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Best Gilt Mutual Funds

Gilt mutual funds predominantly invest in government bonds and securities with varying maturity tenures and coupon rates. The name “gilt” comes from gilded-edged certificates since previously, government bonds and securities were issued in golden-edged certificates. The RBI issues this category of bonds and securities on behalf of the Central government to finance various development projects.

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Top 10 Gilt Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Edelweiss Government Securities FundDebtModerate6.9%5star113
Axis Gilt FundDebtModerate4.2%5star150
IDFC Government Securities Fund Investment PlanDebtModerate3.3%4star1,957
DSP Government Securities FundDebtModerate4.5%4star439
Aditya Birla Sun Life Government Securities FundDebtModerate4.6%4star971
SBI Magnum Gilt FundDebtModerate3.8%4star3,689
LIC MF G Sec FundDebtLow to Moderate3.1%4star72
Nippon India Gilt Securities FundDebtModerate3.5%3star1,328
Nippon India Gilt Securities FundDebtModerate3.5%3star1,328
ICICI Prudential Gilt FundDebtModerate5.1%3star3,243
PGIM India Gilt FundDebtModerate4.6%3star136
L&T Gilt FundDebtModerate3.1%3star258
HDFC Gilt Fund DebtModerate3.3%3star1,560
UTI Gilt FundDebtLow to Moderate3.3%2star619
Baroda Pioneer Gilt FundDebtModerate3.5%2star29
View All Top 10 Gilt Mutual Funds

Features of Gilt Mutual Fund

Types: There are two classifications of this sub-type of debt Mutal Funds. One type invests in government schemes with various maturity periods. The other kind invests 80% of the assets in government bonds with a constant maturity tenure of 10 years.

Asset allocation: According to the SEBI rules, the best gilt mutual funds must invest at least 80% of their assets in government bonds and securities. 

Risk-reward ratio: Gilt funds carry nominal default risk since these invest significantly in government securities. However, they carry a high-interest rate risk. The value of the underlying securities is inversely proportionate to RBI’s monetary policy. Therefore, when the apex bank reduces its policy rates, the demand for these securities shoot up as they carry a higher interest rate and vice versa. The best gilt mutual funds generate stable returns, reciprocating the overall low risk associated with the constituent securities. 

Taxability

Long-term Capital Gains Tax: Capital gains generated after an investment period of 36 months attract a 20% LTCGT, irrespective of the amount. Long-term capital gains on gilt funds are also liable for indexation benefits, which accrues as long as one remains invested. Without indexation benefit, this rate is 10%. 

Short-term Capital Gains Tax: On the other hand, returns earned from gilt fund units sold within 3 years are classified as STCG. This amount is added to an investor’s annual taxable income, and they are liable to pay taxes as per their income slab.

TDS: Income from the best gilt mutual funds 2021 is not liable for TDS or tax deducted at the source. 

Who Are These Funds Suited For?

The best gilt mutual funds are suitable for investors with a low-risk capacity and a mid to long-term investment horizon. Unlike bond funds, where asset allocation may include investments in corporate bonds, the focus here is on government-issued securities. Therefore, the chances of default are significantly low. These funds can suit objectives of capital preservation alongside moderate returns.

However, it’s essential to note that timing is of the utmost significance in the case of gilt funds. These MFs are sensitive to RBI’s policy rate movements. Resultantly, they perform well during falling interest rates and suffer when policy rates pick up. Having a sound knowledge of the money or bond market may be a necessary factor when investing in this type of mutual fund scheme.

Besides, here are some points to consider before investing in the best gilt mutual funds.

Investment objective: One must evaluate a particular scheme’s objectives before making an investment. Clarity on this matter will aid individuals to choose an investment method that can match their financial goals within the stipulated time.

Economic outlook: Investors may want to reckon the macroeconomic prospects before investing in gilt funds. Although these funds are virtually immune to market and credit risks, they are susceptible to policy rate fluctuations. Weak macroeconomic prospects favour gilt funds because there’s a less significant probability of RBI increasing interest rates. Conversely, a strong outlook may not bode well for even the best gilt mutual fund because of increased chances of RBI upping the interest rates. 

Previous performance of a fund: Even though the past performance of a fund does not foretell its future returns, it is still imperative to perform due diligence. Reviewing the performance of a fund can allow investors an insight into its overall performance under various macroeconomic conditions.

Experience of the fund manager: Since a fund manager is responsible for any investment, it is necessary to check his/her previous experience before investing. This will help investors gauge whether the person in charge has enough experience to navigate through difficult market conditions.

