Best Debt Funds - Consider the best performing debt mutual funds to invest in 2024 with Scripbox.com. Find the list of best debt funds in India on the basis of Returns, Latest Nav, Ratings, Performance etc
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Stability, growth & quality in your portfolio, with pre-selected debt funds at Scripbox.
Below are the best debt funds in india:
BHARAT Bond FOF - April 2031 Direct (G) is a Debt fund that has delivered a 1 Year return of 9.3% and a 3 Years return of 6.2%. The fund has an expense ratio of 0.1% and an AUM of ₹4627 crores as of 2024-12-22. It was Launched on 2020-07-23. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 097.20% to debt and 2.79% to other assets.
Nippon India Arbitrage Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.3%, a 3 Years return of 6.9% and a 5 Years return of 6.1%. The fund has an expense ratio of 0.4% and an AUM of ₹15418 crores as of 2024-12-22.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates -0.48% to equities, 26.69% to debt and 73.80% to other assets.
Kotak Nifty SDL Apr 2027 Top 12 Equal Weight Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.4%. The fund has an expense ratio of 0.2% and an AUM of ₹7938 crores as of 2024-12-22. It was Launched on 2022-02-11. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.46% to debt and 1.54% to other assets.
HDFC Overnight Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 6.7%, a 3 Years return of 5.9% and a 5 Years return of 4.9%. The fund has an expense ratio of 0.1% and an AUM of ₹12133 crores as of 2024-12-22. It was Launched on 2013-01-01. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 06.25% to debt and 93.75% to other assets.
HDFC Floating Rate Debt Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.6%, a 3 Years return of 7.0% and a 5 Years return of 7.0%. The fund has an expense ratio of 0.3% and an AUM of ₹15104 crores as of 2024-12-22. It was Launched on 2013-01-01. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.96% to debt and 3.04% to other assets.
BHARAT Bond ETF FOF - April 2032 Direct (G) is a Debt fund that has delivered a 1 Year return of 9.2% and a 3 Years return of 6.5%. The fund has an expense ratio of 0.1% and an AUM of ₹4568 crores as of 2024-12-22. It was Launched on 2021-12-15. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.01% to debt and 3.99% to other assets.
ICICI Prudential Liquid Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.5%, a 3 Years return of 6.4% and a 5 Years return of 5.4%. The fund has an expense ratio of 0.2% and an AUM of ₹50756 crores as of 2024-12-22.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹1000. The fund allocates 0107.81% to debt and -7.81% to other assets.
Aditya Birla Sun Life Money Manager Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.9%, a 3 Years return of 6.8% and a 5 Years return of 6.2%. The fund has an expense ratio of 0.2% and an AUM of ₹25834 crores as of 2024-12-22.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 0109.30% to debt and -9.30% to other assets.
Aditya Birla Sun Life Savings Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.1%, a 3 Years return of 6.8% and a 5 Years return of 6.3%. The fund has an expense ratio of 0.4% and an AUM of ₹16278 crores as of 2024-12-22.The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.49% to debt and 1.51% to other assets.
Bandhan CRISIL IBX Gilt April 2028 Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.0% and a 3 Years return of 5.8%. The fund has an expense ratio of 0.2% and an AUM of ₹4733 crores as of 2024-12-22. It was Launched on 2021-03-23. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.28% to debt and 1.72% to other assets.
A debt mutual fund is a mutual fund scheme that invests in fixed income generating instruments with lesser risk and lesser volatility like Certificate of deposit, Corporate Bonds, treasury bills, commercial paper, government securities. Debt mutual funds are also popularly known as Bond Funds or Fixed Income Bonds
The main objective of this fund is to provide regular and fixed interest during the investment period. Also, aim for capital appreciation for an investor.
The selection of assets for a debt mutual fund is based on the credit rating. A higher credit rating gives a higher assurance that the interest will be paid regularly and the principal amount invested will be repaid upon the maturity of the investment.
| Fund Name | 3 Year Returns | 5 Year Returns |
| BHARAT Bond FOF – April 2031 – Direct Plan Growth | 6.4% | NA |
| HDFC Floating Rate Debt Fund – Direct Plan Growth | 6.9% | 7% |
| Nippon India Arbitrage Fund – Direct Plan Growth | 6.9% | 6% |
| HDFC Gilt Fund – Direct Plan Growth | 5.9% | 6.3% |
| Kotak Banking and PSU Debt Fund – Direct Plan Growth | 6.4% | 7% |
| HDFC Overnight Fund – Direct Plan Growth | 5.8% | 4.8% |
| ICICI Prudential Liquid Fund – Direct Plan Growth | 6.3% | 5.4% |
| Aditya Birla Sun Life Money Manager Fund – Direct Plan Growth | 6.7% | 6.2% |
| Aditya Birla Sun Life Savings Fund – Direct Plan Growth | 6.6% | 6.3% |
| Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund – Direct Plan Growth | 5.6% | NA |
| Fund Name | 3 Year Returns | 5 Year Returns |
| BHARAT Bond ETF FOF – April 2032 – Regular Growth Plan | NA | NA |
| HDFC Overnight Fund – Regular Growth Plan | 5.7% | 4.7% |
| Kotak Nifty SDL Apr 2027 Top 12 Equal Weight Index Fund – Regular Growth Plan | NA | NA |
| HDFC Floating Rate Debt Fund – Regular Growth Plan | 6.6% | 6.7% |
| BHARAT Bond FOF – April 2031 – Regular Growth Plan | 6.5% | NA |
| Aditya Birla Sun Life Savings Fund – Regular Growth Plan | 6.4% | 6.1% |
| Bandhan CRISIL IBX Gilt April 2028 Index Fund – Regular Growth Plan | 5.5% | NA |
| Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund – Regular Growth Plan | 5.5% | NA |
| BHARAT Bond FOF – April 2030 – Regular Growth Plan | 6.4% | NA |
| Nippon India Arbitrage Fund – Regular Growth Plan | 6.0% | 5.2% |
Below are the advantages of investing in debt mutual funds:
Debt mutual funds are suitable for investors who wish to earn a fixed and regular income with less or no risk involved for a short duration. Usually, investors stay invested from a short to medium duration. Accordingly, investors choose the funds which match their investment horizon.
