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Best Debt Mutual Funds in India for 2025 | Top Funds by Tenure & Tax Benefits

Updated on June 5, 2025 , 64480 views

Best debt funds vary according to the tenor of investment of the investor. Investors need to be clear on their time horizon of investment when selecting the best Debt fund for their investment and also factor in the interest rate scenario.

For investors with a very short holding period, say for a couple of days to a month, Liquid Funds and ultra-short term funds may be relevant. When the time horizon is one to two years then short-term funds may be the desired vehicle. For longer tenors, for more than 3 years, long-term debt funds are the most preferred instruments by investors, especially during falling interest rates. Above all, debt funds have proved to be less risky than equities when looking for short-term investments, however, the volatility of long-term income funds may match that of equities.

Best Debt Funds

As debt funds invest in fixed income instruments like government securities, treasury bills, corporate Bonds, etc., they have the capacity of generating consistent and regular returns over time. However, there are many qualitative and quantitative factors that one needs to understand before selecting the best debt funds to invest, viz - AUM, Average Maturity, Taxation, the credit quality of the portfolio, etc. Below we have listed the top 5 best debt funds to invest across the various categories of debt funds - Best Liquid Funds, best ultra short-term funds, best short-term funds, best long-term funds and best Gilt Funds to invest in 2025 - 2026.

Quick Summary

✅ Best for short-term: Liquid, Ultra-Short, and Money market funds

✅ Best for 1–2 years: Short-term bond funds

✅ Best for 3+ years: Gilt funds, Corporate bond funds, Dynamic Bond Funds

✅ Risks: Credit risk, Interest rate risk

✅ Tax: 20% with indexation if held for more than 3 years

Why To Invest in Debt Mutual Funds?

  • Debt funds are considered to be an ideal investment for generating regular income. For example, choosing dividend payout can be an option for regular income.

  • In debt funds, investors can withdraw required money from the investment at any point in time and can let the remaining money stay invested.

  • Since debt funds largely invest in government securities, corporate debt and other securities like treasury bills, etc., they are not affected by equity market volatility.

  • If an investor is planning to achieve short-term Financial goals or invest for short periods then debt funds can be a good option. Liquid funds, ultra short-term funds, and short-term income funds may be the desired options.

  • In debt funds, investors can generate fixed income every month by starting a Systematic Withdrawal Plan (SWP is a reverse of SIP / STP) to withdraw a fixed amount on a monthly basis. Also, you can change the amount of the SWP when required.

Key Benefits of Debt Funds in 2025

  • Safer than equities in volatile markets
  • Offer liquidity and low lock-in
  • Tax-efficient with indexation benefit after 3 years
  • Flexible options for all durations and risk profiles
  • Suitable for conservative and semi-aggressive investors alike

Risks in Debt Mutual Funds

While Investing in debt funds, investors should be cautious about two major risks associated with them - credit risk and interest rate risk.

Credit Risk

A credit risk arises when a company that has issued the debt instruments does not make regular payments. In such cases, it has a major impact on the fund, depending on how much portion the fund has in the portfolio. Hence, it is suggested to be in debt instruments with a rating higher credit rating. An AAA rating is considered to be the highest quality with little or negligible payment default risk.

Interest Risks

The interest rate risk refers to a change in the bond price due to the change in the prevailing interest rate. When the interest rate rises in the economy the bond prices fall down and vice versa. The higher the maturity of the funds’ portfolio, the more prone it is to the interest rate risk. So in a rising interest rate scenario, it is advisable to go for lower maturity debt funds. And the reverse in a falling interest rate scenario.

Debt Mutual Fund Taxation

Tax implication on debt funds is computed in the following manner-

a. Short Term Capital Gains

If the holding period of a debt investment is less than 36 months, then it is classified as a short-term investment and these are taxed as per individual's tax slab.

b. Long Term Capital Gains

If the holding period of debt investment is more than 36 months, then it is classified as a long-term investment and is taxed at 20% with an indexation benefit.

Capital Gains Investment Holding Gains Taxation
Short Term Capital Gains Less than 36 months As per individual's tax slab
Long Term Capital Gains More than 36 months 20% with indexation benefits

📌 Note: Indexation helps adjust the purchase price with Inflation, effectively reducing your tax liability.

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Best Debt Mutual Funds in India for Investments FY 25 - 26

Top 5 Liquid Mutual Funds

Top Liquid funds with AUM/Net Assets > 10,000 Crore.

