Best Debt Mutual Funds

A debt fund is an investment instrument wherein the capital is invested primarily in fixed-income investments. These are predominantly treasury bills, government securities, corporate bonds and other similar money market instruments.

Debt funds, alternatively known as fixed-income funds or credit funds, come under the fixed income asset category of mutual funds. They are low-risk investments vehicles and are comparatively more secure than equity funds which are subject to volatile market forces.

There are several avenues through which you can invest in the best performing debt funds for higher returns. It can be long-term or short-term bonds, monthly income plans (MIPs), floating-rate debt, money market instruments, fixed maturity plans (FMPs) or security products.

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Top 10 Debt Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
SBI Magnum Constant Maturity FundDebtModerate18.3%5star445
SBI Magnum Constant Maturity FundDebtModerately Low18.0%5star445
Reliance Gilt Securities FundDebtModerate17.9%5star1,089
Reliance Gilt Securities FundDebtModerate17.9%5star1,089
Reliance Gilt Securities FundDebtModerate17.9%5star1,089
Reliance Gilt Securities FundDebtModerate17.9%5star1,089
Reliance Gilt Securities FundDebtModerate17.7%5star1,089
DHFL Pramerica Dynamic Bond FundDebtModerate14.3%5star41
DHFL Pramerica Dynamic Bond FundDebtModerate14.3%5star41
DHFL Pramerica Dynamic Bond FundDebtModerate14.3%5star41
SBI Magnum Medium Duration FundDebtModerate11.8%5star1,842
SBI Magnum Medium Duration FundDebtModerate11.7%5star1,842
Franklin India Dynamic Accrual FundDebtModerate10.0%5star3,981
Franklin India Dynamic Accrual FundDebtModerate10.0%5star3,981
Franklin India Corporate Debt FundDebtModerate11.6%5star1,033
View All Top 10 Debt Mutual Funds

Features of Debt Mutual Fund

The primary objective of these funds is to accumulate wealth through capital appreciation and interest income. As these are fixed income instruments, the fund issuer pre-determines the rate of interest as well as the maturity period for these investment schemes.

The capital is invested in various securities, primarily based on their credit rating. The best performing debt mutual funds have a high credit rating, thereby ensuring a steady interest rate pay-out.

By Investing in best debt mutual funds, you can expect optimal returns as the investment is in a diversified portfolio of securities. The returns are somewhat predictable, and although relatively lower than equity funds, they are much safer and hence, preferred by conservative investors.

However, the rate of returns and inherent risks of debt funds are both dependant on the type of funds. Government securities are considered the safest options. The risk associated with corporate bonds depends on that company’s credit rating.

Taxability

For taxation purposes, all mutual funds with investments lower than 65% in equity instruments are considered debt funds. Short-term capital gains of less than 36 months are taxed corresponding to the investor’s income tax slab.

A tax rate of 20% is levied on long-term capital gains above 36 months after indexation. Indexation refers to the adjustment of the price of debt funds after factoring in the inflation between the years when that fund was purchased and the year when you sell them. This adjustment allows for the inflation of purchase price, thereby bringing down the overall quantum of capital gains. Subsequently, your taxable income reduces proportionately.

Who Are These Funds Suited For?

Debt funds are tailor-made for investors whose risk appetite is low. If you invest in the best performing debt funds of 2019, you can expect steady wealth creation, albeit at a slower pace. The slow pace is well-compensated by the lack of any risk whatsoever. It’s akin to a fixed deposit, with slightly higher returns on a smaller timeframe.

Short-term investors should look to put their money in liquid funds. These funds ensure a 7-9% return and can be withdrawn at any time, much like a bank savings account. For long-term investors, dynamic bond funds are considered the best debt funds to invest in via SIP mode.

Major Advantages

Risk-averse investors find these mutual funds as the best investment instruments because of the plethora of benefits they entail. Some of them are mentioned below.

  • These funds are generally extremely liquid. An investor can withdraw the sum any time they wish. Unlike fixed deposits, there are no penalties associated with the premature withdrawal of capital.
  • You can also make partial withdrawals without entirely breaking your fund.
  • They are also more tax-efficient than similar investment instruments. The secret is to hold the investment for as long as you can. The longer the term of investment, the more tax benefits you will enjoy.
  • TDS is also not applicable to debt funds.
  • These funds are incredibly flexible. You may invest as and when you want either through a SIP or if you come across surplus funds. You can even shift your investment seamlessly to a different equity fund from the same fund house. Most astute investors first invest their lump sum amount in a debt fund before starting a systematic transfer plan to equity funds of their choice.
  • In case the interest rate drops, you can expect a much higher return on your long-term debt funds. In the previous year, the average return for short term debt funds was 9.5%. The corresponding rate for long term investment is 12%.

Let's have a closer look

Now let us jump and check about these top 10 mutual fund schemes.

