List of the Best Fixed-income Mutual Funds in India 2025

Worried about unpredictable market fluctuations cutting into profits? Fixed-income mutual funds bring a perfect balance between steady income and low risk. By investing in fixed-income securities, they are a smart choice for risk-averse investors seeking moderate returns. 

Here is a curated list of the best fixed-income mutual funds in India to safeguard your wealth creation journey in 2025.

Quick Synopsis

• Suitable for short-term investments, such as 90 days.
• Mutual fund investments are taxable; STCG is taxed as per the applicable tax slab.
• For LTCG, the tax rate is 12.5%.

List of Best Fixed-income Mutual Funds in India in 2025

Note: All information mentioned here is updated as of 22nd August, 2025.

Key Features of Best Fixed-income Mutual Funds in India

1. Stable Income Source

With a fixed-income mutual fund, you can ensure a stable and predictable source of income. These funds provide regular interest payouts generated from their underlying debt securities.

2. Diversification

When you opt for fixed-income mutual funds, you get the chance to invest in various debt securities spanning different credit ratings and maturities. This way, you can diversify your portfolio and reduce the risk potential of your mutual fund investments. 

3. Management by Professionals

Fixed-income mutual funds are generally handled by certified fund managers with years of experience steering through the financial markets. They choose the most appropriate assets for your portfolio, stay updated on market conditions and adjust holdings accordingly. 

4. Liquidity

By choosing fixed-income mutual funds, you can buy and redeem units as per your needs. Whether an emergency arises or something else, you can access your investment capital whenever you want.

Fixed-Income Mutual Funds Taxation in 2025

Debt mutual funds are subject to tax only when you redeem your units. If you sell them within 2 years, short-term capital gains (STCG) tax applies. For units held more than 2 years, the long-term capital gains (LTCG) apply.

Factors You Must Consider Before Investing in Fixed-income Mutual Funds

1. Past Performance

You must check the past performance of the mutual fund before making an informed decision. Visit a reliable website and review its 1 to 5-year annualised returns. It helps evaluate the fund's sustained performance. 

2. Costs

Consider the expense ratio, which can range between 0.6% to 1.54%. This is an additional cost you need to pay the fund managers. 

3. Tenure

These funds offer various maturity periods. So, choose one that best aligns with your investment goals and return expectations.

Disadvantages of Investing in Fixed-income Mutual Funds 

1. Lower Return

You gain comparatively lower returns than equity-linked securities because your money is invested in government bonds, corporate bonds, and money market instruments. In addition, these are all fixed-income securities.

2. Risks

Though these are highly recommended for their two features: lower risk and stable income generation, fixed-income mutual fund Investments also involve certain risks. They can be interest rate risk, credit risk or other market-related risks.

3. Expense Ratio

As these funds are handled by the professional fund managers, a portion of your return goes toward their fees, which ultimately reduces your take-home amount.  

Who Should Invest in Fixed-Income Mutual Funds?

1. Investors Seeking Passive Income

Investors looking to generate passive income can opt for fixed-income mutual funds, as these create returns at regular intervals. 

2. Investors with Low Risk Appetite

Beginner investors or those with low risk appetite should choose these funds, as fund managers invest them in debt and money market securities. Note that money market securities are usually issued by the government, ensuring guaranteed returns.

3. Conservative Investors

Investors with a conservative mindset, who prioritise security over wealth creation, should go for these funds. These investment instruments are invested in fixed-income securities such as bonds, treasury bills, and corporate debt. 

If you are one of them, consider investing in one of the best fixed-income mutual funds in India and ensure steady income while diversifying your portfolio. As per SEBI guidelines, these funds must invest at least 80% of their corpus into fixed-income securities.

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