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Best Debt Mutual Funds

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 NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Aditya Birla Sun Life Medium Term FundDebtModerately High22.1%5₹1,652
Baroda BNP Paribas Credit Risk FundDebtModerately High5.8%5₹180
UTI Bond FundDebtModerate12.3%5₹286
Sundaram Short Duration FundDebtLow to Moderate5.0%5₹200
Bank of India Short Term Income FundDebtModerate28.4%5₹72
UTI Short-term Income FundDebtModerate5.1%5₹2,270
Aditya Birla Sun Life Dynamic Bond Retail FundDebtModerate7.7%5₹1,795
Sundaram Low Duration FundDebtLow to Moderate5.6%5₹433
Axis Corporate Debt FundDebtModerate4.9%5₹3,783
ICICI Prudential All Seasons Bond FundDebtModerate6.6%5₹6,755
UTI Treasury Advantage FundDebtLow to Moderate5.2%5₹2,566
ICICI Prudential Corporate Bond FundDebtLow to Moderate5.8%5₹16,998
ICICI Prudential Banking & PSU Debt FundDebtLow to Moderate5.7%5₹7,266
Bandhan Banking & PSU Debt FundDebtModerate4.5%5₹14,281
Nippon India Ultra Short Duration FundDebtModerate6.0%5₹5,115
View All

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 15 mutual fund schemes.

Aditya Birla Sun Life Medium Term Direct Plan Growth

Fund Performance: The Aditya Birla Sun Life Medium Term Fund has given 14.76% annualized returns in the past three years and 8.6% in the last 5 years. The Aditya Birla Sun Life Medium Term 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 Medium Term Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹1,652Cr
1Y Returns22.1%

Baroda BNP Paribas Credit Risk Fund Direct Growth

Fund Performance: The Baroda BNP Paribas Credit Risk Fund has given 11.04% annualized returns in the past three years and 7.58% 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₹180Cr
1Y Returns5.8%

UTI Bond Fund Direct Growth

Fund Performance: The UTI Bond Fund has given 10.83% annualized returns in the past three years and 4.37% in the last 5 years. The UTI Bond Fund belongs to the Debt category of UTI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in UTI Bond Fund via lump sum is ₹500 and via SIP is ₹500.

Min Investment Amt₹500
AUM₹286Cr
1Y Returns12.3%

Sundaram Short Duration Fund Direct Growth

Fund Performance: The Sundaram Short Duration Fund has given 9.06% annualized returns in the past three years and 5.8% in the last 5 years. The Sundaram Short Duration Fund belongs to the Debt category of Sundaram Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Sundaram Short Duration Fund via lump sum is ₹5,000 and via SIP is ₹250.

Min Investment Amt₹5,000
AUM₹200Cr
1Y Returns5.0%

Bank of India Short Term Income Fund Direct Growth

Fund Performance: The Bank of India Short Term Income Fund has given 9% annualized returns in the past three years and 4.04% in the last 5 years. The Bank of India Short Term Income Fund belongs to the Debt category of BOI AXA Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Bank of India Short Term Income Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹72Cr
1Y Returns28.4%

UTI Short term Income Direct Growth

Fund Performance: The UTI Short-term Income Fund has given 8.68% annualized returns in the past three years and 5.42% in the last 5 years. The UTI Short-term Income Fund belongs to the Debt category of UTI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in UTI Short-term Income Fund via lump sum is ₹500 and via SIP is ₹500.

Min Investment Amt₹500
AUM₹2,270Cr
1Y Returns5.1%

Aditya Birla Sun Life Dynamic Bond Retail Fund Direct Growth

Fund Performance: The Aditya Birla Sun Life Dynamic Bond Retail Fund has given 8.2% annualized returns in the past three years and 5.98% in the last 5 years. The Aditya Birla Sun Life Dynamic Bond Retail 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 Dynamic Bond Retail Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹1,795Cr
1Y Returns7.7%

Sundaram Low Duration Fund Direct Growth

Fund Performance: The Sundaram Low Duration Fund has given 7.95% annualized returns in the past three years and 5.3% in the last 5 years. The Sundaram Low Duration Fund belongs to the Debt category of Sundaram Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Sundaram Low Duration Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹433Cr
1Y Returns5.6%

Axis Corporate Debt Fund Direct Growth

Fund Performance: The Axis Corporate Debt Fund has given 7.72% annualized returns in the past three years and 7.27% in the last 5 years. The Axis Corporate Debt Fund belongs to the Debt category of Axis Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Axis Corporate Debt Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹3,783Cr
1Y Returns4.9%

ICICI Prudential All Seasons Bond Fund Direct Plan Growth

Fund Performance: The ICICI Prudential All Seasons Bond Fund has given 7.69% annualized returns in the past three years and 8.2% 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₹6,755Cr
1Y Returns6.6%

UTI Treasury Advantage Fund Direct Growth

Fund Performance: The UTI Treasury Advantage Fund has given 7.43% annualized returns in the past three years and 4.76% in the last 5 years. The UTI Treasury Advantage Fund belongs to the Debt category of UTI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in UTI Treasury Advantage Fund via lump sum is ₹500 and via SIP is ₹500.

Min Investment Amt₹500
AUM₹2,566Cr
1Y Returns5.2%

ICICI Prudential Corporate Bond Fund Direct Plan Growth

Fund Performance: The ICICI Prudential Corporate Bond Fund has given 7.17% annualized returns in the past three years and 7.34% in the last 5 years. The ICICI Prudential Corporate Bond Fund belongs to the Debt category of ICICI Prudential Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Corporate Bond Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹16,998Cr
1Y Returns5.8%

ICICI Prudential Banking & PSU Debt Direct Growth

Fund Performance: The ICICI Prudential Banking & PSU Debt Fund has given 7.16% annualized returns in the past three years and 7.14% in the last 5 years. The ICICI Prudential Banking & PSU Debt Fund belongs to the Debt category of ICICI Prudential Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Banking & PSU Debt Fund via lump sum is ₹500 and via SIP is ₹100.

Min Investment Amt₹500
AUM₹7,266Cr
1Y Returns5.7%

Bandhan Banking & PSU Debt Fund Direct Growth

Fund Performance: The Bandhan Banking & PSU Debt Fund has given 7.13% annualized returns in the past three years and 7.57% in the last 5 years. The Bandhan Banking & PSU Debt Fund belongs to the Debt category of IDFC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Bandhan Banking & PSU Debt Fund via lump sum is ₹1,000 and via SIP is ₹100.

Min Investment Amt₹1,000
AUM₹14,281Cr
1Y Returns4.5%

Nippon India Ultra Short Duration Fund Direct Growth

Fund Performance: The Nippon India Ultra Short Duration Fund has given 7.06% annualized returns in the past three years and 5.91% in the last 5 years. The Nippon India Ultra Short Duration Fund belongs to the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Ultra Short Duration Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹5,115Cr
1Y Returns6.0%

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