleeve

✓ Rate-cut cycle positioning

✓ Target maturity for a dated goal

✓ Equity diversifier (5+ yr)

Misuse Destroys Value

✕ Emergency fund / 0–2 yr money

✕ Expecting FD-like certainty

✕ Yield-chasing in 20%/30% slab

✕ Long-duration without understanding it

Three Misconceptions

What Investors Get Wrong

(1) "Government backing means no risk." No credit risk, but real price risk — ~7% NAV per 1% rate move on a 10Y fund. (2) "ETF format = liquid parking option." ETFs give liquidity, not stability; sell in a rising-rate phase and you exit at a loss. (3) "Long duration means better returns." It means higher sensitivity both ways — amplified outcomes, not reliably better ones.

Zero

Credit risk

Sovereign issuer

~7%

NAV per 1% rate

10Y, ~7yr duration

Slab

Tax rate

Section 50AA, new units

Investor FAQ

Questions Indian Investors Ask

Seven questions, answered directly.

Investor FAQ · Page 12

Frequently Asked Questions

Q1 Is a G-Sec ETF safer than a regular debt mutual fund?

In terms of credit risk, yes — G-Sec ETFs hold only government bonds, so no company can default on them. Regular debt funds holding corporate bonds carry some credit risk depending on the portfolio. But "safer" depends on which risk you compare. A short-duration corporate bond fund may be less volatile day-to-day than a long-duration G-Sec ETF. Credit safety and price stability are different dimensions of risk.

Q2 Can I use a G-Sec ETF as an emergency fund?

Generally no — especially a long-duration one. Your emergency fund must hold its value reliably when you need it. A 10-year G-Sec ETF can fall 7% or more in a rising-rate environment. Use a savings account or liquid fund for emergency money. G-Sec ETFs are a medium-to-long-term allocation tool, not a cash equivalent.

Q3 Is a G-Sec ETF better than an FD after the Budget 2024-25 tax changes?

For most investors buying today, gains are taxed at slab rate — the same as FD interest — so there is no longer a tax advantage. The meaningful differences: G-Sec ETFs offer exchange-traded liquidity with no early-exit penalty, while FDs give a known maturity value. If your priority is certainty, an FD is simpler. If you value flexibility and are comfortable with daily NAV movement, a G-Sec ETF has merit.

Q4 What is the difference between a G-Sec ETF and a Bharat Bond ETF?

Bharat Bond ETFs hold bonds issued by Central Public Sector Enterprises (CPSEs) such as NABARD, PFC and REC — government-owned companies. These are AAA-rated with implicit government backing, but technically credit instruments: a CPSE is not the sovereign itself. G-Sec ETFs hold bonds issued directly by the Government of India, carrying zero credit risk — the absolute sovereign floor. Both have very low credit risk in practice; Bharat Bond may offer marginally higher yields to reflect the difference.

Q5 How do I buy a G-Sec ETF in India?

You need a demat and trading account — the same ones used to buy shares. Search the ticker on NSE through your broker and place a buy order during market hours: GSEC10YEAR (Nippon India ETF G-Sec 10Y, ~₹15–₹20); ICICIGI (ICICI Pru Nifty 10Y G-Sec ETF, ~₹1,000–₹1,100); SETFGSEC (SBI ETF 10Y G-Sec); MOTILAL5Y (Motilal Oswal 5Y G-Sec ETF, mid-duration). Names and tickers are illustrative — always verify current scheme details on NSE or your broker platform before investing.

Q6 What happens to my G-Sec ETF when the RBI cuts interest rates?

When the RBI cuts rates, bond prices rise, so the ETF's NAV typically increases — often as cuts are announced or anticipated by the market. The longer the duration of the ETF, the larger the NAV gain from a given cut. This is why long-duration G-Sec ETFs are sometimes bought deliberately at the start of a rate-cutting cycle: the NAV appreciation from falling rates adds meaningfully to total return.

Q7 Can an NRI invest in G-Sec ETFs?

Yes — on a repatriation basis through an NRE demat account, or non-repatriation through an NRO account (via PIS or non-PIS, depending on the broker). Key tax point: mutual funds must deduct TDS at redemption. For Specified Mutual Funds like G-Sec ETFs, TDS is typically applied at the highest applicable slab rate — roughly 30% plus surcharge and 4% cess — because all gains are short-term regardless of holding period. An NRI can file an Indian tax return to claim a refund if TDS was over-collected.

Key Terms & Definitions

G-Sec (Government Security)

A bond — essentially an IOU — issued by the Government of India to borrow money. The government pays interest (a coupon) every six months and repays principal on a fixed date. Carries zero credit/default risk; the sovereign is the safest issuer in the country.

Gilt / G-Sec ETF

An exchange-traded fund that holds a basket of Government of India bonds, bought and sold on the NSE or BSE through a demat account like a share. Provides access, diversification across maturities, and exchange liquidity — pure sovereign exposure in a single listed unit.

Interest-Rate / Duration Risk

The risk that a bond fund's price moves as market interest rates change: rates up → prices down, rates down → prices up. This daily NAV movement exists even though the underlying government bonds carry no default risk. Also called price risk.

Modified Duration

A measure of how sensitive a bond fund's NAV is to interest-rate changes. Rule of thumb: a 1% rate move shifts NAV by roughly the duration (in years). A 10-year constant maturity G-Sec ETF typically runs ~6.5–7.5 years; long-duration funds can exceed 12–15 years.

Constant vs Target Maturity

Constant maturity ETFs always hold a fixed tenor (e.g. 10Y) so rate sensitivity never reduces — suited to rate-cycle positioning. Target maturity ETFs hold bonds maturing around a set year; duration shrinks and volatility compresses as the date nears — suited to time-aligned goals.

Section 50AA / Specified Mutual Fund

Provision introduced by Finance Act 2023. Debt-oriented funds (>65% in debt) bought on/after April 1, 2023 are Specified Mutual Funds: all gains taxed at the investor's slab rate regardless of holding period — no LTCG benefit, no indexation.