A debt fund is an investment instrument wherein the capital is invested primarily in fixed-income investments. These are predominantly treasury bills, government securities, corporate bonds and other similar money market instruments.
Debt funds, alternatively known as fixed-income funds or credit funds, come under the fixed income asset category of mutual funds. They are low-risk investments vehicles and are comparatively more secure than equity funds which are subject to volatile market forces.
There are several avenues through which you can invest in the best performing debt funds for higher returns. It can be long-term or short-term bonds, monthly income plans (MIPs), floating-rate debt, money market instruments, fixed maturity plans (FMPs) or security products.
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| Fund Name | Category | Risk | 1Y Returns | Rating | Fund Size(in Cr) | |
|---|---|---|---|---|---|---|
 | DSP Government Securities Fund | Debt | Moderate | 17.8% | 5star | ₹1,036 |
 | Indiabulls Income Fund | Debt | Moderate | 9.5% | 5star | ₹30 |
 | Kotak Dynamic Bond Fund | Debt | Moderately Low | 12.3% | 5star | ₹1,076 |
 | Franklin India Banking & PSU Debt Fund | Debt | Moderate | 10.9% | 5star | ₹1,126 |
| Kotak Low Duration Fund | Debt | Moderate | 8.8% | 5star | ₹4,488 |
| Kotak Corporate Bond Fund | Debt | Moderately Low | 9.6% | 5star | ₹4,032 |
 | Axis Banking & PSU Debt Fund | Debt | Moderately Low | 10.8% | 5star | ₹13,709 |
| DSP Corporate Bond Fund | Debt | Moderate | 11.0% | 5star | ₹1,110 |
| Franklin India Liquid Fund | Debt | Low | 6.3% | 5star | ₹3,582 |
 | L&T Money Market Fund | Debt | Moderately Low | 9.2% | 5star | ₹878 |
| Kotak Credit Risk Fund | Debt | Moderately Low | 6.8% | 5star | ₹2,662 |
 | ICICI Prudential Credit Risk Fund | Debt | Moderate | 9.6% | 5star | ₹7,956 |
 | Nippon India Gilt Securities Fund | Debt | Moderate | 16.4% | 5star | ₹1,250 |
| ICICI Prudential Ultra Short Term Fund | Debt | Moderate | 8.3% | 5star | ₹5,426 |
 | LIC MF Banking & PSU Debt Fund | Debt | Moderate | 10.6% | 5star | ₹1,320 |
| View All Top 10 Debt Mutual Funds |
Features of Debt Mutual Fund
The primary objective of these funds is to accumulate wealth through capital appreciation and interest income. As these are fixed income instruments, the fund issuer pre-determines the rate of interest as well as the maturity period for these investment schemes.
The capital is invested in various securities, primarily based on their credit rating. The best performing debt mutual funds have a high credit rating, thereby ensuring a steady interest rate pay-out.
By Investing in best debt mutual funds, you can expect optimal returns as the investment is in a diversified portfolio of securities. The returns are somewhat predictable, and although relatively lower than equity funds, they are much safer and hence, preferred by conservative investors.
However, the rate of returns and inherent risks of debt funds are both dependant on the type of funds. Government securities are considered the safest options. The risk associated with corporate bonds depends on that company’s credit rating.
Taxability
For taxation purposes, all mutual funds with investments lower than 65% in equity instruments are considered debt funds. Short-term capital gains of less than 36 months are taxed corresponding to the investor’s income tax slab.
A tax rate of 20% is levied on long-term capital gains above 36 months after indexation. Indexation refers to the adjustment of the price of debt funds after factoring in the inflation between the years when that fund was purchased and the year when you sell them. This adjustment allows for the inflation of purchase price, thereby bringing down the overall quantum of capital gains. Subsequently, your taxable income reduces proportionately.
Who Are These Funds Suited For?
Debt funds are tailor-made for investors whose risk appetite is low. If you invest in the best performing debt funds of 2019, you can expect steady wealth creation, albeit at a slower pace. The slow pace is well-compensated by the lack of any risk whatsoever. It’s akin to a fixed deposit, with slightly higher returns on a smaller timeframe.
