Are debt funds better than FD?

It depends on your financial goals and risk tolerance. Debt funds generally offer potentially higher returns than FDs but come with some level of market risk. FDs, on the other hand, offer fixed returns but tend to have lower interest rates. Consider your risk appetite and investment horizon before deciding.

Are debt funds tax free?

No, debt funds are not entirely tax-free in India. They are subject to capital gains tax based on the holding period. Short-term gains (held for less than 3 years) are taxed as per your income tax slab, while long-term gains (held for more than 3 years) are taxed at 20% with indexation benefits.

Is it a good time to buy debt funds?

Market timing is hard to predict. It's important to base investment decisions on your financial goals, risk tolerance, and investment horizon rather than trying to time the market. Consulting with a financial advisor like Policybazaar can help you make an informed decision based on your individual circumstances.

Best Debt Funds^~

Debt funds are a popular investment option for those seeking stability and steady returns. These funds primarily invest in fixed-income securities such as government bonds, corporate bonds, and other money market instruments which makes them highly liquid. They are managed by professional fund managers who aim to optimize returns while managing risk.

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Disclaimer: #The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CAGR 8%; ₹50,45,591 @ CAGR 4%. *Tax benefits and savings are subject to changes in tax laws. All plans listed here are of insurance companies’ funds.

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Debt

Fund Details	Fund Size	NAV	5 Year	7 Year	10 Year

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Fund Details	Fund Size	NAV	5 Year	7 Year	10 Year

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Fund Details	Fund Size	NAV	5 Year	7 Year	10 Year
Builder Fund Size: 230 Cr	230 Cr	89.42 0.13%	7.46%	7.88%	8.02% Highest Returns	Get Details
Whole Life Income Fund Fund Size: 798 Cr	798 Cr	38.97 -0.01%	6.44%	7.58%	7.61% Highest Returns	Get Details
Income Pension Fund Fund Size: 0 Cr	0 Cr	0.00%	6.6%	7.14%	7.49% Highest Returns	Get Details
Debt Fund Fund Size: 476 Cr	476 Cr	36.94 0.00%	6.37%	7.55% Highest Returns	7.44%	Get Details
Income Advantage Fund Size: 888 Cr	888 Cr	40.25 -0.02%	6.22%	7.4% Highest Returns	7.28%	Get Details
Bond Pension Fund Size: 476 Cr	476 Cr	42.53 -0.01%	5.79%	7.04%	7.23% Highest Returns	Get Details
Secure Plus Fund Fund Size: 232 Cr	232 Cr	32.35 -0.02%	6.59%	7.34% Highest Returns	7.23%	Get Details
Individual Preserver Pension Fund Fund Size: 115 Cr	115 Cr	33.44 -0.02%	5.94%	7.19%	7.22% Highest Returns	Get Details
Protector Fund Size: 291 Cr	291 Cr	64.71 0.03%	6.44%	7.16%	7.21% Highest Returns	Get Details
Conservative Fund Fund Size: 230 Cr	230 Cr	55.91 0.04%	7.34%	7.51% Highest Returns	7.2%	Get Details
Steady Money Fund Fund Size: 69 Cr	69 Cr	39.17 -0.02%	5.91%	6.85%	7.15% Highest Returns	Get Details
Bond Fund Fund Size: 110 Cr	110 Cr	28.06 -0.01%	6.36%	6.85%	7.14% Highest Returns	Get Details
Dynamic Gilt Fund Fund Size: 201 Cr	201 Cr	45.75 -0.01%	5.64%	7.15% Highest Returns	7.06%	Get Details
Dynamic Bond Fund Fund Size: 1,364 Cr	1,364 Cr	49.48 -0.01%	5.58%	7.06% Highest Returns	7.03%	Get Details
Pension Income Fund Fund Size: 257 Cr	257 Cr	31.08 -0.02%	5.72%	7.04% Highest Returns	7.02%	Get Details
Secure Fund Fund Size: 1,052 Cr	1,052 Cr	44.9 -0.01%	6.57%	6.93% Highest Returns	6.91%	Get Details
Income Fund Fund Size: 7,913 Cr	7,913 Cr	31.06 -0.02%	5.55%	6.76%	6.91% Highest Returns	Get Details
Assure Fund Size: 261 Cr	261 Cr	44.8 -0.01%	5.74%	6.52%	6.82% Highest Returns	Get Details
Pension Debt Fund Fund Size: 4 Cr	4 Cr	29.58 0.00%	5.68%	6.67%	6.7% Highest Returns	Get Details
Whole Life Short-Term Fixed Income Fund Fund Size: 238 Cr	238 Cr	34 0.00%	5.51%	6.21%	6.56% Highest Returns	Get Details
Preserver II Fund Size: 71 Cr	71 Cr	28.32 -0.01%	5.92%	6.76% Highest Returns	6.51%	Get Details
Protector II Fund Size: 703 Cr	703 Cr	28.84 0.00%	5.94%	6.26%	6.38% Highest Returns	Get Details
Future Income Fund Fund Size: 80 Cr	80 Cr	36.24 0.00%	4.84%	6%	6.29% Highest Returns	Get Details
Money Market Pension Fund Size: 108 Cr	108 Cr	31.66 0.00%	5.2%	5.61%	6.21% Highest Returns	Get Details
Money Market Fund Fund Size: 401 Cr	401 Cr	34.22 -0.01%	5.21%	5.63%	6.2% Highest Returns	Get Details
Pension Money Market Fund Fund Size: 49 Cr	49 Cr	27.2 0.00%	5.07%	5.54%	6.04% Highest Returns	Get Details
Liquid Plus Fund Size: 221 Cr	221 Cr	22.5 -0.01%	5%	5.52%	5.99% Highest Returns	Get Details
Dynamic Floating Rate Fund Fund Size: 18 Cr	18 Cr	37.22 0.01%	4.74%	5.37%	5.76% Highest Returns	Get Details
Liquid Fund Fund Size: 74 Cr	74 Cr	77.39 -0.01%	4.5%	4.85%	5.35% Highest Returns	Get Details
Safe Money Fund Fund Size: 52 Cr	52 Cr	24.14 -0.01%	4.15%	4.51%	5.07% Highest Returns	Get Details