Expense ratio: The expense ratio represents the aggregated cost of maintaining a fund, which is then deducted from returns. Since this ratio alters from one scheme to another, it is ideal to look into it before investing.

Exit load: Investors are liable to pay an additional fee if they leave a scheme before a pre-defined period, as mentioned in scheme-related papers. Nonetheless, this charge and its particulars differ across schemes. Some schemes may not involve any exit load. 

Major Advantages

Here are some major advantages of investing in the top gilt mutual funds –

Low credit risk: Since gilt funds invest in government bonds and securities, they carry minimal credit risks, unlike mutual funds that invest in corporate bonds. 

Capital protection: Chances of capital loss with the best gilt funds is minimal as they invest significantly in government-backed securities.

Reasonable returns: Gilt funds offer significant returns over a mid to long period. 

Flexible investment modes: One can invest in gilt funds in one of two ways – SIP and lump sum. A Systematic Investment Plan is where investors deposit a fixed sum periodically. This sum can be as low as Rs.100. The lump-sum mode requires one to deposit their investment only once.

Let's have a closer look

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

Edelweiss Government Securities Fund Direct Growth

Fund Performance: This fund has given 11.28% annualized returns in the last three years. In the last year, its returns were 6.94%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.94% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM113Cr
1Y Returns6.9%

Axis Gilt Fund Direct Plan Growth

Fund Performance: This fund has given 10.9% annualized returns in the last three years. In the last year, its returns were 4.2%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 4.2% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM150Cr
1Y Returns4.2%

IDFC Government Securities Investment Plan Direct Growth

Fund Performance: This fund has given 11.56% annualized returns in the last three years. In the last year, its returns were 3.33%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.33% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM1,957Cr
1Y Returns3.3%

DSP Government Securities Direct Plan Growth

Fund Performance: This fund has given 11.38% annualized returns in the last three years. In the last year, its returns were 4.47%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 4.47% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹500. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹500
AUM439Cr
1Y Returns4.5%

Aditya Birla Sun Life Government Securities Fund Direct Plan Growth

Fund Performance: This fund has given 10.71% annualized returns in the last three years. In the last year, its returns were 4.6%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 4.6% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹1,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹1,000
AUM971Cr
1Y Returns4.6%

SBI Magnum Gilt Fund Direct Growth

Fund Performance: This fund has given 10.61% annualized returns in the last three years. In the last year, its returns were 3.82%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.82% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM3,689Cr
1Y Returns3.8%

LIC MF Govt. Securities Fund Direct Growth

Fund Performance: This fund has given 9.86% annualized returns in the last three years. In the last year, its returns were 3.1%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.1% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹10,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹10,000
AUM72Cr
1Y Returns3.1%

Nippon India Gilt Securities Fund Direct Growth

Fund Performance: This fund has given 10.72% annualized returns in the last three years. In the last year, its returns were 3.49%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.49% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹5,000
AUM1,328Cr
1Y Returns3.5%

Nippon India Gilt Securities Fund Direct Defined Maturity Date Growth

Fund Performance: This fund has given 10.72% annualized returns in the last three years. In the last year, its returns were 3.49%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.49% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹5,000
AUM1,328Cr
1Y Returns3.5%

ICICI Prudential Gilt Fund Direct Plan Growth

Fund Performance: This fund has given 10.26% annualized returns in the last three years. In the last year, its returns were 5.08%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 5.08% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM3,243Cr
1Y Returns5.1%

PGIM India Gilt Direct Plan Growth

Fund Performance: This fund has given 9.48% annualized returns in the last three years. In the last year, its returns were 4.59%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 4.59% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹5,000
AUM136Cr
1Y Returns4.6%

L&T Gilt Fund Direct Growth

Fund Performance: This fund has given 9.32% annualized returns in the last three years. In the last year, its returns were 3.13%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.13% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹10,000. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹10,000
AUM258Cr
1Y Returns3.1%

HDFC Gilt Fund Direct Plan Growth

Fund Performance: This fund has given 8.35% annualized returns in the last three years. In the last year, its returns were 3.27%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.27% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM1,560Cr
1Y Returns3.3%

UTI Gilt Fund Direct Growth

Fund Performance: This fund has given 9.38% annualized returns in the last three years. In the last year, its returns were 3.28%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.28% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM619Cr
1Y Returns3.3%

Baroda Gilt Direct Growth

Fund Performance: This fund has given 9.01% annualized returns in the last three years. In the last year, its returns were 3.45%. It has continually hit its benchmark in the Debt segment.

Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 3.45% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹5,000
AUM29Cr
1Y Returns3.5%

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