Debt funds in India principally invest in fixed-income securities. It includes corporate bonds, treasury bills, debentures, and commercial paper, among others.
Since the best debt mutual funds primarily deal with debt instruments that earn a fixed interest, they carry lower risks than equity funds. Before investing in schemes under this category, it’s imperative for individuals to be aware of their characteristics.
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List of Debt Mutual Funds in India
Fund Name | Category | Risk | 1Y Returns | Rating | Fund Size(in Cr) | |
---|---|---|---|---|---|---|
HDFC Credit Risk Debt Fund | Debt | Moderately High | 4.3% | 5 | ₹8,925 | |
ICICI Prudential Medium Term Bond Fund | Debt | Moderately High | 3.6% | 5 | ₹6,816 | |
Baroda BNP Paribas Credit Risk Fund | Debt | Moderately High | 13.0% | 5 | ₹205 | |
ICICI Prudential All Seasons Bond Fund | Debt | Moderate | 2.8% | 5 | ₹5,993 | |
SBI Magnum Medium Duration Fund | Debt | Moderately High | 2.6% | 5 | ₹9,968 | |
UTI Dynamic Bond Fund | Debt | Moderately High | 19.1% | 5 | ₹366 | |
Edelweiss Government Securities Fund | Debt | Low to Moderate | 2.1% | 5 | ₹107 | |
SBI Magnum Gilt Fund | Debt | Low to Moderate | 2.2% | 5 | ₹3,530 | |
SBI Magnum Income Fund | Debt | Moderately High | 1.6% | 5 | ₹1,655 | |
Axis Gilt Fund | Debt | Low to Moderate | 1.7% | 5 | ₹127 | |
ICICI Prudential Short Term Fund | Debt | Moderate | 3.5% | 5 | ₹16,623 | |
Aditya Birla Sun Life Short Term Direct Fund | Debt | Moderate | 3.7% | 5 | ₹7,640 | |
Debt | Moderate | 8.2% | 5 | ₹293 | ||
Debt | Low to Moderate | 2.8% | 5 | ₹4,321 | ||
Debt | Low to Moderate | 3.0% | 5 | ₹17,076 | ||
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Features of Debt Mutual Funds
The following are the characteristics of best debt mutual funds 2022–
Types of debt funds: Debt funds are of 16 types, broadly classified into two categories – security-based and duration-based. Schemes like money market fund, gilt fund, dynamic bond fund, banking and PSU fund fall under the former category. Ultra-short-term funds, long-term funds, medium-duration funds, and overnight fund are examples of the latter type.
Asset allocation: Fixed-income funds invest a significant portion of the corpus in debt and money market instruments.
Risk-return ratio: The best debt mutual fund offers stable and moderate returns against negligible market risks. However, fixed-income funds involve credit risk and inflation risk.
Taxability
Short-term capital gains tax: In case debt fund units are sold before 3 years from the date of purchase, proceeds are taxed as per the investors’ slab rate. Thus, it will be 31.20% (30% + 4% cess) for investors in the highest tax bracket.
Long-term capital gains tax: If units of a debt fund are redeemed after 3 years, 20% tax will be applicable on the gains along with indexation benefits. This benefit applies to each year an individual remains invested in a debt MF.
TDS: Not applicable.
Who Are These Funds Suited For?
The best debt mutual funds are immune to stock market volatility and provide higher capital appreciation compared to bank fixed deposits. Debt MFs may be suitable for those looking to capitalise on these elements for diversifying their portfolio.
To decide whether to invest in fixed income funds, investors can take into consideration certain factors, like investment goal, investment horizon, and risk tolerance.
Major Advantages
Investors can reap the following benefits by investing in the best debt mutual funds:
- High liquidity: One of the key benefits of fixed income funds is liquidity. Investors can redeem their units any time after their purchase. The amount will reflect in their bank account within a day.
- Partial withdrawals: One can withdraw partially from their funds to meet necessary requirements without impacting the rest of the investment.
- Flexibility in investment: Investors can either buy units in a lump-sum or choose to invest via SIP.
- Provides stability: Since a major portion of the investment corpus is allocated to debt instruments, stock market fluctuations mostly do not impact the returns.
- Tax-efficient: Debt funds are more tax-efficient than traditional investment options, such as bank fixed deposits. Income from debt funds is taxed when an investor chooses to redeem his/her units. However, income from bank FD is taxed every year. Debt funds also attract indexation benefits if sold after 3 years from the purchase date.
Credit quality rating: The debt instruments are rated by credit rating agencies in India. Before investing in these funds, individuals can check the credit quality rating to get an idea of the risk level associated with a scheme.
Let's have a closer look
Now let us jump and check about these top 10 mutual fund schemes.