FundNAVNet Assets (Cr)Min Investment1 MO (%)3 MO (%)6 MO (%)1 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Axis Liquid Fund Growth ₹2,896.89
↑ 1.57
₹39,069 500 0.61.93.67.37.46.53%1M 11D1M 14D
Invesco India Liquid Fund Growth ₹3,576.22
↑ 2.13
₹13,775 5,000 0.61.93.67.37.46.45%1M 14D1M 14D
Aditya Birla Sun Life Liquid Fund Growth ₹419.222
↑ 0.20
₹53,912 5,000 0.61.93.67.37.36.59%1M 13D1M 13D
Tata Liquid Fund Growth ₹4,097.88
↑ 2.53
₹21,425 5,000 0.61.93.67.37.36.54%1M 7D1M 7D
ICICI Prudential Liquid Fund Growth ₹385.177
↑ 0.20
₹53,193 500 0.61.93.67.37.46.55%1M 11D1M 15D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Ultra Short Term Bond Mutual Funds

Top Ultra Short Bond funds with AUM/Net Assets > 1,000 Crore.

FundNAVNet Assets (Cr)Min Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Savings Fund Growth ₹547.154
↑ 0.89
₹17,263 1,000 2.64.38.37.47.97.27%5M 16D6M 14D
UTI Ultra Short Term Fund Growth ₹4,228.62
↑ 5.11
₹4,131 5,000 2.23.87.56.87.26.95%5M 22D5M 28D
ICICI Prudential Ultra Short Term Fund Growth ₹27.643
↑ 0.04
₹15,092 5,000 2.44.17.87.17.57.05%5M 1D8M 8D
SBI Magnum Ultra Short Duration Fund Growth ₹5,961.78
↑ 7.24
₹15,125 5,000 2.347.87.17.46.77%5M 8D6M 22D
Invesco India Ultra Short Term Fund Growth ₹2,690.75
↑ 3.24
₹1,130 5,000 2.347.66.97.56.88%5M 6D5M 18D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top and Best Floating Rate Mutual Funds

FundNAVNet Assets (Cr)Min Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Floating Rate Fund - Long Term Growth ₹348.101
↑ 0.84
₹13,438 1,000 3.14.78.97.77.97.05%1Y 14D1Y 10M 28D
Nippon India Floating Rate Fund Growth ₹45.4095
↑ 0.14
₹7,731 5,000 3.95.510.188.27.09%2Y 10M 6D3Y 9M 18D
ICICI Prudential Floating Interest Fund Growth ₹424.363
↑ 1.12
₹7,313 5,000 2.94.58.9887.5%1Y 2M 5D4Y 1M 17D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Best Money Market Mutual Funds

FundNAVNet Assets (Cr)Min Investment3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Aditya Birla Sun Life Money Manager Fund Growth ₹369.629
↑ 0.51
₹27,171 1,000 2.64.38.37.57.86.91%7M 24D7M 24D
UTI Money Market Fund Growth ₹3,081.27
↑ 4.43
₹17,804 10,000 2.74.48.47.57.76.76%8M 17D8M 17D
ICICI Prudential Money Market Fund Growth ₹379.266
↑ 0.58
₹28,644 500 2.74.48.37.57.76.74%8M 12D8M 30D
Kotak Money Market Scheme Growth ₹4,487.86
↑ 6.58
₹27,977 5,000 2.74.48.37.47.76.8%8M 12D8M 16D
L&T Money Market Fund Growth ₹26.3756
↑ 0.04
₹2,834 10,000 2.64.38.17.17.57%8M 26D9M 14D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Short Term Bond Mutual Funds

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
PGIM India Short Maturity Fund Growth ₹39.3202
↓ 0.00
₹281.23.16.14.2 7.18%1Y 7M 28D1Y 11M 1D
Nippon India Short Term Fund Growth ₹53.1126
↑ 0.15
₹6,69245.710.27.887.14%2Y 9M3Y 7M 13D
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹47.8042
↑ 0.11
₹8,3433.85.49.87.97.97.19%2Y 10M 13D3Y 8M 23D
UTI Short Term Income Fund Growth ₹31.861
↑ 0.07
₹2,7913.75.29.67.77.96.97%2Y 9M 14D3Y 7M 6D
ICICI Prudential Short Term Fund Growth ₹60.335
↑ 0.14
₹20,9693.65.29.58.27.87.23%2Y 7M 24D4Y 4M 20D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 23

Top 5 Medium to Long Term Bond Mutual Funds

Top Medium to Long Term Bond funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
SBI Magnum Income Fund Growth ₹71.1029
↓ -0.18
₹1,9423.85.29.88.38.17.1%6Y 8M 16D11Y 7M 6D
ICICI Prudential Bond Fund Growth ₹40.5138
↓ -0.03
₹2,8584.25.710.78.98.66.91%6Y 4M 13D12Y 9M 7D
Aditya Birla Sun Life Income Fund Growth ₹126.464
↓ -0.20
₹2,3043.95.19.888.46.93%6Y 8M 23D15Y 8M 16D
HDFC Income Fund Growth ₹58.7078
↓ -0.16
₹9304.25.510.18.196.66%6Y 8M 1D12Y 7D
Kotak Bond Fund Growth ₹77.3518
↓ -0.09
₹2,1303.95.19.688.26.75%6Y 5M 8D12Y 4M 24D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Banking and PSU Debt Mutual Funds

