4 Best Debt Mutual Fund SIPs To Invest In India In 2021

Fixed income instruments such as the conventional and highly popular bank fixed deposits currently fetch a low return of up to 5.5% for a 1-year deposit. Amid high inflation, it is expected that sooner or later government will have to hike interest rate in the economy. Nonetheless to get better yield on your investments in comparison to bank fixed deposits; here we list down some of the debt mutual fund schemes which have the potential to offer a higher return than bank fixed deposits.

Notably, FDs attract TDS at the rate of 10% (20% in the case of non-PAN holders) if interest income is over Rs. 40000 per year, excluding some cases. Also, FD interest is taxable as per the income tax slab rate of the investor.

4 Best Debt Mutual Funds Offering Higher Return Than Bank FDs

1. JM Low Duration Fund Direct Plan-Growth:

The fund is given 5-star rating by Value Research and commands an AUM size of Rs. 128.47 crore. Annualised return for the last 1 year is 25.09%. Expense ratio of the fund is 0.42 percent. The low duration fund from the house of JM Financial carries a low to moderate risk as per the risk-o-meter.

The corpus of the fund is 90% put in debt of which over 58% is in G-securities. The benchmark for the fund is CRISIL 10 year GILT Index. SIP in the fund can be started for as less as Rs. 500, while for lump sum minimum investment required is Rs. 5000.

2. HDFC Credit Risk Debt Fund Direct- Growth:

This Credit Risk fund from the HDFC MF AMC is given a 4-star rating by CRISIL. AUM of the fund are to the tune of Rs. 7367 crore. The fund entails an expense ratio of 1.1 percent. Further the fund carries moderate risk.

This MF option is in particular suitable for investors who can invest for a longer duration but prefer less risky assets in comparison to equity mutual funds. The fund has close to 90% investment in debt. Against its benchmark CRISIL 10 year Gilt Index which returned 3.915 during the last year, this HDFC credit risk fund offered a return of 12.87%. The category peers of the fund include Baroda Credit Risk Fund - Plan B (Direct) - Growth, Axis Credit Risk Fund - Direct Plan - Growth etc.

3. ICICI Prudential Medium Term Bond Fund Direct Plan-Growth:

This Medium Duration fund from ICICI Prudential has a CRISIL 3-star rating. AUM under the fund total to as much as Rs. 6542.22 crore. The expense ratio of the fund is 0.74 percent. The fund has 95% investment into debt of which 19 percent is in G-securities. Against its benchmark the fund has offered 1-year return of 11.01%.

Investors with an investment horizon of 1-3 year and looking for alternatives to bank deposits can park their funds into this MF. Risk-o-meter suggests the fund to carry medium risk. SIP in the fund can be started for Rs. 1000, while for lump sum investment, a minimum of Rs. 5000 is needed.

4. SBI Credit Risk Fund Direct-Growth

This Credit Risk fund from SBI MF house commands a fund size of Rs. 3496.77 crore. Expense ratio of the fund is 0.91 percent, while it is moderately risky as per the risk-o-meter. In comparison to the fund benchmark CRISIL 10-year GILT Index, the scheme 1-year return has been 9.65%.

The fund is mostly invested into debt i.e. over 92% percent. SIP in the fund can be started for as low as Rs. 500, while for lump sum, minimum sum requirement is of Rs. 500

Taxation of debt funds :

Debt funds if held for less than 3 years attract short term capital gains as per income tax slab of the investor. In a case when the debt fund units are redeemed after a tenure of 3 years, long term capital gains tax apply at the rate of 20 percent after indexation. Sale or redemption of debt mutual funds does not entail Securities transaction tax.

Disclaimer:

The article is purely informational and is not a solicitation to buy, sell in securities mentioned in the article. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.