Table of Contents
- Quick Summary
- Why To Invest in Debt Mutual Funds?
- Key Benefits of Debt Funds in 2025
- Risks in Debt Mutual Funds
- Debt Mutual Fund Taxation
- Best Debt Mutual Funds in India for Investments FY 25 - 26
- Top 5 Liquid Mutual Funds
- Top 5 Ultra Short Term Bond Mutual Funds
- Top and Best Floating Rate Mutual Funds
- Top 5 Best Money Market Mutual Funds
- Top 5 Short Term Bond Mutual Funds
- Top 5 Medium to Long Term Bond Mutual Funds
- Top 5 Banking and PSU Debt Mutual Funds
- Top 5 Credit Risk Mutual Funds
- Top 5 Dynamic Bond Mutual Funds
- Top 5 Corporate Bond Mutual Funds
- Top 5 Gilt Mutual Funds
- How to Evaluate Best Debt Mutual Funds
- Things to consider as an investor
- How to Invest in Best Debt Funds Online?
- Conclusion
Top 5 Funds
Best Debt Mutual Funds in India for 2025 | Top Funds by Tenure & Tax Benefits
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.
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.
Fund NAV Net Assets (Cr) Min Investment 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Axis Liquid Fund Growth ₹2,898.74
↑ 0.44 ₹39,069 500 0.6 1.9 3.6 7.3 7.4 6.53% 1M 11D 1M 14D Invesco India Liquid Fund Growth ₹3,578.47
↑ 0.50 ₹13,775 5,000 0.6 1.9 3.6 7.3 7.4 6.45% 1M 14D 1M 14D Aditya Birla Sun Life Liquid Fund Growth ₹419.498
↑ 0.07 ₹53,912 5,000 0.6 1.9 3.6 7.3 7.3 6.59% 1M 13D 1M 13D Tata Liquid Fund Growth ₹4,100.41
↑ 0.59 ₹21,425 5,000 0.6 1.9 3.6 7.3 7.3 6.54% 1M 7D 1M 7D ICICI Prudential Liquid Fund Growth ₹385.419
↑ 0.06 ₹53,193 500 0.6 1.9 3.6 7.2 7.4 6.55% 1M 11D 1M 15D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Ultra Short Term Bond Mutual Funds
Top Ultra Short Bond funds with AUM/Net Assets > 1,000 Crore.
Fund NAV Net Assets (Cr) Min Investment 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Aditya Birla Sun Life Savings Fund Growth ₹547.287
↓ -0.17 ₹17,263 1,000 2.5 4.3 8.2 7.4 7.9 7.27% 5M 16D 6M 14D UTI Ultra Short Term Fund Growth ₹4,230.46
↓ -0.43 ₹4,131 5,000 2.2 3.8 7.4 6.8 7.2 6.95% 5M 22D 5M 28D ICICI Prudential Ultra Short Term Fund Growth ₹27.6529
↓ 0.00 ₹15,092 5,000 2.4 4 7.8 7.1 7.5 7.05% 5M 1D 8M 8D SBI Magnum Ultra Short Duration Fund Growth ₹5,964
↓ -0.75 ₹15,125 5,000 2.3 4 7.7 7 7.4 6.77% 5M 8D 6M 22D Invesco India Ultra Short Term Fund Growth ₹2,692.19
↓ -0.05 ₹1,130 5,000 2.2 4 7.6 6.9 7.5 6.88% 5M 6D 5M 18D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top and Best Floating Rate Mutual Funds
Fund NAV Net Assets (Cr) Min Investment 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Aditya Birla Sun Life Floating Rate Fund - Long Term Growth ₹347.852
↓ -0.27 ₹13,438 1,000 2.9 4.6 8.7 7.7 7.9 7.05% 1Y 14D 1Y 10M 28D Nippon India Floating Rate Fund Growth ₹45.3265
↓ -0.08 ₹7,731 5,000 3.6 5.2 9.8 7.9 8.2 7.09% 2Y 10M 6D 3Y 9M 18D ICICI Prudential Floating Interest Fund Growth ₹424.124
