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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Fund Details	Fund Size	NAV	5 Year	7 Year	10 Year
Equity Fund Fund Size: 77,577 Cr	77,577 Cr	204.39 0.50%	16.25% Highest Returns	13.57%	11.8%	Get Details
Opportunities Fund Fund Size: 35,798 Cr	35,798 Cr	77.16 0.11%	21.77% Highest Returns	16.47%	14.44%	Get Details
High Growth Fund Fund Size: 10,580 Cr	10,580 Cr	117.39 0.10%	29.3% Highest Returns	22.69%	17.8%	Get Details
Pension India Consumption Fund Fund Size: 6 Cr	6 Cr	10.37 0.02%	20.5% Highest Returns	-	15.5%	Get Details
Multi Cap Fund Fund Size: 8,666 Cr	8,666 Cr	64.65 0.02%	25.78% Highest Returns	22.75%	20.5%	Get Details
Accelerator Mid-Cap Fund II Fund Size: 5,482 Cr	5,482 Cr	81.7 0.00%	20.48% Highest Returns	14.35%	14.46%	Get Details
Multiplier Fund Size: 4,527 Cr	4,527 Cr	95.42 0.01%	22.64% Highest Returns	16.72%	15.51%	Get Details
Frontline Equity Fund Fund Size: 4,333 Cr	4,333 Cr	69.97 0.14%	20.2% Highest Returns	16.59%	14.23%	Get Details
Virtue II Fund Size: 3,256 Cr	3,256 Cr	70.94 0.22%	20.17% Highest Returns	17.55%	15.03%	Get Details
Equity II Fund Fund Size: 3,416 Cr	3,416 Cr	42.19 0.11%	15.98% Highest Returns	12%	10.67%	Get Details
US Equity Fund Fund Size: 0 Cr	0 Cr	0.00%	14.69% Highest Returns	-	13.87%	Get Details
Global Artificial Intelligence Strategy Fund Size: 0 Cr	0 Cr	11.63 -11.63%	21.05% Highest Returns	-	-	Get Details
Grow Money Plus Fund Fund Size: 426 Cr	426 Cr	69.55 0.02%	17.19% Highest Returns	15.31%	14.25%	Get Details
Equity Top 250 Fund Fund Size: 522 Cr	522 Cr	58.22 0.04%	16.48% Highest Returns	13.68%	11.42%	Get Details
Future Apex Fund Fund Size: 104 Cr	104 Cr	57.1 0.19%	20.38% Highest Returns	16.27%	13.48%	Get Details
Pension Dynamic Equity Fund Fund Size: 5 Cr	5 Cr	73.93 0.14%	15.88% Highest Returns	12.54%	11.19%	Get Details
Accelerator Fund Fund Size: 232 Cr	232 Cr	50.39 0.12%	19.42% Highest Returns	16.4%	13.69%	Get Details
Balanced Fund Fund Size: 2,555 Cr	2,555 Cr	18.81 0.00%	10.94% 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 17-10-2025. The returns are the returns of best-performing fund in the plan

Disclaimer :
˜The insurers/plans mentioned are arranged in order of highest to lowest first year premium (sum of individual single premium and individual non-single premium) offered by Policybazaar’s insurer partners offering life insurance investment plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI 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
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.
^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.
˜The insurers/plans mentioned are arranged in order of highest to lowest first year premium (sum of individual single premium and individual non-single premium) offered by Policybazaar’s insurer partners offering life insurance investment plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in