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
HDFC Banking and PSU Debt Fund Growth ₹23.1733
↑ 0.05
₹6,0074.25.6107.87.96.93%3Y 11M 1D5Y 6M 18D
UTI Banking & PSU Debt Fund Growth ₹22.0272
↑ 0.07
₹7923.85.49.67.87.66.75%2Y 7D2Y 3M 25D
DSP BlackRock Banking and PSU Debt Fund Growth ₹24.2507
↑ 0.01
₹3,6664.35.310.37.88.66.86%5Y 1M 17D9Y 10M 2D
Kotak Banking and PSU Debt fund Growth ₹65.8834
↑ 0.18
₹6,0134.25.610.2886.97%3Y 8M 16D5Y 5M 23D
Aditya Birla Sun Life Banking & PSU Debt Fund Growth ₹369.461
↑ 0.78
₹8,8264.25.610.17.87.96.91%3Y 9M 18D5Y 7D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Credit Risk Mutual Funds

Top Credit Risk funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
SBI Credit Risk Fund Growth ₹45.6812
↑ 0.06
₹2,2483.45.19.88.28.16.85%2Y 2M 1D2Y 11M 19D
HDFC Credit Risk Debt Fund Growth ₹24.0842
↑ 0.04
₹7,1803.44.89.47.78.28.06%2Y 7M 24D4Y 2M 26D
L&T Credit Risk Fund Growth ₹32.3387
↑ 0.05
₹67015.817.62211.47.27.44%2Y 6M 7D3Y 5M 12D
Kotak Credit Risk Fund Growth ₹29.4595
↑ 0.07
₹7093.758.47.17.18.25%2Y 4M 10D3Y
Nippon India Credit Risk Fund Growth ₹34.9945
↑ 0.10
₹1,0003.55.4108.38.38.34%2Y 11D2Y 4M 20D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Dynamic Bond Mutual Funds

Top Dynamic Bond funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
SBI Dynamic Bond Fund Growth ₹36.0035
↓ -0.12
₹3,4894.25.29.98.58.66.95%9Y 25D19Y 22D
Aditya Birla Sun Life Dynamic Bond Fund Growth ₹46.7908
↓ -0.03
₹1,8374.76.1119.48.87.15%6Y 10M 2D11Y 4M 17D
Axis Dynamic Bond Fund Growth ₹29.8634
↓ -0.03
₹1,3374.85.810.78.68.66.68%8Y 6M 22D19Y 11M 1D
HDFC Dynamic Debt Fund Growth ₹90.2804
↓ -0.37
₹7993.84.89.57.88.56.73%7Y 11M 26D17Y 5M 12D
IDFC Dynamic Bond Fund Growth ₹34.1897
↓ -0.27
₹2,9323.53.98.57.9107.02%12Y 28Y 3M
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Corporate Bond Mutual Funds

Top Corporate Bond funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
HDFC Corporate Bond Fund Growth ₹32.7908
↑ 0.06
₹32,6574.25.610.48.48.67.05%4Y 2M 19D6Y 4M 20D
Aditya Birla Sun Life Corporate Bond Fund Growth ₹113.613
↑ 0.09
₹25,8843.95.510.38.38.57.03%3Y 7M 28D5Y 2M 12D
Nippon India Prime Debt Fund Growth ₹60.4445
↑ 0.14
₹6,9984.45.910.78.48.47.07%3Y 9M 25D5Y 11D
Kotak Corporate Bond Fund Standard Growth ₹3,798.55
↑ 9.59
₹15,1274.15.710.488.37.02%3Y 6M 7D4Y 10M 10D
ICICI Prudential Corporate Bond Fund Growth ₹29.9361
↑ 0.06
₹31,1333.75.39.78.287.02%2Y 11M 8D4Y 10M 17D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

Top 5 Gilt Mutual Funds

Top GILT funds with AUM/Net Assets > 500 Crore.