↓ -0.29 ₹7,313 5,000 2.8 4.5 8.8 8 8 7.5% 1Y 2M 5D 4Y 1M 17D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Best Money Market Mutual Funds
Fund NAV Net Assets (Cr) Min Investment 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Aditya Birla Sun Life Money Manager Fund Growth ₹369.773
↓ -0.09 ₹27,171 1,000 2.6 4.3 8.2 7.5 7.8 6.91% 7M 24D 7M 24D UTI Money Market Fund Growth ₹3,082.37
↓ -1.08 ₹17,804 10,000 2.6 4.4 8.3 7.5 7.7 6.76% 8M 17D 8M 17D ICICI Prudential Money Market Fund Growth ₹379.386
↓ -0.16 ₹28,644 500 2.7 4.4 8.3 7.5 7.7 6.74% 8M 12D 8M 30D Kotak Money Market Scheme Growth ₹4,489.25
↓ -1.65 ₹27,977 5,000 2.6 4.3 8.2 7.4 7.7 6.8% 8M 12D 8M 16D L&T Money Market Fund Growth ₹26.3858
↓ -0.01 ₹2,834 10,000 2.6 4.3 8.1 7.1 7.5 7% 8M 26D 9M 14D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Short Term Bond Mutual Funds
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity PGIM India Short Maturity Fund Growth ₹39.3202
↓ 0.00 ₹28 1.2 3.1 6.1 4.2 7.18% 1Y 7M 28D 1Y 11M 1D Nippon India Short Term Fund Growth ₹53.0057
↓ -0.09 ₹6,692 3.8 5.4 9.9 7.7 8 7.14% 2Y 9M 3Y 7M 13D Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹47.6977
↓ -0.07 ₹8,343 3.5 5 9.5 7.7 7.9 7.19% 2Y 10M 13D 3Y 8M 23D UTI Short Term Income Fund Growth ₹31.8045
↓ -0.04 ₹2,791 3.4 4.9 9.3 7.6 7.9 6.97% 2Y 9M 14D 3Y 7M 6D ICICI Prudential Short Term Fund Growth ₹60.253
↓ -0.07 ₹20,969 3.4 5 9.3 8.1 7.8 7.23% 2Y 7M 24D 4Y 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.
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity SBI Magnum Income Fund Growth ₹70.7169
↓ -0.09 ₹1,942 3.2 4.4 9.1 8 8.1 7.1% 6Y 8M 16D 11Y 7M 6D ICICI Prudential Bond Fund Growth ₹40.3672
↓ -0.08 ₹2,858 3.7 5.2 10.3 8.7 8.6 6.91% 6Y 4M 13D 12Y 9M 7D Aditya Birla Sun Life Income Fund Growth ₹125.828
↓ -0.26 ₹2,304 3.3 4.4 9.2 7.7 8.4 6.93% 6Y 8M 23D 15Y 8M 16D HDFC Income Fund Growth ₹58.293
↓ -0.15 ₹930 3.4 4.5 9.3 7.8 9 6.66% 6Y 8M 1D 12Y 7D Kotak Bond Fund Growth ₹77.0045
↓ -0.11 ₹2,130 3.4 4.4 9 7.8 8.2 6.75% 6Y 5M 8D 12Y 4M 24D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Banking and PSU Debt Mutual Funds
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity HDFC Banking and PSU Debt Fund Growth ₹23.1003
↓ -0.05 ₹6,007 3.8 5.1 9.6 7.6 7.9 6.93% 3Y 11M 1D 5Y 6M 18D UTI Banking & PSU Debt Fund Growth ₹21.9979
↓ -0.03 ₹792 3.6 5.1 9.4 7.7 7.6 6.75% 2Y 7D 2Y 3M 25D DSP BlackRock Banking and PSU Debt Fund Growth ₹24.1629
↓ -0.04 ₹3,666 3.9 4.8 9.8 7.7 8.6 6.86% 5Y 1M 17D 9Y 10M 2D Kotak Banking and PSU Debt fund Growth ₹65.6639
↓ -0.16 ₹6,013 3.8 5.1 9.7 7.8 8 6.97% 3Y 8M 16D 5Y 5M 23D Aditya Birla Sun Life Banking & PSU Debt Fund Growth ₹368.191
↓ -0.84 ₹8,826 3.8 5.1 9.6 7.6 7.9 6.91% 3Y 9M 18D 5Y 7D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Credit Risk Mutual Funds
Top Credit Risk funds with AUM/Net Assets > 500 Crore.
