- Mutual Funds
- Best Ultra Short Term Fund
Best Ultra Short Term Fund
Invest in the best mutual funds recommended by Scripbox that are algorithmically selected that best suit your needs
Filters
List of Ultra Short Mutual Funds in 2025
Top 10 Ultra Short Mutual Funds to invest in 2025
Below are the ultra short mutual funds in india:
1. Aditya Birla Sun Life Savings Fund Direct (G)
Aditya Birla Sun Life Savings Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.0%, a 3 Years return of 7.1% and a 5 Years return of 6.4%. The fund has an expense ratio of 0.3% and an AUM of ₹14988 crores as of 2025-04-02.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 094.36% to debt and 5.64% to other assets.
2. ICICI Prudential Ultra Short Term Fund Direct (G)
ICICI Prudential Ultra Short Term Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.8%, a 3 Years return of 7.1% and a 5 Years return of 6.5%. The fund has an expense ratio of 0.4% and an AUM of ₹13589 crores as of 2025-04-02.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates -15.82% to equities, 92.11% to debt and 23.71% to other assets.
3. SBI Magnum Ultra Short Duration Fund Direct (G)
SBI Magnum Ultra Short Duration Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.6%, a 3 Years return of 6.8% and a 5 Years return of 5.9%. The fund has an expense ratio of 0.3% and an AUM of ₹11987 crores as of 2025-04-02.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 097.98% to debt and 2.02% to other assets.
4. Nippon India Ultra Short Duration Fund Direct (G)
Nippon India Ultra Short Duration Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.0%, a 3 Years return of 7.3% and a 5 Years return of 7.2%. The fund has an expense ratio of 0.4% and an AUM of ₹7545 crores as of 2025-04-02.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 092.89% to debt and 7.11% to other assets.
5. Kotak Savings Fund Direct (G)
Kotak Savings Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.7%, a 3 Years return of 6.9% and a 5 Years return of 6.0%. The fund has an expense ratio of 0.4% and an AUM of ₹12726 crores as of 2025-04-02.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.31% to debt and 3.69% to other assets.
6. UTI Ultra Short Duration Fund Direct (G)
UTI Ultra Short Duration Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.8%, a 3 Years return of 6.9% and a 5 Years return of 6.6%. The fund has an expense ratio of 0.3% and an AUM of ₹3385 crores as of 2025-04-02.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 087.11% to debt and 12.89% to other assets.
7. HDFC Ultra Short Term Fund Direct (G)
HDFC Ultra Short Term Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.8%, a 3 Years return of 6.9% and a 5 Years return of 6.2%. The fund has an expense ratio of 0.4% and an AUM of ₹14202 crores as of 2025-04-02. It was Launched on 2018-09-25. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.20% to debt and 1.80% to other assets.
8. Bandhan Ultra Short Term Fund Direct (G)
Bandhan Ultra Short Term Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.6%, a 3 Years return of 6.8% and a 5 Years return of 5.8%. The fund has an expense ratio of 0.3% and an AUM of ₹3641 crores as of 2025-04-02. It was Launched on 2018-07-18. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.28% to debt and 3.72% to other assets.
9. Baroda BNP Paribas Ultra Short Duration Fund Direct (G)
Baroda BNP Paribas Ultra Short Duration Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.7%, a 3 Years return of 7.0% and a 5 Years return of 6.0%. The fund has an expense ratio of 0.3% and an AUM of ₹1408 crores as of 2025-04-02. It was Launched on 2018-06-01. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.86% to debt and 1.14% to other assets.
10. PGIM India Ultra Short Duration Fund Direct (G)
PGIM India Ultra Short Duration Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.6%, a 3 Years return of 6.9% and a 5 Years return of 6.0%. The fund has an expense ratio of 0.3% and an AUM of ₹204 crores as of 2025-04-02. It was Launched on 2013-01-01. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 099.60% to debt and 0.40% to other assets.
Ultra short term funds are open ended debt funds. According to SEBI, the fund’s portfolio should have securities with a maturity of 3 to 6 months. These funds have sufficient liquidity and best suit investors with surplus cash available for the next 3-6 months. Gains from ultra short duration funds are taxable just like debt funds. In this article, we have covered what are ultra short term funds, how do they work and the top performing ultra short duration funds.