A Liquid fund is suitable for investors who look for a short or medium duration investment and generally park their surplus money either in fixed deposits or saving account. Liquid mutual funds can be withdrawn anytime just like a savings bank account and provide returns in the range of 7% to 9%.
For investments done before March 31st, 2023, the gains arising from debt mutual funds are taxed under Capital Gains depending on the holding period of the investment.
As per the Finance Bill 2023, for investments done after April 1st 2023, the capital gains are taxable as per the investor’s income tax slab rate. The benefit of indexation for long-term capital gains is no longer available for debt mutual funds.
Taxation for investments made before March 31st 2023:
| Period of holding | Taxation |
| Less than 1 year | STCG- Taxed at Slab Rate |
| 1 year to 3 year | STCG- Taxed at Slab Rate |
| More than 3 years | LTCG- 20% after indexation |
For investments made after April 1st 2023, the capital gains are added to the investor’s taxable income and are taxed at the applicable slab rate. Thus, no LTCG tax benefit for debt mutual funds.
There are many types of debt mutual funds depending on the interest rate and maturity. An investor who wishes to invest in debt mutual funds must also consider which type of fund is most suitable for his investment terms.
The different types of debt mutual funds are listed below:
The maturity of any debt fund is a very important criterion for any investor before selecting the most suitable debt fund to match with investment horizon and investment goals. Often, this is missed by investors and results in unnecessary risk.
The duration or maturity of a debt fund is important because it helps in optimizing returns at a given risk and maturity. Example- a liquid fund has an average maturity ranging from a few days to a month and it is a better option for an investor looking for an investment option for a few days. On the other hand, for investors looking for an investment option for say a year, short-term debt funds will be an ideal option.
The yield is the measure of interest income generated by the bonds. A higher coupon or yield of the invested debt instruments or bonds would mean a higher coupon of the entire portfolio.
The yield to maturity (ytm) of a fund means the present yield of the fund. An investor must always be keen to know-how is the extra yield being generated on the existing funds. Is this extra yield being generated through funds with lower quality? If this is the case it would mean the fund may default later.
In debt funds, one of the most important factors is the interest rate prevailing in the economy. An investor must understand the market environment w.r.t. Interest rate and its fluctuations.
The interest rate is directly related to the price or NAV of the bonds. With an increase in interest rate, the price of the bonds falls, and vice versa. While the interest rate increases, new bonds are introduced in the market which are attractive for new investors and values higher than current bonds. Here a repricing of current bonds takes place.
A debt fund portfolio which involves such older bonds will be impacted. With a rise in the interest rate, the value of these older bonds will decrease, having a negative impact on the overall portfolio.
Example
During the period of rising interest rates in the market, long term debt funds are at a higher risk. In such a scenario, investing in short term debt funds and liquid funds are a safer and better option
An investor who has a better understanding will always benefit from market conditions.
An expense ratio is a fee that the fund manager charges for the management of the portfolio. An expense ratio differs from fund to fund.
BPS is a unit to measure interest rates wherein one bps is equal to 1/100th of 1%.
Example
Liquid funds have an expense ratio of up to 50 bps while other debt funds charge up to 150 bps.
The expense ratios lower the net returns earned by the portfolio. Hence an investor must consider the expense ratios before selecting funds.
A credit rating is provided to all the debt instruments and bonds. This rating reflects the ability of the instrument or bond to repay the amount invested. The higher the rating, the lower is the level of default risk.
An investor who wants a safe and secure option for investment must consider AAA or AA+ rated instruments and bonds.
You can invest in Scripbox’s recommended best debt mutual funds in India by following the below-mentioned steps:
Yes, it is a relatively safe option to invest in debt mutual funds. Debt funds invest in government securities, corporate bonds, fixed income generating instruments Historically, these funds have provided a regular income with moderate to low risk on the invested amount.
There are two reasons why debt mutual funds are considered a better option to invest than FD or saving account. Firstly, debt mutual funds do not have a lock-in period like FD. Secondly, historically debt mutual funds have delivered higher returns than FD rates.
Maturity is the time period for which the amount is invested in the scheme and on the expiry of this maturity period, the principal amount invested is redeemed. On average, the maturity period of debt funds is 5 years. However, an investor can choose to invest in schemes with any maturity period
Debt mutual funds do not have a lock-in period, an investor can choose to withdraw anytime.
TREPs are Tri-Party Repo agreements. TREPs allow the borrowing and lending of funds against Government Securities as collateral in a Triparty Repo arrangement. TREP is a repo contract in which a third party (Tri-party) acts as an intermediary between the borrower and lender. The role of the Tri-Party Agent is collateral selection, ensuring payments and settlements, custody and management of the contract.
Clearing Corporation of India Ltd (CCIL) is the Central Counterparty to all trades from Tri-Party Repo Dealing System (TREPS). The following entities participate in TREPS: Mutual Funds, Banks, Financial Institutions, Pension Funds, NBFCs, Insurance Companies, Corporates, Primary Dealers, etc.