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity HDFC Credit Risk Debt Fund Growth ₹24.0505
↓ -0.03 ₹7,180 3.2 4.6 9.1 7.7 8.2 8.06% 2Y 7M 24D 4Y 2M 26D SBI Credit Risk Fund Growth ₹45.6063
↓ -0.04 ₹2,248 3.2 4.8 9 8.1 8.1 6.85% 2Y 2M 1D 2Y 11M 19D L&T Credit Risk Fund Growth ₹32.2895
↓ -0.04 ₹670 15.6 17.3 21.8 11.3 7.2 7.44% 2Y 6M 7D 3Y 5M 12D Kotak Credit Risk Fund Growth ₹29.4268
↓ -0.04 ₹709 3.6 4.8 8.2 7 7.1 8.25% 2Y 4M 10D 3Y Nippon India Credit Risk Fund Growth ₹34.9558
↓ -0.06 ₹1,000 3.4 5.2 9.7 8.3 8.3 8.34% 2Y 11D 2Y 4M 20D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Dynamic Bond Mutual Funds
Top Dynamic Bond funds with AUM/Net Assets > 500 Crore.
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity SBI Dynamic Bond Fund Growth ₹35.7991
↓ -0.04 ₹3,489 3.5 4.3 9.2 8.3 8.6 6.95% 9Y 25D 19Y 22D Aditya Birla Sun Life Dynamic Bond Fund Growth ₹46.4955
↓ -0.15 ₹1,837 4 5.1 10.3 9.1 8.8 7.15% 6Y 10M 2D 11Y 4M 17D Axis Dynamic Bond Fund Growth ₹29.7251
↓ -0.06 ₹1,337 4.2 5 10.1 8.4 8.6 6.68% 8Y 6M 22D 19Y 11M 1D HDFC Dynamic Debt Fund Growth ₹89.7264
↓ -0.17 ₹799 3.1 3.9 8.8 7.6 8.5 6.73% 7Y 11M 26D 17Y 5M 12D IDFC Dynamic Bond Fund Growth ₹33.8637
↓ -0.06 ₹2,932 2.5 2.6 7.4 7.5 10 7.02% 12Y 28Y 3M Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Corporate Bond Mutual Funds
Top Corporate Bond funds with AUM/Net Assets > 500 Crore.
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity HDFC Corporate Bond Fund Growth ₹32.6589
↓ -0.08 ₹32,657 3.7 5.1 9.9 8.2 8.6 7.05% 4Y 2M 19D 6Y 4M 20D Aditya Birla Sun Life Corporate Bond Fund Growth ₹113.217
↓ -0.22 ₹25,884 3.5 5 9.8 8.2 8.5 7.03% 3Y 7M 28D 5Y 2M 12D Nippon India Prime Debt Fund Growth ₹60.2675
↓ -0.13 ₹6,998 4 5.4 10.3 8.2 8.4 7.07% 3Y 9M 25D 5Y 11D Kotak Corporate Bond Fund Standard Growth ₹3,788.08
↓ -7.73 ₹15,127 3.8 5.3 10 7.9 8.3 7.02% 3Y 6M 7D 4Y 10M 10D ICICI Prudential Corporate Bond Fund Growth ₹29.8872
↓ -0.04 ₹31,133 3.4 5 9.4 8.1 8 7.02% 2Y 11M 8D 4Y 10M 17D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25
Top 5 Gilt Mutual Funds
Top (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 Below is the key information for HDFC Corporate Bond Fund Returns up to 1 year are on (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 Below is the key information for Aditya Birla Sun Life Corporate Bond Fund Returns up to 1 year are on 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 Below is the key information for ICICI Prudential Long Term Plan Returns up to 1 year are on 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 Below is the key information for HDFC Banking and PSU Debt Fund Returns up to 1 year are on 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 Below is the key information for UTI Dynamic Bond Fund Returns up to 1 year are on GILT funds with AUM/Net Assets > 500 Crore.
