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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)
Baroda BNP Paribas Credit Risk FundDebtModerately High13.5%5₹202
UTI Short-term Income FundDebtModerate8.2%5₹2,315
ICICI Prudential Medium Term Bond FundDebtModerately High4.5%5₹6,332
ICICI Prudential All Seasons Bond FundDebtModerate4.2%5₹5,691
Axis Corporate Debt FundDebtLow to Moderate3.8%5₹3,122
UTI Treasury Advantage FundDebtLow to Moderate8.9%5₹2,697
SBI Magnum Income FundDebtModerately High2.5%5₹1,529
HDFC Dynamic Debt FundDebtModerate1.7%5₹476
Aditya Birla Sun Life Corporate Bond FundDebtModerate3.3%5₹13,321
Nippon India Short Term FundDebtModerate3.6%5₹6,681
IDFC Banking & PSU Debt FundDebtLow to Moderate3.0%5₹16,162
Nippon India Corporate Bond FundDebtModerate3.9%5₹1,915
IDBI Ultra Short Term FundDebtLow to Moderate4.4%5₹240
Edelweiss Government Securities FundDebtModerate3.6%5₹107
IIFL Dynamic Bond FundDebtModerate4.1%5₹576
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 10 mutual fund schemes.

Baroda BNP Paribas Credit Risk Fund Direct Growth

Fund Performance: The Baroda BNP Paribas Credit Risk Fund has given 8.62% annualized returns in the past three years and 7.42% 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₹202Cr
1Y Returns13.5%

UTI Short term Income Direct Growth

Fund Performance: The UTI Short-term Income Fund has given 8.25% annualized returns in the past three years and 5.12% 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 ₹10,000 and via SIP is ₹500.

Min Investment Amt₹10,000
AUM₹2,315Cr
1Y Returns8.2%

ICICI Prudential Medium Term Bond Fund Direct Plan Growth

Fund Performance: The ICICI Prudential Medium Term Bond Fund has given 7.87% annualized returns in the past three years and 7.28% 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₹6,332Cr
1Y Returns4.5%

ICICI Prudential All Seasons Bond Fund Direct Plan Growth

Fund Performance: The ICICI Prudential All Seasons Bond Fund has given 7.59% annualized returns in the past three years and 7.32% 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₹5,691Cr
1Y Returns4.2%

Axis Corporate Debt Fund Direct Growth

Fund Performance: The Axis Corporate Debt Fund has given 7.29% annualized returns in the past three years and 7.35% 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₹3,122Cr
1Y Returns3.8%

UTI Treasury Advantage Fund Direct Growth

Fund Performance: The UTI Treasury Advantage Fund has given 7.2% annualized returns in the past three years and 4.8% 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 ₹10,000 and via SIP is ₹500.

Min Investment Amt₹10,000
AUM₹2,697Cr
1Y Returns8.9%

SBI Magnum Income Direct Plan Growth

Fund Performance: The SBI Magnum Income Fund has given 7.06% annualized returns in the past three years and 7.07% 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₹1,529Cr
1Y Returns2.5%

HDFC Dynamic Debt Fund Direct Plan Growth

Fund Performance: The HDFC Dynamic Debt Fund has given 6.93% annualized returns in the past three years and 5.1% in the last 5 years. The HDFC Dynamic Debt Fund belongs to the Debt category of HDFC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HDFC Dynamic Debt Fund via lump sum is ₹5,000 and via SIP is ₹300.

Min Investment Amt₹5,000
AUM₹476Cr
1Y Returns1.7%

Aditya Birla Sun Life Corporate Bond Fund Direct Growth

Fund Performance: The Aditya Birla Sun Life Corporate Bond Fund has given 6.87% annualized returns in the past three years and 7.23% in the last 5 years. The Aditya Birla Sun Life Corporate Bond 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 Corporate Bond Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹13,321Cr
1Y Returns3.3%

Nippon India Short Term Fund Direct Growth

Fund Performance: The Nippon India Short Term Fund has given 6.85% annualized returns in the past three years and 6.92% in the last 5 years. The Nippon India Short Term Fund belongs to the Debt category of Nippon India Mutual Funds.

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

Min Investment Amt₹100
AUM₹6,681Cr
1Y Returns3.6%

IDFC Banking & PSU Debt Fund Direct Growth

Fund Performance: The IDFC Banking & PSU Debt Fund has given 6.63% annualized returns in the past three years and 7.37% 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₹16,162Cr
1Y Returns3.0%

Nippon India Corporate Bond Fund Direct Growth

Fund Performance: The Nippon India Corporate Bond Fund has given 6.6% annualized returns in the past three years and 6.91% in the last 5 years. The Nippon India Corporate Bond Fund belongs to the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Corporate Bond Fund via lump sum is ₹1,000 and via SIP is ₹100.

Min Investment Amt₹1,000
AUM₹1,915Cr
1Y Returns3.9%

IDBI Ultra Short Term Fund Direct Growth

Fund Performance: The IDBI Ultra Short Term Fund has given 6.53% annualized returns in the past three years and 5.93% in the last 5 years. The IDBI Ultra Short Term Fund belongs to the Debt category of IDBI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in IDBI Ultra Short Term Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹240Cr
1Y Returns4.4%

Edelweiss Government Securities Fund Direct Growth

Fund Performance: The Edelweiss Government Securities Fund has given 6.51% annualized returns in the past three years and 7.89% 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 Returns3.6%

IIFL Dynamic Bond Fund Direct Growth

Fund Performance: The IIFL Dynamic Bond Fund has given 6.46% annualized returns in the past three years and 6.44% in the last 5 years. The IIFL Dynamic Bond Fund belongs to the Debt category of IIFL Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in IIFL Dynamic Bond Fund via lump sum is ₹10,000 and via SIP is ₹1,000.

Min Investment Amt₹10,000
AUM₹576Cr
1Y Returns4.1%

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