Debt Funds for Long Term

Debt funds are a type of mutual funds that deliver returns by lending money to discerning companies and the government. The borrower type, as well as the lending duration, determines the level of risk in a debt fund. Debt funds are majorly low-risk investment tools and tend to be more secure in comparison to equity funds that are subject to volatile market forces.

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Long term debt funds additionally refer to the debt funds that lend to companies for five or more years and are quite similar to the typical bank fixed deposit schemes.

For whom shall Best Long Term Debt Fund Investment be Ideal?

If you can invest funds for the long run and bear short-term volatility, then making a long term debt fund investment can be a prudent choice for you. In comparison to discerning other debt fund options, it can provide you with higher returns. To achieve medium-term financial goals, you can ideally consider investing in such funds while having a time horizon of three to five years.

Typically, long term debt funds invest in a mix of corporate and government bonds for a long period of time. It may even invest in money market instruments and bonds. At least 65% of the corpus of these funds is invested in securities that provide fixed income.

As the long term debt funds are comparatively more volatile than the short term ones, you must make sure that you are willing to deal with the risks associated with them. Long term debt funds, however, can generate quite good returns in the scenarios where the interest rates are expected to fall. To provide superior returns than other debt funds, the interest income is augmented by capital gains. Moreover, these funds are less volatile in comparison to equity funds and can provide the investors with the assurance that their capital is safe while enjoying moderate growth.

Taxability of Long Term Debt Funds

A long term debt fund is taxed in the same manner as any other debt fund. After a holding period of fewer than 36 months, short-term capital gains shall be added to your taxable income. It would be taxed on the basis of your relevant income tax slab.

The long-term capital gains beyond the holding period of 36 months and more would be taxed at 20%, along with the indexation benefit. This indexation benefit shall aid you to inflate the purchase price of the long term bond to adequately adjust it for inflation.

Dividends coming from the long term debt fund are also added to your taxable income. In case your income tax bracket is on the higher side, then you may end up enjoying a more tax-efficient income in comparison to fixed deposits by making a long term debt fund investment.

The Debt Funds for Long Term

Here is the list of some of the debt funds for long-term:

ICICI Prudential Long Term Bond Fund

This fund is meant for investors designing to invest money for a long span of time, but desire less risky assets than the typical equity funds. It helps them to generate income through investments in a wide range of money market and debt instruments.

Launch date

9th July 1998

Risk

Moderate

Minimum investment

INR 5000

Minimum SIP investment

INR 1000

Effective maturity

11 Years 1 Month  and 17 Days

Modified duration

7 Years 1 Month and 20 Days

Nippon India Income Fund

The prime aim of this investment tool is to provide optimal returns consistently along with moderate risk levels. The income acquired through such funds can be complemented by the capital appreciation of its portfolio, and as per that investments might majorly be made in the debt and money market instruments.

Launch Date

1st January 1998

Minimum investment

INR 5000

Minimum SIP  investment

INR 100

Effective Maturity

8 Years 29 Days

Modified Duration

5 Years 7 Months 24 Days

Aditya Birla Sun Life Income Fund

This open-ended income scheme meant to provide consistent returns with the help of greater returns on its investments and at moderate risk levels. Aditya Birla Sun Life Income Fund maintains a diversified investment technique, and its income can be supplemented by the changes in the price of the instruments in the portfolio.

Launch Date

21st October 1995

Minimum Investment

INR 1000

Minimum SIP Investment

INR 1000

Effective Maturity

6 Years 10 Months 24 Days

Modified Duration

4 Years 11 Months 1 Day

IDFC Bond Fund Long Term Plan

The key investment objective of this scheme is to try and generate stable returns with a low-risk strategy by creating a portfolio that is invested in premium fixed income and money market securities. Conversely, there is no type of assurance that the investment objectives of this scheme would be realized.

Launch Date

14th July 2000

Minimum Investment

INR 5000

Minimum SIP Investment

INR 1000

Effective Maturity

5 Years 11 Months 1 Day

Modified Duration

4 Years 8 Months 12 Days

HDFC Income Fund

This scheme has been designed to optimize returns, while also balancing yield, liquidity and safety.

Launch Date

11th September 2000

Minimum Investment

INR 5,000

Minimum SIP Investment

INR 500

Effective Maturity

Maturity 6 Years 9 Months 2 Days

Modified Duration

4 Years 5 Months 24 Days

You can easily evaluate the features and returns of diverse debt funds available, and subsequently, opt to invest in the one most feasible for you.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Investing in a Short or Long Term Debt Fund?

If you have a conservative risk appetite and simply capital protection and steady income, then short-term funds would be a better option for you.  Funds that come under this category shall include ultra-short-term, money market funds, as well as short-term bond funds that invest in short maturity corporate bonds. However, if you are saving money for the long term and seek strategic growth with the help of movement in interest rates and bond yields, then investing in debt funds for the long term shall prove to be a smart option for you.

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