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity SBI Magnum Constant Maturity Fund Growth ₹63.9785
↓ -0.09 ₹1,886 4 5.4 10.8 9.1 9.1 6.49% 6Y 11M 1D 9Y 8M 26D ICICI Prudential Gilt Fund Growth ₹103.256
↓ -0.09 ₹7,166 3.9 5.4 10.1 8.9 8.2 6.65% 5Y 11Y 18D SBI Magnum Gilt Fund Growth ₹66.2264
↓ -0.07 ₹11,954 3.3 4.2 9.2 8.5 8.9 6.79% 10Y 7M 2D 25Y 2M 1D UTI Gilt Fund Growth ₹62.9782
↓ -0.08 ₹742 3.2 4.2 9.1 7.9 8.9 6.64% 9Y 2M 16D 19Y 11M 26D Nippon India Gilt Securities Fund Growth ₹38.1358
↓ -0.06 ₹2,115 3 3.8 8.7 7.9 8.9 6.76% 9Y 3M 25D 21Y 4M 10D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Jun 25 1. HDFC Corporate Bond Fund
CAGR/Annualized return of 8.2% since its launch. Ranked 2 in Corporate Bond category. Return for 2024 was 8.6% , 2023 was 7.2% and 2022 was 3.3% . HDFC Corporate Bond Fund
Growth Launch Date 29 Jun 10 NAV (10 Jun 25) ₹32.6589 ↓ -0.08 (-0.25 %) 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.
Date Value 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 Returns for HDFC Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 10 Jun 25 Duration Returns 1 Month 1.1% 3 Month 3.7% 6 Month 5.1% 1 Year 9.9% 3 Year 8.2% 5 Year 6.8% 10 Year 15 Year Since launch 8.2% Historical performance (Yearly) on absolute basis
Year Returns 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
Name Since Tenure Anupam Joshi 27 Oct 15 9.6 Yr. Dhruv Muchhal 22 Jun 23 1.94 Yr. Data below for HDFC Corporate Bond Fund as on 30 Apr 25
Asset Allocation
Asset Class Value Cash 2.83% Debt 96.9% Other 0.27% Debt Sector Allocation
Sector Value Corporate 60.94% Government 35.96% Cash Equivalent 2.83% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.23% Govt Stock 2039
Sovereign Bonds | -4% ₹1,423 Cr 132,500,000 6.92% Govt Stock 2039
Sovereign Bonds | -4% ₹1,179 Cr 112,500,000
↑ 2,500,000 Bajaj Finance Ltd.
Debentures | -3% ₹1,131 Cr 112,500 7.81% Govt Stock 2033
Sovereign Bonds | -3% ₹1,039 Cr 100,000,000 State Bank Of India
Debentures | -2% ₹809 Cr 800 HDFC Bank Limited
Debentures | -2% ₹518 Cr 50,000 Ncd Small Industries Development Bank Of India
Debentures | -2% ₹509 Cr 50,000 6.99% Govt Stock 2034
Sovereign Bonds | -2% ₹509 Cr 50,000,000 LIC Housing Finance Limited
Debentures | -2% ₹509 Cr 5,000 Reliance Industries Limited
Debentures | -1% ₹480 Cr 4,500 2. Aditya Birla Sun Life Corporate Bond Fund
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% . Aditya Birla Sun Life Corporate Bond Fund
Growth Launch Date 3 Mar 97 NAV (10 Jun 25) ₹113.217 ↓ -0.22 (-0.19 %) 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.
