Best Debt Mutual Funds to invest, Mutual funds investment has become immensely popular in recent times among different types of investors. Though there are many reasons to invest in mutual funds, the most exciting feature of mutual funds investment is the flexibility it offers in all terms. Whether you want to invest for a short term, long-term, amount on a monthly basis, or a lumpsum amount, there is always a mutual fund scheme for you. Among different types of mutual funds, debt funds are extremely popular. Debt funds primarily invest the accumulated money in fixed-income securities like treasury bills, commercial paper, debentures, corporate bonds, etc.
A mutual fund can be defined as a pool of money which is invested in different types of stocks by a dedicated fund manager. The money is deposited by a large number of investors in a mutual fund. The purpose of a mutual fund is to channel the money in different types of investment tools like stocks, bonds, commodities, currencies, and others and generate remarkable gains for the investors. Mutual funds are great for those investors who are kin to invest in stocks but don’t possess proper knowledge about stock investment.
What Are Debt Mutual Funds in India? Debt Funds can be termed as a type of mutual fund that produce returns by lending the fund amount to fixed-income securities. The risk level of a debt fund is determined by the lending tenure and the borrower’s category.
However, debt funds are considered to be less risky than equity funds as they invest the amount in debt instruments. If you are looking to invest in a debt fund, it is very much necessary for you to gain as much knowledge about them before investing.
Best Debt Mutual Funds to invest, Debt funds come in 16 different varieties, which are primarily divided into two groups depending on security and length. The former group includes programmes like money market funds, dynamic bond funds, gilt funds, banking and PSU funds. Examples of the latter category include ultra-short-term funds, long-term funds, medium-duration funds, and overnight funds.
Asset distribution: Debt and money market instruments make up a sizable component of the corpus invested by fixed-income securities.
Risk-return ratio: The best debt mutual fund guarantees stable and modest returns against insignificant market risks. However, credit risk and inflation risk can be there in fixed-income funds.
Read More- Best Small Cap Mutual Fund In 2023
Short-term capital gains tax: In this scenario, debt fund units are sold in the market 3 years from the date of purchase. The taxes remain applicable as per the tax slab of the investors. Therefore, the taxes will be 31.20% (30% + 4% cess) in the case of investors belonging to the topmost tax slab.
Long-term capital gains tax: After a span of three years, if units of a debt fund are redeemed, 20% tax and indexation advantages will be applied to the profits. Every year that a person keeps money invested in a debt mutual fund qualifies for this benefit.
There is no applicability of TDS with Debt mutual funds.
Debt mutual funds are funds that have something for almost every type of investor. Whether you have short-term investment goals or a long-term objective, debt mutual funds emerge as the best choice. The selection of the best debt mutual fund depends on several factors like your investment objective, investment tenure, SIP or lumpsum, and others.
Type of Investor |
Benefits of Investing in Debt Mutual Funds |
New Investor |
Better returns as compared to conventional investment tools |
Equity Investor |
For putting money for short-term gains |
Safe Investor |
Lower risk and stable returns in comparison to equity mutual funds |
Seasoned Investor |
Easy portfolio management and better returns for long-term wealth creation |
Senior Citizen |
Stable and improved returns |
Read More-
What Is A Loan Against Property In 2023
How To Apply For Loan Against Property In 2023?
There are several benefits debt mutual funds offer to investors. A few of them are listed below:
Superior liquidity:
One major advantage of investing in debt mutual funds is liquidity. Investors can choose to redeem their fund units anytime, anywhere. The redeemed amount will be deposited in your bank in no time.
Flexibility:
Investors have the option to invest in these mutual funds through a lumpsum amount or monthly instalments (SIP).
Stable Returns:
Stock market swings seldom affect returns since a large percentage of the investment corpus is devoted to debt instruments.
Fractional Withdrawals:
An investor may take a certain part of their invested amount out to fulfil criteria without making any effect on the remainder of their investment.
Tax-Efficient:
Compared to more various typical investment options such as fixed deposits, debt funds are more tax-efficient. When an investor redeems their units, the income from the debt fund levies the applicable tax. However, bank FD income is subject to annual taxation. If sold after three years from the purchase date, debt funds become also eligible for tax indexation advantages.
Looking to invest in the best debt mutual funds in 2023? Below are the top 7 debt mutual funds to consider.
Debt Mutual Fund Scheme |
AUM |
1 Year Returns |
Aditya Birla Sun Life Medium Term Direct Plan Growth |
₹1,891Cr |
7.40% |
Baroda BNP Paribas Credit Risk Fund Direct Growth |
₹165Cr |
7.80% |
Bank of India Short Term Income Fund Direct Growth |
₹76Cr |
13.10% |
UTI Bond Fund Direct Growth |
₹321Cr |
6.50% |
Sundaram Low Duration Fund Direct Growth |
₹416Cr |
7.10% |
Sundaram Short Duration Fund Direct Growth |
₹200Cr |
6.80% |
Nippon India Ultra Short Duration Fund Direct Growth |
₹5,854Cr |
7.20% |
1. Do Debt Mutual Funds Carry Risk?
In comparison to equity funds, debt mutual funds carry lesser risk to investors and provide safer and more stable returns to them.
2. Which Are The Safest Debt Funds?
The safest debt fund is Overnight Fund. These funds invest in assets with a one-day maturity, which eliminates all credit and interest risk and almost eliminates the possibility of a loss.
3. Is There Any Lock-In Period In Debt Mutual Funds?
No. there is no lock-in period in debt funds. An investor can choose to withdraw the amount fully or partially from the funds.
4. Can I Invest In A Short-Term Debt Mutual Fund?
Yes, it is beneficial to invest in short-term debt funds. They are better than long-term debt funds as long-term funds' values are more likely to decline as interest rates go up.
From the aforementioned points, it becomes clear that debt mutual funds are suited for almost all types of investors. However, it is necessary to choose from the best debt mutual funds in Delhi that are known to provide stable returns over years. You can check from the given fund houses that have become immensely popular among investors in recent times.
Taxation Regulations for Mutual Funds for NRIs in India, In recent times, mutual funds have eme...
Read more...Difference Between SIP and Mutual Fund, Though terms like SIP and mutual funds correlate, there migh...
Read more...How Do You Withdraw Money from Mutual Funds? In recent times, the popularity of mutual funds as an i...
Read more...A market-linked return and tax deduction under Section 80C of the Income Tax Act, 1961 are two advan...
Read more...How Long Should We Invest In Index Funds? Given that more investors are expressing interest in passi...
Read more...How to Choose The Best Mutual Funds in India? Investing is a skill that is unique to each perso...
Read more...Best mutual funds to invest in 2023, When an asset management firm (AMC) combines the capital o...
Read more...How Mutual Funds Are Better Investment Options? Purchasing individual stocks is one approach to atte...
Read more...Benefits of Investing in Mutual Funds, A mutual fund is a type of financial vehicle that invests the...
Read more...How Can I Withdraw SIP Amount Online, In recent times, mutual fund investment, especially throu...
Read more...Drop a Mail or give us a Missed Call & Begin your Investment Journey here