Recommended: To check best mutual funds to invest
Top 5 Performing Ultra Short Term Funds 2025
Direct Plan
| Fund Name | 3 Year Returns | 5 Year Returns |
| Aditya Birla Sun Life Savings Fund Direct (G) | 6.6% | 6.3% |
| HDFC Ultra Short Term Fund Direct (G) | 6.5% | 6% |
| Kotak Savings Fund Direct (G) | 6.5% | 5.9% |
| ICICI Prudential Ultra Short Term Fund Direct (G) | 6.6% | 6.4% |
| SBI Magnum Ultra Short Duration Fund Direct (G) | 6.4% | 5.8% |
Regular Plan
| Fund Name | 3 Year Returns | 5 Year Returns |
| Aditya Birla Sun Life Savings Fund Regular (G) | 6.4% | 6.1% |
| SBI Magnum Ultra Short Duration Fund Regular (G) | 6.1% | 5.6% |
| Bandhan Ultra Short Term Fund Regular (G) | 6.1% | 5.5% |
| HDFC Ultra S T Fund Regular (G) | 6.1% | 5.7% |
| ICICI Prudential Ultra Short Term Fund Regular (G) | 6.1% | 5.9% |
What are Ultra Short Term Funds?
Ultra short term funds or Ultra short duration funds are open ended debt mutual funds. These funds have a Macaulay duration between 3 to 6 months. In other words, these funds have securities with maturity between 3-6 months period. These funds primarily invest in money market instruments or fixed income securities like treasury bills, commercial papers and certificates of deposit with maturities below six months.
Ultra short term funds provide reasonable returns with sufficient liquidity. The low maturities make the fund less sensitive to interest rate movements in the market. The fund has the potential to offer higher growth than other long maturity debt funds during a rising interest rate regime.
These funds believe in generating return by holding the securities until their maturity. These funds best suit investors who have surplus funds for a period of 3-6 months.
Gains on ultra short term funds are taxable. They are taxed similar to debt mutual funds. The short term capital gains are gains arising from investments redeemed before three years from the investment date. On the other hand, long term capital gains are those gains arising from investments redeemed after three years from the investment date. Short term capital gains are taxable at the individual’s income tax slab rate. While long term capital gains are taxable at 20% with indexation benefit and 10% without indexation benefit. By holding investments for more than three years, investors of the highest tax slab can save tax. This is because the taxation for long term gains is 20% with indexation benefit.
As per the new Finance Bill 2023, capital gains from debt mutual funds from April 1st 2023, will be taxed as per the investor’s income tax slab rate.
How Do Ultra Short Term Funds Work?
Ultra short term funds are similar to liquid funds but with a longer maturity than liquid funds. They are more liquid than other debt funds with long durations. According to SEBI regulations, ultra short duration funds should invest in securities with a maturity of 3-6 months.
Returns from ultra short term funds are predictable as they come with low maturities. The return is calculated based on rise or fall in the Net Asset Value (NAV). The NAV of the fund rises or falls with a change in interest rates.
Though the fund is less sensitive to interest rate movements than a debt fund with longer duration, there is still an element of interest rate risk present. Hence this fund is best suitable during falling interest rate regimes. The fund is also prone to credit risk. If the fund manager’s choice of investments is more inclined towards low rated securities (low credit quality), the chance of default risk is high.
Things to Remember Before Investing
Investment and Financial goals
Ultra short term funds are debt funds that offer liquidity more than any other long term investment funds. The advisable investment duration in these funds ranges between one week to 18 months. Therefore, investors looking at short term investments can consider investing in ultra short term funds. Investors with short term financial goals such as payments which are a month away. Instead of holding the cash in a savings bank account, they can invest in ultra short term funds. Or have an emergency fund. Hence, based on the cash requirement, investors can invest in ultra short term funds. Additionally, investors can also use these funds for Systematic Transfer Plans (STPs) and Systematic Withdrawal Plans (SWPs).
Investment horizon
Typically, the investment horizon for these funds ranges between one week to 18 months. These funds invest in securities with longer maturity. Therefore, one can invest in these funds for slightly longer durations in comparison to liquid funds owing to the higher average maturity of the securities.
Return
Historically, ultra short term funds have generated returns around 7% to 9%. They are expected to deliver 6% or slightly more going forward. In comparison to other funds in the debt category, returns from these are slightly higher. However, even though ultra short term funds invest in fixed income instruments, they do not guarantee returns. These funds have an inverse relationship with interest rate movements. In other words, the Net Asset Value (NAV) of the fund tends to fall with a rise in interest rates and vice versa.
