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Best Debt Mutual Funds For Conservative Investors For Meeting Their Regular Income Needs


Anyone who does not have a regular income source including retirees wish to park their investments in order to earn regular income so as to meet their living expenses. Now for the optimal parking of your funds to reap that regular income, your fund or investment needs to qualify on three parameters listed below:


1. Returns from the fund should be known: This is because when you regularly withdraw from the investment, the returns should not be volatile and instead provide you some definite return.

2. Liquidity: This is another criterion as you need your investment to be highly liquid such that you can withdraw as and when needed and no penalty implication should arise as in the case of fixed income instruments like bank FDs.

3. Inflation beating returns: Lastly, the investment should not erode your money value and should at least offer you inflation beating returns.

Now within the debt fund category for meeting your liquidity needs as well as regular income requirement, short duration debt funds will serve to be the best. The returns are fairly predictable too. Before we will list out some of the best debt funds, here we will give a brief outline of this mutual fund category:

What are short duration debt funds?

What are short duration debt funds?

These funds are open ended debt schemes that invest in securities with a duration of between one and three years. So, investors with an investment horizon of few years, can park their funds in the category.

Feature of short duration debt funds:

1. Highly liquid, can withdraw at a notice of one day.

2. Returns are more or less comparable to bank fixed deposits.

Now here we list some of the best short duration debt funds:

1.	Axis Short Term Fund- Direct Plan:

1. Axis Short Term Fund- Direct Plan:

This is a 5-star rated fund with an expense ratio of 0.3 percent. The fund has over 68 percent investment in very low risk securities while over 27 percent is parked in government securities. SIP in the fund can be started for Rs. 1000 and for lump sum investment, one needs to dole out a minimum sum of Rs. 5000.

The benchmark for the fund is CRISIL10 year gilt index and 1-year return from the fund has been at 7.5 percent.

2.	ICICI Prudential Short Term Fund - Direct Fund – Growth:

2. ICICI Prudential Short Term Fund - Direct Fund – Growth:

This is again a 5-star rated fund with expense ratio at 0.39 percent. The fund's allocation of 95% is parked in debt securities. The SIP in the fund can be started for Rs. 1000 while minimum lump sum investment is Rs. 5000. Risk grade is below average and return grading is high for the fund category. Against its benchmark the fund has delivered a 1-year retun of 8.27%.

3.	HDFC Short Term Debt Fund Direct Plan-Growth:

3. HDFC Short Term Debt Fund Direct Plan-Growth:

It is again a 4-star rated fund with expense ratio at 0.24%. SIP in the fund could be made for Rs. 500 while lump sum investment has to start at Rs. 5000. The fund against the category average return of 7.63 percent has offered a 1-year return of 8.17

Taxation of Short term debt funds

Taxation of Short term debt funds

1. In case of long term holding i.e. if the debt fund is held for over 3 years then gains are taxed at 20 percent after providing for indexation benefit.

2. For short term capital gains, when the units are redeemed before 3 years then the gains are added to individual's income and taxed as per his or her slab.


Dividend if any are added to investors total income and taxed as per their tax slab. Note dividends over Rs. 5000 in a year attracts at the rate of 10 percent, which is deducted by the fund house


The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advise to buy or sell stocks, gold, currency or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor. While we do update gold, petrol, stock, currency, interest rates and other prices mentioned from time to time, we do not guarantee such accuracy. You should consult other sources before taking an investment decision, based on the prices provided. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in

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