Date Value 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 Returns for Aditya Birla Sun Life Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 10 Jun 25 Duration Returns 1 Month 1% 3 Month 3.5% 6 Month 5% 1 Year 9.8% 3 Year 8.2% 5 Year 7% 10 Year 15 Year Since launch 9% Historical performance (Yearly) on absolute basis
Year Returns 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
Name Since Tenure Kaustubh Gupta 12 Apr 21 4.14 Yr. Data below for Aditya Birla Sun Life Corporate Bond Fund as on 30 Apr 25
Asset Allocation
Asset Class Value Cash 3.59% Debt 96.15% Other 0.26% Debt Sector Allocation
Sector Value Corporate 64.91% Government 31.24% Cash Equivalent 3.59% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.1% Govt Stock 2034
Sovereign Bonds | -7% ₹1,864 Cr 177,661,700
↑ 8,500,000 6.79% Govt Stock 2034
Sovereign Bonds | -3% ₹834 Cr 81,000,000
↑ 60,000,000 Small Industries Development Bank Of India
Debentures | -3% ₹749 Cr 74,550 7.18% Govt Stock 2033
Sovereign Bonds | -2% ₹637 Cr 60,500,000
↓ -22,000,000 Small Industries Development Bank Of India
Debentures | -2% ₹602 Cr 6,000 Bajaj Housing Finance Limited
Debentures | -2% ₹566 Cr 55,000 7.18% Govt Stock 2037
Sovereign Bonds | -2% ₹560 Cr 52,824,100
↓ -22,500,000 7.48% National Bank For Agriculture And Rural Development
Debentures | -2% ₹508 Cr 50,000
↓ -5,000 Bajaj Finance Limited
Debentures | -2% ₹459 Cr 45,000 Reliance Utilities And Power Private Limited
Debentures | -2% ₹445 Cr 44,000 3. ICICI Prudential Long Term Plan
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% . ICICI Prudential Long Term Plan
Growth Launch Date 20 Jan 10 NAV (10 Jun 25) ₹37.0261 ↓ -0.04 (-0.10 %) 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.
Date Value 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 Returns for ICICI Prudential Long Term Plan
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 10 Jun 25 Duration Returns 1 Month 0.8% 3 Month 3.5% 6 Month 5% 1 Year 9.8% 3 Year 8.7% 5 Year 7% 10 Year 15 Year Since launch 8.9% Historical performance (Yearly) on absolute basis
Year Returns 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
Name Since Tenure Manish Banthia 28 Sep 12 12.68 Yr. Nikhil Kabra 22 Jan 24 1.36 Yr. Data below for ICICI Prudential Long Term Plan as on 30 Apr 25
Asset Allocation
Asset Class Value Cash 10.73% Debt 89.02% Other 0.25% Debt Sector Allocation
Sector Value Government 47.51% Corporate 41.68% Cash Equivalent 10.56% Credit Quality
Rating Value AA 33.97% AAA 66.03% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.1% Govt Stock 2034
Sovereign Bonds | -19% ₹2,787 Cr 264,519,690
↓ -63,768,000 7.34% Govt Stock 2064
Sovereign Bonds | -9% ₹1,264 Cr 118,212,000 7.58% LIC Housing Finance Limited (23/03/2035)
Debentures | -6% ₹958 Cr 94,000 7.81% Govt Stock 2033
Sovereign Bonds | -5% ₹695 Cr 66,848,050 6.99% Govt Stock 2034
Sovereign Bonds | -3% ₹463 Cr 45,460,800 6.79% Govt Stock 2034
Sovereign Bonds | -3% ₹438 Cr 42,263,200
↓ -27,921,800 Vedanta Limited
Debentures | -3% ₹401 Cr 40,000 7.09% Govt Stock 2054
Sovereign Bonds | -2% ₹312 Cr 30,000,000 7.12% Maharashtra SDL 2038
Sovereign Bonds | -2% ₹273 Cr 26,457,100 7.14% Maharashtra SDL 2039
Sovereign Bonds | -2% ₹248 Cr 24,000,000 4. HDFC Banking and PSU Debt Fund
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% . HDFC Banking and PSU Debt Fund
Growth Launch Date 26 Mar 14 NAV (10 Jun 25) ₹23.1003 ↓ -0.05 (-0.24 %) 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.
