Shariah Compliant mutual funds in India

In recent years, there’s been a growing demand for halal investments in India—especially among Muslim investors who want to build wealth without compromising their faith. If you’re someone who’s been looking for ethical, interest-free, and Shariah-compliant investment options, this guide is just for you.

This blog will help you understand what Shariah-compliant investments are, the benefits of halal mutual funds, and the three Shariah-compliant mutual funds available in India—including details about how they maintain compliance and how you can get started.

What is a Shariah-Compliant Investment?

Shariah-compliant investing refers to financial activities that adhere to Islamic principles derived from the Quran and Sunnah. In simple terms, this means:

✅ Avoiding interest (riba)
✅ Staying away from excessive speculation (gharar)
✅ Not investing in haram (prohibited) sectors such as alcohol, tobacco, pork, conventional banking, gambling, and adult entertainment
✅ Partnering in businesses that follow ethical practices and real economic activity

When you invest in halal investments, you’re not only managing your finances the right way but also aligning your wealth with your values.

Why Choose Halal Mutual Funds in India?

A mutual fund is a pool of money collected from many investors that is professionally managed and invested in stocks, bonds, or other assets. When a mutual fund is Shariah-compliant, it means the stocks in its portfolio are screened by Islamic scholars to ensure they meet halal criteria.

Benefits of Shariah-Compliant Mutual Funds

✅ Faith-aligned investing
✅ Ethical and transparent
✅ Professionally managed
✅ Diversified portfolio to reduce risk
✅ SIP (Systematic Investment Plan) options available

These mutual funds are ideal for Indian Muslims who want to invest for long-term goals like marriage, education, Hajj/Umrah, or retirement—without compromising Shariah principles.

Top 3 Shariah-Compliant Mutual Funds in India (2024–25)

There are currently three mutual funds in India that are officially Shariah-compliant:

1. Tata Ethical Fund

Type: Equity Mutual Fund
Launch Year: 1996
Objective: Invests in Shariah-compliant companies from large-cap and mid-cap sectors
Shariah Compliance Advisory: TASIS (Taqwaa Advisory and Shariah Investment Solutions)

Tata Ethical Fund is the oldest and most recognized Shariah-compliant mutual fund in India. It’s a great option for investors who want consistent long-term returns while adhering to halal standards.

2. Taurus Ethical Fund

Type: Equity Mutual Fund
Launch Year: 2009
Objective: Invests in a diversified basket of Shariah-screened companies
Shariah Compliance Advisory: ShariahCap Advisors

Taurus Ethical Fund is managed with Shariah oversight by ShariahCap Advisors, an organization that ensures the portfolio avoids prohibited businesses and financial ratios. It’s a reliable option for investors looking for balanced ethical exposure.

3. Quantum Ethical Fund

Type: Equity Mutual Fund
Launch Year: 2019 (rebranded for ethical compliance)
Objective: Focuses on investing in companies that meet Shariah and ESG (Environmental, Social, Governance) principles
Shariah Compliance Advisory: ShariahCap Advisors

Though previously known for ESG investing, Quantum Ethical Fund has now explicitly positioned itself as a Shariah-compliant mutual fund, combining Islamic ethics with environmental and social responsibility.

How Do These Funds Ensure Shariah Compliance?

Shariah compliance is not a one-time process. These funds are constantly monitored and audited by Shariah advisory firms:

TASIS manages compliance for Tata Ethical Fund
ShariahCap Advisors supervises Taurus Ethical Fund and Quantum Ethical Fund

The process includes:

Filtering out companies based on industry (no haram sectors)
Financial ratio checks (debt levels, cash holdings, etc.)
Continuous monitoring and portfolio rebalancing

How to Invest in a Shariah-Compliant Mutual Fund in India

Getting started is simple, even if you’re new to investing:

Step 1: Select a Fund

Choose between:

Tata Ethical Fund
Taurus Ethical Fund
Quantum Ethical Fund

Step 2: Complete KYC

Use your Aadhaar and PAN to complete KYC online via any mutual fund platform or directly through AMC websites.

Step 3: Start SIP or Lump Sum

Set up a SIP (monthly investment) or make a one-time lump sum investment based on your budget and goals.

Platforms to Invest:

Directly via the AMC website (Tata, Taurus, Quantum)
Apps like Groww, Kuvera, Paytm Money, Zerodha Coin
Shariah-focused fintech platforms like Shariah Equities

Who Should Invest in Halal Mutual Funds?

These funds are ideal for:

Muslim investors who want halal, faith-aligned investments
Ethical investors interested in clean, responsible businesses
New investors looking for long-term wealth creation without complex stock picking

FAQs About Shariah-Compliant Mutual Funds in India

Q1: Are these funds completely free from interest-based income?

✅ Yes, they are screened to avoid riba (interest) and speculation.

Q2: Are halal mutual funds profitable?

✅ While returns vary, they perform competitively compared to regular mutual funds over the long term.

Q3: Can I do SIP in Shariah-compliant mutual funds?

✅ Absolutely! All three funds offer SIP options starting as low as ₹500/month.

Q4: Are these funds approved by Islamic scholars?

✅ Yes. They are certified and regularly monitored by TASIS or ShariahCap Advisors, both respected in the field of Islamic finance.

Final Thoughts: Invest with Ethics, Grow with Faith

As a Muslim investor in India, you now have clear, halal investment options through Shariah-compliant mutual funds. Whether you’re a student, working professional, or business owner, these funds give you the opportunity to invest in a way that is both profitable and permissible.