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Best ULIP Funds - Consider the best performing ULIP funds to invest in 2025 with Policybazaar. Find the list of best ULIP funds in India on the basis of Returns, Latest Nav, Fund Size and Categories

Data source :

Returns as on 25-02-2025. The returns are the returns of best-performing fund in the plan

Disclaimer :
˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

Best Debt Mutual Funds^≈

Let us explore some of the Best Debt Fund options available in the market:

Fund Name	1-Year Return	3-Years Return	5-Years Return
Bank of India Short Term Income Fund	13.93% p.a.	11.94%	4.11%
BHARAT Bond ETF FOF - April 2032	6.78% p.a.	-	-
DSP 10Y G-Sec Fund	8.65% p.a.	3.21%	7.34%
ICICI Prudential Constant Maturity Gilt Fund	8.46% p.a.	4.47%	8.85%
Kotak Nifty SDL Apr 2032 Top 12 Equal Weight Index Fund	8.09% p.a.	-	-
LIC MF Medium to Long Duration Bond Fund	7.75% p.a.	4.40%	7.11%
Nippon India Income Fund	8.64% p.a.	5.26%	8.30%
SBI Magnum Constant Maturity Fund	8.47% p.a.	4.42%	8.25%
SBI Magnum Income Fund	8.35% p.a.	5.73%	8.40%
UTI Gilt Fund with 10 year Constant Duration	8.49% p.a.	3.21%	7.34%

Disclaimer: ≈ Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is done in alphabetical order (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

As of September 2023

Best Debt Funds^≈

Fund Name	Fund Size	NAV	5-Years	7-Years	10-Years
Aditya Birla Capital Builder	Rs. 250 Crores	79.80%	8.27%	7.69%	9.34%
Aditya Birla Capital Income Advantage	Rs. 820 Crores	32.00%	7.78%	6.59%	7.88%
Aditya Birla Capital Protector	Rs. 298 Crores	57.98%	7.52%	6.73%	8.19%
Bharti AXA Steady Money Fund	Rs. 72 Crores	35.06%	7.14%	6.32%	7.87%
Canara HSBC Debt Fund	Rs. 446 Crores	33.10%	8.16%	6.72%	8.04%
Edelweiss Tokio Bond Fund	Rs. 110 Crores	23.35%	6.34%	8.12%	8.06%
ICICI Prudential Income Fund	Rs. 10,373 Crores	25.81%	5.82%	7.23%	7.82%
IDBI Federal Life Insurance Pure Fund	Rs. 410 Crores	38.52%	12.07%	11.99%	15.37%
Kotak Life Dynamic Bond Fund	Rs. 1,527 Crores	44.44%	7.55%	6.31%	7.87%
Tata AIA Life Insurance Whole Life Income Fund	Rs. 794 Crores	34.74%	7.84%	6.89%	8.31%