Date Value 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 Returns for HDFC Banking and PSU Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 10 Jun 25 Duration Returns 1 Month 1.3% 3 Month 3.8% 6 Month 5.1% 1 Year 9.6% 3 Year 7.6% 5 Year 6.5% 10 Year 15 Year Since launch 7.8% Historical performance (Yearly) on absolute basis
Year Returns 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
Name Since Tenure Anil Bamboli 26 Mar 14 11.19 Yr. Dhruv Muchhal 22 Jun 23 1.94 Yr. Data below for HDFC Banking and PSU Debt Fund as on 30 Apr 25
Asset Allocation
Asset Class Value Cash 3.24% Debt 96.48% Other 0.28% Debt Sector Allocation
Sector Value Corporate 52.68% Government 43.8% Cash Equivalent 3.24% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity Indian Railway Finance Corporation Limited
Debentures | -5% ₹282 Cr 27,500 Small Industries Development Bank Of India
Debentures | -4% ₹226 Cr 22,500 Indian Railway Finance Corporation Limited
Debentures | -3% ₹205 Cr 20,000 7.18% Govt Stock 2033
Sovereign Bonds | -3% ₹201 Cr 19,000,000 7.26% Govt Stock 2033
Sovereign Bonds | -3% ₹180 Cr 17,000,000 State Bank Of India
Debentures | -3% ₹177 Cr 175 Housing And Urban Development Corporation Ltd.
Debentures | -3% ₹154 Cr 15,000 Bajaj Housing Finance Limited
Debentures | -3% ₹153 Cr 15,000 Rural Electrification Corporation Limited
Debentures | -3% ₹153 Cr 1,500 Housing And Urban Development Corporation Limited
Debentures | -2% ₹132 Cr 1,250 5. UTI Dynamic Bond Fund
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% . UTI Dynamic Bond Fund
Growth Launch Date 16 Jun 10 NAV (10 Jun 25) ₹31.0673 ↓ -0.06 (-0.20 %) 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.
Date Value 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 Returns for UTI Dynamic Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 10 Jun 25 Duration Returns 1 Month 0.6% 3 Month 3.6% 6 Month 4.6% 1 Year 9.6% 3 Year 7.4% 5 Year 8.7% 10 Year 15 Year Since launch 7.9% Historical performance (Yearly) on absolute basis
Year Returns 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
Name Since Tenure Pankaj Pathak 8 Apr 25 0.15 Yr. Data below for UTI Dynamic Bond Fund as on 30 Apr 25
Asset Allocation
Asset Class Value Cash 14.23% Debt 85.48% Other 0.3% Debt Sector Allocation
Sector Value Government 61.62% Corporate 23.86% Cash Equivalent 14.23% Credit Quality
Rating Value AA 1.22% AAA 98.78% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.92% Govt Stock 2039
Sovereign Bonds | -20% ₹94 Cr 900,000,000 6.79% Govt Stock 2034
Sovereign Bonds | -16% ₹78 Cr 750,000,000
↓ -500,000,000 National Bank For Agriculture And Rural Development
Debentures | -9% ₹41 Cr 4,000 Small Industries Development Bank Of India
Debentures | -9% ₹41 Cr 4,000 Rec Limited
Debentures | -9% ₹41 Cr 4,000 Power Finance Corporation Ltd.
Debentures | -6% ₹26 Cr 2,500 7.17% Indian Railway Finance Corporation Limited**
Debentures | -5% ₹25 Cr 2,500
↑ 2,500 Chhattisgarh (Government of) 7.32%
- | -4% ₹21 Cr 200,000,000 Assam (Government of) 7.34%
- | -4% ₹21 Cr 200,000,000 7.34% Govt Stock 2064
Sovereign Bonds | -2% ₹11 Cr 100,000,000
↑ 100,000,000
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.
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?
Open Free Investment Account for Lifetime at Fincash.com.
Complete your Registration and KYC Process
Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!
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!_
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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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