Short-term investors should look to put their money in liquid funds. These funds ensure a 7-9% return and can be withdrawn at any time, much like a bank savings account. For long-term investors, dynamic bond funds are considered the best debt funds to invest in via SIP mode.
Major Advantages
Risk-averse investors find these mutual funds as the best investment instruments because of the plethora of benefits they entail. Some of them are mentioned below.
Now let us jump and check about these top 10 mutual fund schemes.
Fund Performance: This fund has given 10.52% annualized returns in the last three years. In the last year, its returns were 17.78%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 17.78% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹500. Minimum SIP investment amount required for this scheme is ₹500.
| Min Investment Amt | ₹500 |
|---|---|
| AUM | ₹1,036Cr |
| 1Y Returns | 17.8% |
Fund Performance: This fund has given 8.85% annualized returns in the last three years. In the last year, its returns were 9.52%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 9.52% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹500. Minimum SIP investment amount required for this scheme is ₹500.
| Min Investment Amt | ₹500 |
|---|---|
| AUM | ₹30Cr |
| 1Y Returns | 9.5% |
Fund Performance: This fund has given 9.62% annualized returns in the last three years. In the last year, its returns were 12.26%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 12.26% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,076Cr |
| 1Y Returns | 12.3% |
Fund Performance: This fund has given 9.12% annualized returns in the last three years. In the last year, its returns were 10.94%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 10.94% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,126Cr |
| 1Y Returns | 10.9% |
Fund Performance: This fund has given 8.44% annualized returns in the last three years. In the last year, its returns were 8.78%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 8.78% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹4,488Cr |
| 1Y Returns | 8.8% |
Fund Performance: This fund has given 8.58% annualized returns in the last three years. In the last year, its returns were 9.63%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 9.63% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹4,032Cr |
| 1Y Returns | 9.6% |
Fund Performance: This fund has given 9.24% annualized returns in the last three years. In the last year, its returns were 10.81%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 10.81% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹13,709Cr |
| 1Y Returns | 10.8% |
Fund Performance: In the last year, its returns were 10.98%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 10.98% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹500. Minimum SIP investment amount required for this scheme is ₹500.
| Min Investment Amt | ₹500 |
|---|---|
| AUM | ₹1,110Cr |
| 1Y Returns | 11.0% |
Fund Performance: This fund has given 6.96% annualized returns in the last three years. In the last year, its returns were 6.26%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.26% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹10,000. Minimum SIP investment amount required for this scheme is ₹500.
| Min Investment Amt | ₹10,000 |
|---|---|
| AUM | ₹3,582Cr |
| 1Y Returns | 6.3% |
Fund Performance: This fund has given 8.2% annualized returns in the last three years. In the last year, its returns were 9.15%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 9.15% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹10,000. Minimum SIP investment amount required for this scheme is ₹1,000.
| Min Investment Amt | ₹10,000 |
|---|---|
| AUM | ₹878Cr |
| 1Y Returns | 9.2% |
Fund Performance: This fund has given 7.22% annualized returns in the last three years. In the last year, its returns were 6.76%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.76% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹2,662Cr |
| 1Y Returns | 6.8% |
Fund Performance: This fund has given 8.43% annualized returns in the last three years. In the last year, its returns were 9.57%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 9.57% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹100. Minimum SIP investment amount required for this scheme is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹7,956Cr |
| 1Y Returns | 9.6% |
Fund Performance: This fund has given 10.84% annualized returns in the last three years. In the last year, its returns were 16.44%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 16.44% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,250Cr |
| 1Y Returns | 16.4% |
Fund Performance: This fund has given 8.11% annualized returns in the last three years. In the last year, its returns were 8.25%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 8.25% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹5,426Cr |
| 1Y Returns | 8.3% |
Fund Performance: This fund has given 8.93% annualized returns in the last three years. In the last year, its returns were 10.56%. It has continually hit its benchmark in the Debt segment.
Why to invest: It is one of the most remarkable Debt mutual funds in India. This fund has constantly outperformed other similar funds, providing 10.56% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹5,000. Minimum SIP investment amount required for this scheme is ₹1,000.