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2024 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
SBI Magnum Constant Maturity Fund Growth ₹64.3442
↓ -0.18
₹1,8864.56.311.49.39.16.49%6Y 11M 1D9Y 8M 26D
ICICI Prudential Gilt Fund Growth ₹103.443
↓ -0.11
₹7,1664.25.710.38.98.26.65%5Y 11Y 18D
SBI Magnum Gilt Fund Growth ₹66.6515
↓ -0.41
₹11,9544.15.29.98.88.96.79%10Y 7M 2D25Y 2M 1D
UTI Gilt Fund Growth ₹63.3718
↓ -0.35
₹74245.29.88.18.96.64%9Y 2M 16D19Y 11M 26D
Nippon India Gilt Securities Fund Growth ₹38.3912
↓ -0.24
₹2,1153.84.89.48.18.96.76%9Y 3M 25D21Y 4M 10D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jun 25

1. HDFC Corporate Bond Fund

(Erstwhile HDFC Medium Term Opportunities Fund)

To generate regular income through investments in Debt/ Money Market Instruments and Government Securities with maturities not exceeding 60 months.

HDFC Corporate Bond Fund is a Debt - Corporate Bond fund was launched on 29 Jun 10. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8.3% since its launch.  Ranked 2 in Corporate Bond category.  Return for 2024 was 8.6% , 2023 was 7.2% and 2022 was 3.3% .

Below is the key information for HDFC Corporate Bond Fund

HDFC Corporate Bond Fund
Growth
Launch Date 29 Jun 10
NAV (06 Jun 25) ₹32.7908 ↑ 0.06   (0.19 %)
Net Assets (Cr) ₹32,657 on 30 Apr 25
Category Debt - Corporate Bond
AMC HDFC Asset Management Company Limited
Rating
Risk Moderately Low
Expense Ratio 0.59
Sharpe Ratio 2.21
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 300
Exit Load NIL
Yield to Maturity 7.05%
Effective Maturity 6 Years 4 Months 20 Days
Modified Duration 4 Years 2 Months 19 Days

Growth of 10,000 investment over the years.

DateValue
31 May 20₹10,000
31 May 21₹10,759
31 May 22₹11,006
31 May 23₹11,784
31 May 24₹12,646
31 May 25₹13,927

HDFC Corporate Bond Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for HDFC Corporate Bond Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 6 Jun 25

DurationReturns
1 Month 1.3%
3 Month 4.2%
6 Month 5.6%
1 Year 10.4%
3 Year 8.4%
5 Year 6.9%
10 Year
15 Year
Since launch 8.3%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8.6%
2023 7.2%
2022 3.3%
2021 3.9%
2020 11.8%
2019 10.3%
2018 6.5%
2017 6.5%
2016 10.6%
2015 8.6%
Fund Manager information for HDFC Corporate Bond Fund
NameSinceTenure
Anupam Joshi27 Oct 159.6 Yr.
Dhruv Muchhal22 Jun 231.94 Yr.

Data below for HDFC Corporate Bond Fund as on 30 Apr 25

Asset Allocation
Asset ClassValue
Cash2.83%
Debt96.9%
Other0.27%
Debt Sector Allocation
SectorValue
Corporate60.94%
Government35.96%
Cash Equivalent2.83%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.23% Govt Stock 2039
Sovereign Bonds | -
4%₹1,423 Cr132,500,000
6.92% Govt Stock 2039
Sovereign Bonds | -
4%₹1,179 Cr112,500,000
↑ 2,500,000
Bajaj Finance Ltd.
Debentures | -
3%₹1,131 Cr112,500
7.81% Govt Stock 2033
Sovereign Bonds | -
3%₹1,039 Cr100,000,000
State Bank Of India
Debentures | -
2%₹809 Cr800
HDFC Bank Limited
Debentures | -
2%₹518 Cr50,000
Ncd Small Industries Development Bank Of India
Debentures | -
2%₹509 Cr50,000
6.99% Govt Stock 2034
Sovereign Bonds | -
2%₹509 Cr50,000,000
LIC Housing Finance Limited
Debentures | -
2%₹509 Cr5,000
Reliance Industries Limited
Debentures | -
1%₹480 Cr4,500

2. Aditya Birla Sun Life Corporate Bond Fund

(Erstwhile Aditya Birla Sun Life Short Term Fund)

An Open-ended income scheme with the objective to generate income and capital appreciation by investing 100% of the corpus in a diversified portfolio of debt and money market securities.

Aditya Birla Sun Life Corporate Bond Fund is a Debt - Corporate Bond fund was launched on 3 Mar 97. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 9% since its launch.  Ranked 1 in Corporate Bond category.  Return for 2024 was 8.5% , 2023 was 7.3% and 2022 was 4.1% .

Below is the key information for Aditya Birla Sun Life Corporate Bond Fund

Aditya Birla Sun Life Corporate Bond Fund
Growth
Launch Date 3 Mar 97
NAV (06 Jun 25) ₹113.613 ↑ 0.09   (0.08 %)
Net Assets (Cr) ₹25,884 on 30 Apr 25
Category Debt - Corporate Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderately Low
Expense Ratio 0.5
Sharpe Ratio 2.52
Information Ratio 0
Alpha Ratio 0
Min Investment 1,000
Min SIP Investment 100
Exit Load NIL
Yield to Maturity 7.03%
Effective Maturity 5 Years 2 Months 12 Days
Modified Duration 3 Years 7 Months 28 Days

Growth of 10,000 investment over the years.

