Best Nippon India Debt Mutual Funds

Nippon India Mutual Fund is a joint venture between Nippon Life Insurance, a Japanese company, and India’s Reliance Capital. It began operations in 1995 as Reliance Mutual Fund, thereafter adopting its current name in 2019. Presently, this asset management company is one of the largest fund houses in India in terms of AUM. 

The AMC offers more than 65 mutual fund schemes under various channels. These MFs include hybrid schemes, equity schemes, ETFs, and a number of debt funds, among others.

Debt funds are a type of mutual fund that invests primarily in fixed-income securities. The best Nippon debt mutual funds distribute wealth in an array of money-market instruments. 

Debt instruments include treasury bills, commercial papers, corporate bonds, government securities, and debentures, among others. These come with a pre-decided date of maturity and interest rate.

Moreover, investors earn yields based on the interest generated, which impacts the securities’ market value. As a result, debt MFs are also referred to as fixed-income funds.

Like any other MF investment, investing in the best Nippon debt mutual funds 2025 has its set of benefits and drawbacks, depending upon the kind of scheme. The upsides of these funds include higher liquidity, more flexibility, and stable earnings. Additionally, debt MFs tend to be less volatile than other aggressive investment tools as they invest in fixed-income avenues.

On the flip side, however, debt mutual funds offer lower returns as compared to their equity counterparts.

Nippon India Mutual Fund offers more than 10 schemes under its category of debt funds. These debt fund schemes comprise several long- and short-term options under their investment portfolio.

Factors to Consider Before Investing

Before investing in one of the top Nippon debt mutual funds, it is vital to have a clear understanding of its various aspects. 

Duration: Debt MFs tend to be more sensitive to interest rate movements. In fact, the price of fixed-income securities is inversely related to interest rates. This price sensitivity of these mutual funds is called duration. A fund with a longer duration is more vulnerable to fluctuations in interest rates and vice versa.

Expense ratio: Every mutual fund house levies an annual fee for its portfolio management services. The expense ratio is a percentage of aggregate expenses borne by investors. For example, a debt fund that offers 10% returns with an expense ratio of 1.5% delivers actual returns worth 8.5% to its investors.

Assets under management (AUM): It is the market value of the investments held by a mutual fund house. Therefore, debt MFs with larger assets under management or a higher AUM can stand in a better position to distribute fixed fund expenses across their investors. As a result, a large fund size can indicate a lower expense ratio per investor. 

Credit risk of constituents: Credit rating agencies in India examine the creditworthiness of issuers of fixed-income instruments. They also analyse an issuer’s ability to pay back investors. Premised upon this analysis, debt securities receive a rating. For instance, securities with an ‘AAA’ rating are considered to carry low credit risk. Contrastingly, securities with a ‘C’ rating carry a higher risk of default.

Prevailing interest rate regime: Under a falling interest rate regime, freshly issued bonds are valued lower compared to previously issued ones. Likewise, with a rising interest rate regime in place, the value of freshly issued bonds goes up. And, as debt funds invest in bonds, they usually perform better during a falling interest rate regime. 

Risk appetite: It is necessary to weigh your capacity to digest risks before investing in any fund. Theoretically, debt mutual funds are less prone to market risks. However, they can be vulnerable to inflation, interest rate, and credit risks.

Investment objective: When choosing the best Nippon debt mutual fund for yourself, it is critical to evaluate your investment objectives. Thereafter, you can choose a plan that aligns with your financial goals and the timeframe within which you wish to achieve them.

Taxability

Alongside the above-mentioned parameters, it is also imperative for investors to know the tax treatment of the best Nippon debt mutual funds.

Short-term Capital Gains Tax (STCG tax): If investors sell units of their MF before a holding period of 3 years, the gains are added to their taxable income. Moreover, the applicable tax on a debt MF for less than 3 years depends upon an investor’s income slab. For instance, an investor falling under the 10% tax slab is liable to pay taxes at 10% with 4% cess as STCG tax. 

Long-term Capital Gains Tax (LTCG tax): Debt mutual funds redeemed after a holding period of 3 years are subject to LTCGT. This implies that tax is applicable at a flat rate of 20% on long-term capital gains. Additionally, debt MFs extend indexation benefits to investors, thereby lowering their taxable income. 

TDS: When investing in the best Nippon debt mutual funds, investors must note that tax deducted at source does not apply to debt MFs.