Debt Mutual Funds
Funds investing in bonds, government securities and money-market instruments.
Updated 30 September 2026 · SEBI rules as of 2026Overview
Debt funds invest in fixed-income securities — treasury bills, commercial paper, certificates of deposit, corporate bonds and government securities. SEBI defines 16 debt categories based on duration and credit quality. They are used for parking surplus money, short-to-medium-term goals and portfolio stability. Since 1 April 2023, gains on new debt-fund investments are taxed at slab rate.
| Particular | Details |
|---|---|
| Categories | 16 (overnight to long duration, credit-based, gilt, floater) |
| Tax | Slab rate for units bought on/after 1 Apr 2023 |
| Risk disclosure | Potential Risk Class (PRC) matrix + riskometer |
| Exit load | Nil in most; some short-term loads |
SEBI debt categories
| Category | Rule | Risk |
|---|---|---|
| Overnight | 1-day securities | Very low |
| Liquid | Up to 91 days maturity | Low |
| Ultra Short Duration | Macaulay duration 3–6 months | Low–moderate |
| Low Duration | 6–12 months | Low–moderate |
| Money Market | Up to 1 year maturity | Low–moderate |
| Short Duration | 1–3 years | Moderate |
| Medium Duration | 3–4 years | Moderate |
| Medium to Long | 4–7 years | Moderate |
| Long Duration | > 7 years | Moderate–high (rate risk) |
| Dynamic Bond | Any duration | Moderate |
| Corporate Bond | ≥ 80% in AA+ and above | Moderate |
| Credit Risk | ≥ 65% below AA+ | High |
| Banking & PSU | ≥ 80% in banks, PSUs, PFIs | Moderate |
| Gilt | ≥ 80% in G-secs | Rate risk, no credit risk |
| Gilt 10-yr Constant Duration | G-secs, ~10-year duration | Rate risk |
| Floater | ≥ 65% floating-rate | Low–moderate |
How debt funds earn
Interest on the bonds held.
Bond prices rise when interest rates fall.
Yield changes as bonds approach maturity.
Frequently asked questions
Debt fund or FD?
FDs give fixed returns; debt funds offer liquidity and potential rate gains but no guarantee. Tax is now similar (slab rate).
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Information is educational and may change with SEBI / tax rules — verify with the AMC, AMFI or SEBI. FinancePortal is not an investment adviser.