DateValue
31 May 20₹10,000
31 May 21₹10,801
31 May 22₹11,104
31 May 23₹11,892
31 May 24₹12,772
31 May 25₹14,070

Aditya Birla Sun Life Corporate Bond Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for Aditya Birla Sun Life Corporate Bond Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 6 Jun 25

DurationReturns
1 Month 1.1%
3 Month 3.9%
6 Month 5.5%
1 Year 10.3%
3 Year 8.3%
5 Year 7.1%
10 Year
15 Year
Since launch 9%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8.5%
2023 7.3%
2022 4.1%
2021 4%
2020 11.9%
2019 9.6%
2018 7%
2017 6.5%
2016 10.2%
2015 8.9%
Fund Manager information for Aditya Birla Sun Life Corporate Bond Fund
NameSinceTenure
Kaustubh Gupta12 Apr 214.14 Yr.

Data below for Aditya Birla Sun Life Corporate Bond Fund as on 30 Apr 25

Asset Allocation
Asset ClassValue
Cash3.59%
Debt96.15%
Other0.26%
Debt Sector Allocation
SectorValue
Corporate64.91%
Government31.24%
Cash Equivalent3.59%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.1% Govt Stock 2034
Sovereign Bonds | -
7%₹1,864 Cr177,661,700
↑ 8,500,000
6.79% Govt Stock 2034
Sovereign Bonds | -
3%₹834 Cr81,000,000
↑ 60,000,000
Small Industries Development Bank Of India
Debentures | -
3%₹749 Cr74,550
7.18% Govt Stock 2033
Sovereign Bonds | -
2%₹637 Cr60,500,000
↓ -22,000,000
Small Industries Development Bank Of India
Debentures | -
2%₹602 Cr6,000
Bajaj Housing Finance Limited
Debentures | -
2%₹566 Cr55,000
7.18% Govt Stock 2037
Sovereign Bonds | -
2%₹560 Cr52,824,100
↓ -22,500,000
7.48% National Bank For Agriculture And Rural Development
Debentures | -
2%₹508 Cr50,000
↓ -5,000
Bajaj Finance Limited
Debentures | -
2%₹459 Cr45,000
Reliance Utilities And Power Private Limited
Debentures | -
2%₹445 Cr44,000

3. UTI Dynamic Bond Fund

The investment objective of the scheme is to generate optimal returns with adequate liquidity through active management of the portfolio, by investing in debt and money market instruments. However, there can be no assurance that the investment objective of the scheme will be realized.

UTI Dynamic Bond Fund is a Debt - Dynamic Bond fund was launched on 16 Jun 10. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.9% since its launch.  Ranked 3 in Dynamic Bond category.  Return for 2024 was 8.6% , 2023 was 6.2% and 2022 was 10.1% .

Below is the key information for UTI Dynamic Bond Fund

UTI Dynamic Bond Fund
Growth
Launch Date 16 Jun 10
NAV (06 Jun 25) ₹31.2288 ↓ -0.01   (-0.02 %)
Net Assets (Cr) ₹465 on 30 Apr 25
Category Debt - Dynamic Bond
AMC UTI Asset Management Company Ltd
Rating
Risk Moderate
Expense Ratio 1.54
Sharpe Ratio 1.65
Information Ratio 0
Alpha Ratio 0
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 6.61%
Effective Maturity 7 Years 9 Months
Modified Duration 5 Years 4 Months 6 Days

Growth of 10,000 investment over the years.

DateValue
31 May 20₹10,000
31 May 21₹10,375
31 May 22₹12,298
31 May 23₹13,033
31 May 24₹13,915
31 May 25₹15,299

UTI Dynamic Bond Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹206,148.
Net Profit of ₹26,148
Invest Now

Returns for UTI Dynamic Bond Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 6 Jun 25

DurationReturns
1 Month 0.9%
3 Month 4.1%
6 Month 5.4%
1 Year 10.1%
3 Year 7.6%
5 Year 8.9%
10 Year
15 Year
Since launch 7.9%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8.6%
2023 6.2%
2022 10.1%
2021 10.8%
2020 5.9%
2019 -3.9%
2018 5.2%
2017 4.2%
2016 14.9%
2015 6.9%
Fund Manager information for UTI Dynamic Bond Fund
NameSinceTenure
Pankaj Pathak8 Apr 250.15 Yr.

