Investors often look for safe yet rewarding options to grow their money. While equity mutual funds are riskier, debt mutual funds have become a preferred choice for those who want stable growth with decent returns. In 2025, some debt mutual funds have surprised investors by delivering 10% to 24% returns in just one year, which is significantly higher compared to traditional options like Fixed Deposits (FDs) or Savings Schemes.
In this article, we will explore the Top 10 Best Debt Mutual Funds in 2025, their performance, key benefits, and why they are considered reliable investment options.
Why Choose Debt Mutual Funds in 2025?
Debt mutual funds are investment schemes that primarily invest in fixed-income securities such as bonds, government securities, corporate debentures, and treasury bills. Unlike equity funds, they carry lower risk but still manage to deliver better-than-average returns when compared to fixed deposits.
Some key reasons why investors are shifting towards debt mutual funds in 2025 include:
- Higher Returns – Many funds delivered 10% to 24% returns last year.
- Safety & Stability – Less volatile than equity investments.
- Liquidity – Easy redemption compared to FDs.
- Diversification – Helps balance a high-risk portfolio.
Top 10 Best Debt Mutual Funds 2025
Here is a table showcasing the performance of the best debt mutual funds in 2025 with their 1-year returns, fund type, and risk level:
| Rank | Mutual Fund Name | Type of Fund | 1-Year Return (2024-25) | Risk Level | Minimum Investment |
|---|---|---|---|---|---|
| 1 | HDFC Corporate Bond Fund | Corporate Bond Fund | 24% | Low to Moderate | ₹5,000 |
| 2 | ICICI Prudential Short Term Fund | Short Duration Fund | 21% | Moderate | ₹1,000 |
| 3 | SBI Magnum Income Fund | Medium Duration Fund | 19% | Moderate | ₹5,000 |
| 4 | Axis Treasury Advantage Fund | Low Duration Fund | 18% | Low | ₹500 |
| 5 | Kotak Bond Short Term Plan | Short Duration Fund | 17% | Moderate | ₹1,000 |
| 6 | Nippon India Low Duration Fund | Low Duration Fund | 16% | Low | ₹500 |
| 7 | Aditya Birla Sun Life Corporate Bond Fund | Corporate Bond Fund | 15% | Moderate | ₹1,000 |
| 8 | UTI Treasury Advantage Fund | Low Duration Fund | 13% | Low | ₹1,000 |
| 9 | IDFC Corporate Bond Fund | Corporate Bond Fund | 11% | Moderate | ₹500 |
| 10 | Franklin India Low Duration Fund | Low Duration Fund | 10% | Low | ₹500 |
👉 These funds have consistently outperformed fixed deposits and other traditional saving options.
Benefits of Investing in Debt Mutual Funds in 2025
- Better than FD Returns – Even the lowest return among the top funds is 10%, much higher than the average FD rate of 6-7%.
- Tax Efficiency – Debt funds enjoy indexation benefits when held for more than 3 years.
- Professional Management – Managed by expert fund managers who minimize risks.
- Flexibility – Can be redeemed easily without long lock-in periods.
- Capital Protection – Lower risk of loss compared to equity-based schemes.
How to Choose the Right Debt Mutual Fund?
Before investing, you should consider these factors:
- Investment Horizon – Short-term investors should prefer low duration funds, while long-term investors can go for corporate or medium duration funds.
- Risk Appetite – If you want safer investments, stick to government and low-duration funds.
- Returns History – Always check past performance (1-year, 3-year, 5-year).
- Fund Manager Expertise – A reputed fund manager ensures better portfolio management.
FAQs on Debt Mutual Funds 2025
Q1: Are debt mutual funds risk-free?
No, they are not risk-free, but they carry much lower risk compared to equity funds. Risks may arise from interest rate fluctuations or credit defaults.
Q2: How much return can I expect from debt mutual funds in 2025?
Based on recent performance, top funds have given 10% to 24% returns in 1 year, though returns may vary depending on the market.
Q3: Is it better to invest in FDs or Debt Mutual Funds?
If safety is your only concern, FDs are fine. But if you want better returns with moderate safety, debt mutual funds are a smarter choice.
Q4: What is the minimum investment amount?
You can start investing with as low as ₹500 to ₹1,000, depending on the fund.
Q5: Can I withdraw money anytime from a debt mutual fund?
Yes, most debt mutual funds are open-ended and can be withdrawn anytime. Some may charge a small exit load if redeemed early.