The returns from traditional or highly popular fixed income products such as bank fixed deposits (FDs) are currently at multi-year low of sub 6 percent. In this scenario, to fetch a still higher return without being exposed to too much risk, here we list out some of the debt funds that typically invest in debt instruments backed by the government of India as well as other very low-risk securities.
|Fund||AUM ( in crore)||NAV as on May 17||1-year return||2-year return|
|Nippon India Fixed Horizon Fund 40- Series 3- G||Rs. 122.7||11.19||10.18%||11.93%|
|UTI Fixed Term Income Fund-Series XXIX-Plan XIII-G||Rs. 229.38||12||8.87%||11.94%|
|Nippon India Fixed Horizon Fund 39- Series 5- G||Rs. 108||11.568||9.82%||12%|
|Nippon India Fixed Horizon Fund 38-Series 2-G||Rs. 153||12.04||8.8%||12%|
1. Nippon India Fixed Horizon Fund 40- Series 3:
From the category of Fixed maturity plan- Debt. This fund with an AUM of Rs. 122.7 crore and NAV as on May 17 as 11.19 is a closed ended fund. Investments typically in FMPs are allowed only during the time the NFO opens.
The fund has over 93.5 percent investment into debt of which 84 percent is in funds that have invested in very-low risk securities.
Such an investment is suitable for investors who have a longer horizon but can take low risk in comparison to equity schemes.
The benchmark for the scheme has been CRISIL 10-year Gilt Index and the fund has outperformed the index during the 1-year period giving an absolute return of 18.62 percent.
Now if SIP into this fund was started a year back with Rs. 1000 invested every month, the total investment of Rs. 12000 shall be now worth Rs. 13221, providing an annualized return of over 19 percent.
Some of the major securities into which Nippon India Fixed Horizon Fund 40- Series 3 is invested are GOI, CD, T-Bills, CP, NCD and Bonds.
2. UTI Fixed Term Income Fund-Series XXIX-Plan XIII-G:
The FMP fund with 94% of investment into debt has 16% exposure in government securities while the 68% is parked in low-risk securities. Against its benchmark, the scheme has outperformed delivering annualized return of over 15 percent. This is in respect of the lump sum investment. Also, the scheme has stood out when compared to category average return of 7.4 percent. Since inception that was in 2018, the fund has given absolute return of more than 20 percent.
3. Nippon India Fixed Horizon Fund 39- Series 5- G:
This Nippon India FMP was opened in the year 2018 and since inception has given absolute return of over 15 percent. In comparison to its benchmark, the scheme has outperformed delivering over 18 percent gains on an absolute basis. The fund's 94 percent corpus is into debt of which 82 percent is invested in very low risk securities.
4. Nippon India Fixed Horizon Fund 38-Series 2-G:
Opened in the year 2018, this fund has over 93 percent investment into debt of which 83 percent is in funds that are invested in very low risk securities. This fund has also outperformed both the benchmark and category average return delivering 1 year return of more than 17 percent.
Taxation of debt mutual funds:
Mutual funds can provide you return in 2 ways:
2. Capital gains
|Tax treatment of Debt mutual funds|
|Dividend||Income added to investors taxable income||Taxation at their individual income tax slab rate|
|STCG (holding period less than 36 months)||Gains added to your taxable income|
|LTCG (holding period of 36 months and more)||LTCGs are taxed at 20% after indexation|