Data below for UTI Dynamic Bond Fund as on 30 Apr 25

Asset Allocation
Asset ClassValue
Cash14.23%
Debt85.48%
Other0.3%
Debt Sector Allocation
SectorValue
Government61.62%
Corporate23.86%
Cash Equivalent14.23%
Credit Quality
RatingValue
AA1.22%
AAA98.78%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
6.92% Govt Stock 2039
Sovereign Bonds | -
20%₹94 Cr900,000,000
6.79% Govt Stock 2034
Sovereign Bonds | -
16%₹78 Cr750,000,000
↓ -500,000,000
National Bank For Agriculture And Rural Development
Debentures | -
9%₹41 Cr4,000
Small Industries Development Bank Of India
Debentures | -
9%₹41 Cr4,000
Rec Limited
Debentures | -
9%₹41 Cr4,000
Power Finance Corporation Ltd.
Debentures | -
6%₹26 Cr2,500
7.17% Indian Railway Finance Corporation Limited**
Debentures | -
5%₹25 Cr2,500
↑ 2,500
Chhattisgarh (Government of) 7.32%
- | -
4%₹21 Cr200,000,000
Assam (Government of) 7.34%
- | -
4%₹21 Cr200,000,000
7.34% Govt Stock 2064
Sovereign Bonds | -
2%₹11 Cr100,000,000
↑ 100,000,000

4. HDFC Banking and PSU Debt Fund

To generate regular income through investments in debt and money market instruments consisting predominantly of securities issued by entities such as Scheduled Commercial Banks and Public Sector undertakings. There is no assurance that the investment objective of the Scheme will be realized.

HDFC Banking and PSU Debt Fund is a Debt - Banking & PSU Debt fund was launched on 26 Mar 14. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.8% since its launch.  Ranked 6 in Banking & PSU Debt category.  Return for 2024 was 7.9% , 2023 was 6.8% and 2022 was 3.3% .

Below is the key information for HDFC Banking and PSU Debt Fund

HDFC Banking and PSU Debt Fund
Growth
Launch Date 26 Mar 14
NAV (06 Jun 25) ₹23.1733 ↑ 0.05   (0.21 %)
Net Assets (Cr) ₹6,007 on 30 Apr 25
Category Debt - Banking & PSU Debt
AMC HDFC Asset Management Company Limited
Rating
Risk Moderately Low
Expense Ratio 0.79
Sharpe Ratio 1.86
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 300
Exit Load NIL
Yield to Maturity 6.93%
Effective Maturity 5 Years 6 Months 18 Days
Modified Duration 3 Years 11 Months 1 Day

Growth of 10,000 investment over the years.

DateValue
31 May 20₹10,000
31 May 21₹10,733
31 May 22₹11,015
31 May 23₹11,714
31 May 24₹12,511
31 May 25₹13,726

HDFC Banking and PSU Debt Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for HDFC Banking and PSU Debt Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 6 Jun 25

DurationReturns
1 Month 1.4%
3 Month 4.2%
6 Month 5.6%
1 Year 10%
3 Year 7.8%
5 Year 6.6%
10 Year
15 Year
Since launch 7.8%
Historical performance (Yearly) on absolute basis
YearReturns
2024 7.9%
2023 6.8%
2022 3.3%
2021 3.7%
2020 10.6%
2019 10.2%
2018 5.9%
2017 6.3%
2016 10.8%
2015 9.8%
Fund Manager information for HDFC Banking and PSU Debt Fund
NameSinceTenure
Anil Bamboli26 Mar 1411.19 Yr.
Dhruv Muchhal22 Jun 231.94 Yr.

Data below for HDFC Banking and PSU Debt Fund as on 30 Apr 25

Asset Allocation
Asset ClassValue
Cash3.24%
Debt96.48%
Other0.28%
Debt Sector Allocation
SectorValue
Corporate52.68%
Government43.8%
Cash Equivalent3.24%
Credit Quality
RatingValue
AAA100%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Indian Railway Finance Corporation Limited
Debentures | -
5%₹282 Cr27,500
Small Industries Development Bank Of India
Debentures | -
4%₹226 Cr22,500
Indian Railway Finance Corporation Limited
Debentures | -
3%₹205 Cr20,000
7.18% Govt Stock 2033
Sovereign Bonds | -
3%₹201 Cr19,000,000
7.26% Govt Stock 2033
Sovereign Bonds | -
3%₹180 Cr17,000,000
State Bank Of India
Debentures | -
3%₹177 Cr175
Housing And Urban Development Corporation Ltd.
Debentures | -
3%₹154 Cr15,000
Bajaj Housing Finance Limited
Debentures | -
3%₹153 Cr15,000
Rural Electrification Corporation Limited
Debentures | -
3%₹153 Cr1,500
Housing And Urban Development Corporation Limited
Debentures | -
2%₹132 Cr1,250

5. ICICI Prudential Long Term Plan

To generate income through investments in a range of debt and money market instruments of various maturities with a view to maximising income while maintaining the optimum balance of yield, safety and liquidity.