Risk
In comparison to other debt funds, ultra short term funds have lower interest rate risks. This is because of the short maturity of the underlying assets. However, the fund manager’s or fund house’s investment strategy might have low credit quality securities with an expectation that they would upgrade in the future. This exposes the fund to credit risk.
Cost
Similar to all mutual funds, ultra short term funds also charge a fee to manage the fund. The fee is referred to as the expense ratio. SEBI has levied an upper limit on the expense ratio to be 1.05%. Therefore, to generate significant returns, investors should consider investing in the fund with a long holding period and low expense ratio.
Tax
Gains from ultra short term funds are subject to tax. On the basis of the investment duration, the gains are subject to short term capital gains tax (STCG) and long term capital gains tax (LTCG). For an investment horizon less than three years, the gains are subject to short term capital gains tax. The returns are added to the investor’s income and are taxable as per the applicable income tax slab rate. On the other hand, investments with a holding period of more than three years, are subject to long term capital gains tax. The returns then are taxable at 20% with indexation benefit and at 10% without indexation benefit. By holding investments for more than three years, investors of the highest tax slab can save tax. This is because the taxation for long term gains is 20% with indexation benefit.
From April 1st 2023, capital gains arising from debt mutual fund investments will be taxable as per the investor’s income tax slab rate, irrespective of the holding period.
Who Should Invest in Ultra Short Term Funds?
Ultra short term funds are ideal for an investment horizon of 3 to 6 months. Investors looking for an investment vehicle to park their excess funds up to a period of 6 months can consider investing in these funds.
Investors who are conservative and prefer getting predictable returns can also invest in these funds. The fund is subject to both credit risk and interest rate risk. Investors who understand this level of risk can also look at investing in this fund.
Ultra short term funds can be used for both short term financial goals as well as Systematic Transfer Plans (STP) in place of liquid funds. Instead of investing a lump sum amount in equity funds, one can invest them in ultra short duration funds and use STP to transfer a certain amount of money to an equity fund. This way, they are earning a return on their debt funds investment. At the same time, they can take advantage of SIP investment in equity funds.
How to Invest in Ultra Short Term Funds?
Investing in ultra short term funds can be done easily through Scripbox. Following are the steps to invest through Scripbox:
- Visit www.scripbox.com
- Choose a plan to start investing
- Create an account (Signup or login)
- Invest and make online transfers
- Track investments
Following are the documents required to invest in mutual funds:
- Photograph
- Pan Card
- Address proof (Aadhaar Card (Both Front & Back)/Driving License/Passport/Voter ID Card)
- Identity proof (Pan Card, Aadhaar Card, Driving License/Passport/Voter ID Card)
- Saving account details (including saving account number, branch and IFSC code)
Investments in mutual funds can be made either through a lump sum or Systematic Investment Plan (SIP) route. Scripbox supports investments through both the routes. Additionally, one can use Scripbox’s SIP calculator and lump sum calculator to estimate potential returns from their investments. Moreover, investments through Scripbox are entirely online and paperless. Therefore, one can easily invest and track their investments using the Scripbox account.
Conclusion
Ultra short duration funds are open ended debt funds with a maturity of 3-6 months. The returns they offer are predictable and have comparatively low risk than long duration debt funds. They best suit investors with short term financial goals. Investors can invest in ultra short duration funds through Scripbox, an online platform for mutual funds.
Frequently Asked Questions
Equity mutual funds have an asset allocation of at least 65% in stocks. This asset allocation is mandated by SEBI and has to be followed by the fund house. One can invest in equity funds through SIP route and lump sum route. However, to invest in equity funds, SIP is the more preferred route. To calculate SIP returns, one can use a SIP calculator. The categories under equity funds are:
1. Large Cap Fund
2. Mid Cap Fund
3. Large and Mid Cap Fund
4. Small Cap Fund
5. Multi Cap Fund
6. Value Funds
7. Thematic / Sector Funds
8. Equity Linked Savings Scheme (ELSS – tax saver fund)
9. Focused Funds
10. Dividend Yield Funds
11. Index funds
Ultra short term mutual funds are debt funds that have a maturity of up to 6 months. They invest in securities with maturities of 91 days or 180 days. The tenure for ultra short term funds is anywhere between 1 month to 6 months. Hence these are considered short term investments. Investors with surplus funds can part their money for a short term investment horizon. These funds are considered less risky than long term debt securities as they are immune to interest rate changes. With a short term horizon, the interest rate changes wouldn’t be very drastic. Hence they give predictable returns.