Many mutual fund categories follow socially responsible investing. Based on the Shariah or Sharia law of the Muslim religion, the Shariah Compliant Mutual Funds are a type of socially responsible investing. Let’s read further to know in detail about Shariah Compliant Mutual Funds.
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As per Islamic law, Muslims cannot invest in all the categories of funds as there are certain restrictions on their type of investment. Shariah Complaint Mutual Fund allows them to invest by being within the boundaries of the Islamic laws. The following are the key features of these funds.
There are certain rules that the investors need to follow to invest in Shariah Compliant Mutual Funds. These are as following:
Finding a company that has 100% interest-free income can be impossible. So, the Sharaih Compliant Mutual Funds invest in companies that interest income is 3% of the total income.
This fund cannot invest in companies whose total debt is one-fourth of its total asset or more.
This fund cannot acquire shares of the company that is involved in financial services like insurance companies and banks. Also, the Shariah fund cannot invest in companies that manufacture tobacco, liquor, pork, or are involved in nightclub activities, gambling, pornography, etc.
Currently, there are three Shariah Compliant Mutual Funds in India. These are as following:
This fund is best suitable for investors who want to invest in a diversified equity fund without getting exposure to finance and banking. It is suitable for investors who wants to gain long-term capital appreciation and wish to invest in equity and equity securities of Shariah-compliant companies.
This fund is best suitable for investors who want to invest in a diversified equity fund without getting exposure to finance and banking. It is suitable for investors who wants to gain long-term capital appreciation and wish to invest in equity and equity securities of Shariah-compliant companies.
Nippon India ETF invests money in different securities of that index that aims to generate returns that closely resembles the Nifty50 Shariah Index. Investments in the Nifty50 Shariah Index securities are made in a similar proportion as in the index. It is best suitable for investors who wants to invest for medium to long term period to generate long term capital appreciation.
Note: You will need a Demat account to invest in Nippon India ETF Sharia BeES as it is an ETF.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Let’s take a look at the yearly returns of different funds.
Fund Name |
1 Year Return (%) |
3 years Returns (%) |
5 years Returns (%) |
Tata Ethical Fund |
64.13% |
17.12% |
14.55% |
Taurus Ethical Fund |
54.25% |
16.61% |
13.28% |
Nippon India ETF Shariah BeEs |
65.22% |
18.52% |
17.42% |
Shariah Compliant Mutual Funds are a type of socialy responsible investing, which allows the muslim investors to invest in market with an objective to gain high returns on investment, without breaking any Shariah Law of Muslim religion.