ICICI Prudential Long Term Plan is a Debt - Dynamic Bond fund was launched on 20 Jan 10. It is a fund with Moderate risk and has given a CAGR/Annualized return of 8.9% since its launch.  Ranked 1 in Dynamic Bond category.  Return for 2024 was 8.2% , 2023 was 7.6% and 2022 was 4.5% .

Below is the key information for ICICI Prudential Long Term Plan

ICICI Prudential Long Term Plan
Growth
Launch Date 20 Jan 10
NAV (06 Jun 25) ₹37.0816 ↑ 0.00   (0.01 %)
Net Assets (Cr) ₹14,635 on 30 Apr 25
Category Debt - Dynamic Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.36
Sharpe Ratio 2.33
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 100
Exit Load 0-1 Months (0.25%),1 Months and above(NIL)
Yield to Maturity 7.32%
Effective Maturity 8 Years 6 Months 11 Days
Modified Duration 4 Years 1 Month 17 Days

Growth of 10,000 investment over the years.

DateValue
31 May 20₹10,000
31 May 21₹10,701
31 May 22₹10,944
31 May 23₹11,882
31 May 24₹12,738
31 May 25₹14,004

ICICI Prudential Long Term Plan SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for ICICI Prudential Long Term Plan

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 6 Jun 25

DurationReturns
1 Month 0.8%
3 Month 3.7%
6 Month 5.3%
1 Year 10%
3 Year 8.7%
5 Year 7.1%
10 Year
15 Year
Since launch 8.9%
Historical performance (Yearly) on absolute basis
YearReturns
2024 8.2%
2023 7.6%
2022 4.5%
2021 4.3%
2020 11.8%
2019 10.2%
2018 6.2%
2017 5.1%
2016 16.9%
2015 5.7%
Fund Manager information for ICICI Prudential Long Term Plan
NameSinceTenure
Manish Banthia28 Sep 1212.68 Yr.
Nikhil Kabra22 Jan 241.36 Yr.

Data below for ICICI Prudential Long Term Plan as on 30 Apr 25

Asset Allocation
Asset ClassValue
Cash10.73%
Debt89.02%
Other0.25%
Debt Sector Allocation
SectorValue
Government47.51%
Corporate41.68%
Cash Equivalent10.56%
Credit Quality
RatingValue
AA33.97%
AAA66.03%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.1% Govt Stock 2034
Sovereign Bonds | -
19%₹2,787 Cr264,519,690
↓ -63,768,000
7.34% Govt Stock 2064
Sovereign Bonds | -
9%₹1,264 Cr118,212,000
7.58% LIC Housing Finance Limited (23/03/2035)
Debentures | -
6%₹958 Cr94,000
7.81% Govt Stock 2033
Sovereign Bonds | -
5%₹695 Cr66,848,050
6.99% Govt Stock 2034
Sovereign Bonds | -
3%₹463 Cr45,460,800
6.79% Govt Stock 2034
Sovereign Bonds | -
3%₹438 Cr42,263,200
↓ -27,921,800
Vedanta Limited
Debentures | -
3%₹401 Cr40,000
7.09% Govt Stock 2054
Sovereign Bonds | -
2%₹312 Cr30,000,000
7.12% Maharashtra SDL 2038
Sovereign Bonds | -
2%₹273 Cr26,457,100
7.14% Maharashtra SDL 2039
Sovereign Bonds | -
2%₹248 Cr24,000,000

How to Evaluate Best Debt Mutual Funds

In order to select the best debt funds you wish to invest in, it is necessary to consider some of the important parameters such as average maturity, credit quality, AUM, expense ratio, tax implication., etc. Let's have an in-depth look-

1. Average Maturity/Duration

Average maturity is an essential parameter in debt funds that is sometimes overlooked by investors, who tend to invest for a long period without considering the risks involved. Investors need to decide their debt fund investment based on its maturity period, Matching the time period of investment with the maturity period of the debt fund is a good way to ensure you don't end up taking unnecessary risk. Thus, it is advisable to know the average maturity of a debt fund, before investing, in order to aim for optimum risk returns in debt funds. Looking at the average maturity (duration is a similar factor) is important, for example, a liquid fund may have an average maturity of a couple of days to maybe a month, this would mean it is a great option for an investor who is looking to invest money for a couple of days. Similarly, if you are looking at the time frame of one-year Investment plan then, a short-term debt fund can be ideal.