As of September 2023

IDBI Federal Life Insurance Pure Fund

Following are the main highlights of Ageas Federal Life Insurance Pure Fund:

The date of inception of this fund is 1st September 2010.
The total fund size is Rs. 410 crores approximately.
The current 1 day returns are 0.09%, and the Net Asset Value (NAV) stands at 38.58%.
5 year returns under this fund are 12.07%, 7 years is 11.99%, whereas the highest 10 year returns under the fund are 15.37%.

Tata AIA Life Insurance Whole Life Income Fund

Tata AIA Life Insurance Whole Life Income Fund is a ULIP (Unit Linked Insurance Plan) fund that principally invests in fixed income instruments in the market. Following are the main highlights of Tata AIA Life Insurance Whole Life Income Fund:

The date of inception of this fund is 3rd May 2018.
The total fund size is Rs. 794 crores approximately.
The Net Asset Value (NAV) stands at 34.74%.
5 year returns under this fund are 7.84%, 7 years is 6.89%, whereas the highest 10 year returns under the fund are 8.31%.

People Also Read: Max Life Nifty Small Cap Fund

Edelweiss Tokio Bond Fund

Following are the main highlights of the Edelweiss Tokio Bond Fund:

The date of inception of the Edelweiss Tokio Bond Fund is 28th July 2011.
The total fund size is Rs. 110 crores approximately.
The Net Asset Value (NAV) stands at 25.41%.
5 year returns under this fund are 6.81%, 7 years’ highest return under this fund is 6.62%, whereas the 10 year returns are 7.84%.

ICICI Prudential Income Fund

Following are the main highlights of ICICI Prudential Income Fund:

The date of inception of the ICICI Prudential Income Fund is 23rd December 2009.
Total fund size is Rs. 9,589 crores approximately.
The Net Asset Value (NAV) stands at 27.95%.
5 year returns under this fund are 6.99%, 7 years is 6.31%, whereas the highest 10 year returns under the fund are 7.62%.

People Also Read: Nifty Midcap 150

Kotak Life Dynamic Bond Fund

Kotak Life Dynamic Bond Fund is a fund scheme by Kotak Mahindra with a fund size of approximately Rs. 1,527 crores. Following are the main highlights of Kotak Life Dynamic Bond Fund:

The date of inception of Kotak Life Dynamic Bond Fund is 1st January 2013.
The Net Asset Value (NAV) stands at 44.44%.
5 year returns under this fund are 7.55%, 7 years’ highest return under this fund is 6.31%, whereas the 10 year returns are 7.87%.

People Also Read: ICICI Prudential Nifty Midcap 150

To conclude!

Debt Funds are great investment options for investors looking forward to investing their money in safe money making instruments in the market. Investors generally opt for debt funds for capital appreciation and guaranteed moderate returns. It is important to always check returns on your investments using the SIP Calculator and it is crucial to have a market understanding before making any kind of investments.

FAQs

Are debt funds better than FD?

It depends on your financial goals and risk tolerance. Debt funds generally offer potentially higher returns than FDs but come with some level of market risk. FDs, on the other hand, offer fixed returns but tend to have lower interest rates. Consider your risk appetite and investment horizon before deciding.
Are debt funds tax free?

No, debt funds are not entirely tax-free in India. They are subject to capital gains tax based on the holding period. Short-term gains (held for less than 3 years) are taxed as per your income tax slab, while long-term gains (held for more than 3 years) are taxed at 20% with indexation benefits.
Is it a good time to buy debt funds?

Market timing is hard to predict. It's important to base investment decisions on your financial goals, risk tolerance, and investment horizon rather than trying to time the market. Consulting with a financial advisor like Policybazaar can help you make an informed decision based on your individual circumstances.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Tax benefit is subject to changes in tax laws
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in