SBI Magnum Constant Maturity Fund Direct Dividend Monthly

Fund Performance: This fund has consistently beaten its benchmark in Gilt segment and provided 10.61% annualized returns in the last 3 years. In the last 1 year, it gave 18.28% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 18.28% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM445Cr
1Y Returns18.3%

SBI Magnum Constant Maturity Fund Direct Growth

Fund Performance: This fund has consistently beaten its benchmark in Gilt segment and provided 10.58% annualized returns in the last 3 years. In the last 1 year, it gave 18.04% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 18.04% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM445Cr
1Y Returns18.0%

Reliance Gilt Securities Fund Direct Automatic Annual Reinvest Option

Fund Performance: This fund has consistently beaten its benchmark in Gilt segment and provided 9.91% annualized returns in the last 3 years. In the last 1 year, it gave 17.95% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 17.95% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹100. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,089Cr
1Y Returns17.9%

Reliance Gilt Securities Fund Direct Bonus

Fund Performance: This fund has consistently beaten its benchmark in Gilt segment and provided 9.91% annualized returns in the last 3 years. In the last 1 year, it gave 17.95% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 17.95% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹100. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,089Cr
1Y Returns17.9%

Reliance Gilt Securities Fund Direct Automatic Capital Appreciation Payout option Dividend

Fund Performance: This fund has consistently beaten its benchmark in Gilt segment and provided 9.91% annualized returns in the last 3 years. In the last 1 year, it gave 17.95% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 17.95% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹100. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,089Cr
1Y Returns17.9%

Reliance Gilt Securities Fund Direct Dividend Monthly

Fund Performance: This fund has consistently beaten its benchmark in Gilt segment and provided 9.91% annualized returns in the last 3 years. In the last 1 year, it gave 17.95% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 17.95% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹100. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,089Cr
1Y Returns17.9%

Reliance Gilt Securities Fund Direct Growth

Fund Performance: This fund has consistently beaten its benchmark in Gilt segment and provided 9.88% annualized returns in the last 3 years. In the last 1 year, it gave 17.69% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 17.69% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹100. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,089Cr
1Y Returns17.7%

PGIM India Dynamic Bond Direct Plan Dividend Monthly

Fund Performance: This fund has consistently beaten its benchmark in Dynamic segment and provided 9.52% annualized returns in the last 3 years. In the last 1 year, it gave 14.33% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 14.33% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM41Cr
1Y Returns14.3%

PGIM India Dynamic Bond Direct Plan Dividend Quarterly

Fund Performance: This fund has consistently beaten its benchmark in Dynamic segment and provided 9.52% annualized returns in the last 3 years. In the last 1 year, it gave 14.33% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 14.33% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM41Cr
1Y Returns14.3%

PGIM India Dynamic Bond Direct Plan Growth

Fund Performance: This fund has consistently beaten its benchmark in Dynamic segment and provided 9.51% annualized returns in the last 3 years. In the last 1 year, it gave 14.34% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 14.34% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM41Cr
1Y Returns14.3%

SBI Magnum Medium Duration Fund Direct Dividend quarterly

Fund Performance: This fund has consistently beaten its benchmark in Medium Duration segment and provided 9.41% annualized returns in the last 3 years. In the last 1 year, it gave 11.75% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 11.75% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,842Cr
1Y Returns11.8%

SBI Magnum Medium Duration Fund Direct Growth

Fund Performance: This fund has consistently beaten its benchmark in Medium Duration segment and provided 9.38% annualized returns in the last 3 years. In the last 1 year, it gave 11.68% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 11.68% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,842Cr
1Y Returns11.7%

Franklin India Dynamic Accrual Direct Plan Dividend Quarterly

Fund Performance: This fund has consistently beaten its benchmark in Dynamic segment and provided 9.27% annualized returns in the last 3 years. In the last 1 year, it gave 10.04% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 10.04% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM3,981Cr
1Y Returns10.0%

Franklin India Dynamic Accrual Direct Plan Growth

Fund Performance: This fund has consistently beaten its benchmark in Dynamic segment and provided 9.25% annualized returns in the last 3 years. In the last 1 year, it gave 10.03% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 10.03% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM3,981Cr
1Y Returns10.0%

Franklin India Corporate Debt Fund Direct Dividend Yearly

Fund Performance: This fund has consistently beaten its benchmark in Corporate Bond segment and provided 9.06% annualized returns in the last 3 years. In the last 1 year, it gave 11.55% returns.

Why to invest: The fund has consistently beaten other funds in same category along with its benchmark and provided 11.55% returns in the last 1 year. Minimum lump sum investment amount for this scheme is ₹NaN. Minimum SIP investment amount for this scheme is ₹500. This is one of the best Debt mutual fund in India.

Launch Date
Min Investment Amt₹NaN
AUM1,033Cr
1Y Returns11.6%

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