2. Interest Rate Scenario

Understanding the market environment is very important in debt funds which are affected by interest rates and its fluctuations. When the interest rate rises in the economy, the bond price falls and vice-versa. Also, during the time when the interest rates rise, new bonds are issued in the market with a higher yield than the older bonds, making those older bonds of lower value. Therefore, investors are more attracted towards newer bonds in the market and also a re-pricing of older bonds takes place. In case a debt fund is having an exposure to such "older bonds" then when the interest rates rise, the NAV of the debt fund would be impacted negatively. Furthermore, as debt funds are exposed to interest rate fluctuations, it disturbs the prices of the underlying bonds in the fund portfolio. For instance, long-term debt funds are at a higher risk during times of rising interest rates. During this time making a short-term investment plan will lower your interest rate risks.

If one has good knowledge of interest rates and can monitor the same, one can even take advantage of this. In a falling interest rate market, long-term debt funds would be a good choice. However, during the times of rising interest rates then it would be wise to be in funds with shorter average maturities like short-term funds, Ultra Short Term fund or even liquid funds.

3. Current Yield or Portfolio Yield

The yield is a measure of the interest income generated by the bonds in the portfolio. Funds that invest in debt or bonds that have a higher coupon rate (or yield) would have a higher overall portfolio yield. The yield to maturity(ytm) of a debt mutual fund indicates the running yield of the fund. When comparing debt funds on the basis of YTM, one should also look at that fact that how is the extra yield being generated. Is this at the cost of as lower portfolio quality? Investing in not so good quality instruments has its own issues. You don't want to end up investing in a debt fund which has such bonds or securities that may default later on. So, always look at the portfolio yield and balance it off with the credit quality.

How-to-select-best-debt-funds

4. Credit Quality of Portfolio

In order to invest in best debt funds, checking the credit quality of the bonds and debt securities is an essential parameter. Bonds are assigned a credit rating by various agencies based on their ability to pay the money back. A bond with AAA rating is considered to be the best credit rating and also implies a safe and secure investment. If one truly wants safety and considers this as the paramount parameter in selecting the best debt fund, then getting into a fund with very high-quality debt instruments (AAA or AA+) may be the desired option.

5. Assets Under Management (AUM)

This is the foremost parameter to consider while choosing the best debt funds. AUM is the total amount invested in a particular scheme by all investors. Since, most Mutual Funds’ total AUM is invested in debt funds, investors need to select scheme assets that have a considerable AUM. Being in a fund which has a large exposure to corporates may be risky, since their withdrawals may be large which may affect the overall fund performance.

6. Expense Ratio

An important factor to be considered in debt funds is its expense ratio. A higher expense ratio creates a larger impact on the funds’ performance. For example, liquid funds have the lowest expense ratios which are up to 50 bps (BPS is a unit to measure interest rates wherein one bps is equal to 1/100th of 1%) whereas, other debt funds could charge up to 150 bps. So to make a choice between one debt mutual fund, it is important to consider the management fee or the fund running expense.

7. Taxation Impacts

Debt funds offer the benefit of long-term capital gains (more than 3 years) with indexation benefits. And the short term capital gains (less than 3 years) is taxed at 30%.

Things to consider as an investor

1. Fund Objectives

Debt Fund aims to earn optimal returns by maintaining a diversified portfolio of various types of securities. You can expect them to perform in a predictable manner. It is because of this reason, that debt funds are popular among conservative investors.

2. Fund Types

Debt funds are further divided into various categories like liquid funds, Monthly Income Plan (MIP), fixed maturity plans (FMP), dynamic bond funds, income funds, credit opportunities funds, GILT funds, short-term funds and ultra short-term funds.

3. Risks

Debt funds are basically exposed to interest rate risk, credit risk, and liquidity risk. The fund value may fluctuate due to the overall interest rate movements. There’s a risk of default in the payment of interest and principal by the issuer. Liquidity risk happens when the fund manager is unable to sell the underlying security due to lack of demand.

4. Cost

Debt funds charge an expense ratio to manage your money. Till now SEBI had mandated the upper limit of expense ratio to be 2.25% (Might change time to time with regulations.).

5. Investment Horizon

An investment of 3 months to 1 year would be ideal for liquid funds. If you have a longer horizon of say 2 to 3 years, you may go for short-term bond funds.

6. Financial Goals

Debt funds can be used to achieve a variety of goals like earning additional income or for purpose of liquidity.

How to Invest in Best Debt Funds Online?

  1. Open Free Investment Account for Lifetime at Fincash.com.

  2. Complete your Registration and KYC Process

  3. Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!

    Get Started

Conclusion

Debt funds are one of the best ways to invest your money and generate income on a regular basis by choosing the relevant product matching your risk profile. So, investors looking to generate steady income or take advantage of the debt markets, can consider the above best debt funds for 2025 - 2026 and start investing!_

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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Amol Vyas, posted on 14 Jan 19 5:50 PM

The article is nice and informative but it could be in more simple words because lot of people have much less knowledge in such sector

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