HDFC Credit Risk Debt Fund Direct Growth
Fund Performance: The HDFC Credit Risk Debt Fund has given 8.14% annualized returns in the past three years and 7.64% in the last 5 years. The HDFC Credit Risk Debt Fund belongs to the Debt category of HDFC Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in HDFC Credit Risk Debt Fund via lump sum is ₹5,000 and via SIP is ₹300.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹8,925Cr |
1Y Returns | 4.3% |
ICICI Prudential Medium Term Bond Fund Direct Plan Growth
Fund Performance: The ICICI Prudential Medium Term Bond Fund has given 7.94% annualized returns in the past three years and 7.41% in the last 5 years. The ICICI Prudential Medium Term Bond Fund belongs to the Debt category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Medium Term Bond Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹6,816Cr |
1Y Returns | 3.6% |
Baroda BNP Paribas Credit Risk Fund Direct Growth
Fund Performance: The Baroda BNP Paribas Credit Risk Fund has given 7.92% annualized returns in the past three years and 7.62% in the last 5 years. The Baroda BNP Paribas Credit Risk Fund belongs to the Debt category of Baroda Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Baroda BNP Paribas Credit Risk Fund via lump sum is ₹5,000 and via SIP is ₹500.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹205Cr |
1Y Returns | 13.0% |
ICICI Prudential All Seasons Bond Fund Direct Plan Growth
Fund Performance: The ICICI Prudential All Seasons Bond Fund has given 7.79% annualized returns in the past three years and 7.54% in the last 5 years. The ICICI Prudential All Seasons Bond Fund belongs to the Debt category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential All Seasons Bond Fund via lump sum is ₹5,000 and via SIP is ₹100.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹5,993Cr |
1Y Returns | 2.8% |
SBI Magnum Medium Duration Fund Direct Growth
Fund Performance: The SBI Magnum Medium Duration Fund has given 7.73% annualized returns in the past three years and 7.81% in the last 5 years. The SBI Magnum Medium Duration Fund belongs to the Debt category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Magnum Medium Duration Fund via lump sum is ₹5,000 and via SIP is ₹500.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹9,968Cr |
1Y Returns | 2.6% |
UTI Dynamic Bond Fund Direct Growth
Fund Performance: The UTI Dynamic Bond Fund has given 7.73% annualized returns in the past three years and 5.85% in the last 5 years. The UTI Dynamic Bond Fund belongs to the Debt category of UTI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in UTI Dynamic Bond Fund via lump sum is ₹10,000 and via SIP is ₹500.
Min Investment Amt | ₹10,000 |
---|---|
AUM | ₹366Cr |
1Y Returns | 19.1% |
Edelweiss Government Securities Fund Direct Growth
Fund Performance: The Edelweiss Government Securities Fund has given 7.65% annualized returns in the past three years and 7.82% in the last 5 years. The Edelweiss Government Securities Fund belongs to the Debt category of Edelweiss Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Edelweiss Government Securities Fund via lump sum is ₹5,000 and via SIP is ₹500.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹107Cr |
1Y Returns | 2.1% |
SBI Magnum Gilt Fund Direct Growth
Fund Performance: The SBI Magnum Gilt Fund has given 7.61% annualized returns in the past three years and 7.09% in the last 5 years. The SBI Magnum Gilt Fund belongs to the Debt category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Magnum Gilt Fund via lump sum is ₹5,000 and via SIP is ₹500.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹3,530Cr |
1Y Returns | 2.2% |
SBI Magnum Income Direct Plan Growth
Fund Performance: The SBI Magnum Income Fund has given 7.56% annualized returns in the past three years and 7.23% in the last 5 years. The SBI Magnum Income Fund belongs to the Debt category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Magnum Income Fund via lump sum is ₹5,000 and via SIP is ₹500.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹1,655Cr |
1Y Returns | 1.6% |
Axis Gilt Fund Direct Plan Growth
Fund Performance: The Axis Gilt Fund has given 7.55% annualized returns in the past three years and 6.86% in the last 5 years. The Axis Gilt Fund belongs to the Debt category of Axis Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Axis Gilt Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹127Cr |
1Y Returns | 1.7% |
ICICI Prudential Short Term Fund Direct Plan Growth
Fund Performance: The ICICI Prudential Short Term Fund has given 7.48% annualized returns in the past three years and 7.48% in the last 5 years. The ICICI Prudential Short Term Fund belongs to the Debt category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Short Term Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹16,623Cr |
1Y Returns | 3.5% |
Aditya Birla Sun Life Short Term Direct Fund Growth
Fund Performance: The Aditya Birla Sun Life Short Term Direct Fund has given 7.36% annualized returns in the past three years and 7.46% in the last 5 years. The Aditya Birla Sun Life Short Term Direct Fund belongs to the Debt category of Aditya Birla Sun Life Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Short Term Direct Fund via lump sum is ₹1,000 and via SIP is ₹1,000.
Min Investment Amt | ₹1,000 |
---|---|
AUM | ₹7,640Cr |
1Y Returns | 3.7% |
Fund Performance: The UTI Banking & PSU Debt Fund has given 7.32% annualized returns in the past three years and 5.48% in the last 5 years. The UTI Banking & PSU Debt Fund belongs to the Debt category of UTI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in UTI Banking & PSU Debt Fund via lump sum is ₹5,000 and via SIP is ₹500.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹293Cr |
1Y Returns | 8.2% |
Fund Performance: The Nippon India Banking & PSU Debt Fund has given 7.27% annualized returns in the past three years and 7.35% in the last 5 years. The Nippon India Banking & PSU Debt Fund belongs to the Debt category of Nippon India Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Nippon India Banking & PSU Debt Fund via lump sum is ₹5,000 and via SIP is ₹100.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹4,321Cr |
1Y Returns | 2.8% |
Fund Performance: The IDFC Banking & PSU Debt Fund has given 7.2% annualized returns in the past three years and 7.55% in the last 5 years. The IDFC Banking & PSU Debt Fund belongs to the Debt category of IDFC Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in IDFC Banking & PSU Debt Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
Min Investment Amt | ₹5,000 |
---|---|
AUM | ₹17,076Cr |
1Y Returns | 3.0% |