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Gilt Mutual Funds
3 Year Average Returns
6.30%
Funds on Dhan
24
Gilt Funds are a type of debt funds that invest primarily in government securities. These Funds lend money to the government and earn interest income from them. While these are the best Gilt Mutual Funds to invest in, you must know these 3 things before you start investing.
- Goal: Gilt Funds invest in government securities, which are considered safe since they're backed by the government.
- Investment Horizon: Ideal for conservative investors looking for safety over a medium to long-term horizon, usually 3-5 years.
- Risk: Low risk in terms of credit but subject to interest rate risk, meaning they can fluctuate with changes in interest rates.
Best Gilt Funds to Invest in 2026
Note: 3Y & 5Y returns are annualised. Rest everything is absolute.
Scheme | AUM (in Cr.) | Fund Age | 1W | 1M | 3M | 6M | 1Y | 3Y  | 5Y |
|---|---|---|---|---|---|---|---|---|---|
Compare | ₹ 1,660 | 13 Yrs | 0.13% | 0.49% | 0.23% | 4.50% | 7.29% | 8.21% | 6.45% |
Compare | ₹ 378 | 13 Yrs | 0.14% | 1.20% | -0.09% | 3.38% | 4.23% | 7.25% | 6.11% |
Compare | ₹ 8,968 | 13 Yrs | -0.00% | 0.82% | -1.31% | 2.57% | 3.46% | 6.72% | 6.31% |
Compare | ₹ 493 | 13 Yrs | 0.13% | 0.89% | -0.14% | 3.15% | 2.94% | 6.68% | 5.70% |
Compare | ₹ 409 | 13 Yrs | -0.27% | 0.58% | -0.50% | 1.46% | 4.11% | 6.64% | 5.68% |
Compare | ₹ 7,982 | 13 Yrs | -0.07% | 0.88% | 0.43% | 2.94% | 3.87% | 6.63% | 6.34% |
Compare | ₹ 98 | 13 Yrs | -0.17% | 0.97% | -1.30% | 2.67% | 2.48% | 6.45% | 5.67% |
Compare | ₹ 1,385 | 13 Yrs | 0.06% | 0.79% | -0.42% | 3.17% | 3.48% | 6.44% | 5.63% |
Compare | ₹ 671 | 13 Yrs | 0.28% | 1.05% | -1.46% | 3.00% | 2.66% | 6.43% | 5.85% |
Compare | ₹ 1,059 | 13 Yrs | -0.55% | -0.21% | -1.69% | 2.40% | 2.40% | 6.41% | 5.73% |
Compare | ₹ 1,772 | 13 Yrs | -0.01% | 0.51% | -1.13% | 2.33% | 2.59% | 6.22% | 5.38% |
Compare | ₹ 83 | 13 Yrs | 0.24% | 1.10% | -0.47% | 2.66% | 2.38% | 6.22% | 5.56% |
Compare | ₹ 144 | 13 Yrs | -0.08% | -0.13% | -0.63% | 2.08% | 4.12% | 6.17% | 5.31% |
Compare | ₹ 109 | 13 Yrs | 0.26% | 0.88% | 0.09% | 2.60% | 2.83% | 6.10% | 5.41% |
Compare | ₹ 117 | 12 Yrs | 0.09% | 0.94% | -1.16% | 2.31% | 1.73% | 6.04% | 5.34% |
Compare | ₹ 149 | 13 Yrs | -0.07% | 0.72% | -0.51% | 2.74% | 2.35% | 5.98% | 5.21% |
Compare | ₹ 71 | 3 Yrs | 0.48% | 0.90% | -0.35% | 2.55% | 3.18% | 5.92% | 0.00% |
Compare | ₹ 1,929 | 13 Yrs | 0.12% | 1.14% | -0.25% | 3.44% | 3.33% | 5.83% | 5.48% |
Compare | ₹ 1,929 | 13 Yrs | 0.12% | 1.14% | -0.25% | 3.44% | 3.34% | 5.82% | 5.48% |
Compare | ₹ 43 | 13 Yrs | 0.27% | 1.14% | 0.27% | 3.77% | 3.29% | 5.71% | 5.11% |
Compare | ₹ 1,056 | 13 Yrs | -0.03% | 0.76% | -0.98% | 2.52% | 2.03% | 5.60% | 5.09% |
Compare | ₹ 73 | 4 Yrs | -0.15% | 1.03% | -1.09% | 2.41% | 1.48% | 5.07% | 0.00% |
Compare | ₹ 32 | 1 Yrs | -0.04% | 0.95% | 0.64% | 3.68% | 4.55% | 0.00% | 0.00% |
Compare | ₹ 33 | 1 Yrs | 0.19% | 1.46% | 1.05% | 2.87% | 2.77% | 0.00% | 0.00% |
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Disclaimer: Mutual fund investments carry market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
About Gilt Funds
Gilt funds represent a specific category of investment vehicles primarily concentrated on government securities. These funds allocate their investments to fixed-income instruments issued by the government, offering a lower risk of default compared to other bond types. For investors in search of a secure investment option with a stable return, gaining a comprehensive understanding of gilt funds is crucial. Here are the fundamental aspects to consider:
- Government Backing: The primary feature of gilt funds is that they invest in government securities, which are generally considered safe due to government backing.
- Risk Profile: These funds have a lower credit risk because the government is unlikely to default on its obligations.
- Interest Rate Sensitivity: Gilt funds are sensitive to changes in interest rates, which can affect the fund's performance depending on the market scenario.
Investing in gilt funds offers several benefits, particularly for risk-averse investors:
- Lower Credit Risk: The primary advantage is the lower credit risk, as the government backs these securities.
- Stability: Gilt funds can offer stability in a diversified investment portfolio, especially in times of economic uncertainty.
- Potential for Steady Returns: They provide the potential for steady returns, particularly appealing if you're looking for safer investment options.
- Diversification: Adding gilt funds to your portfolio can enhance diversification, especially if your other investments are concentrated in higher-risk categories.
- Liquidity: Government securities are typically liquid, making gilt funds a relatively liquid investment option compared to other fixed-income instruments.
- Suitable for Conservative Investors: If you have a conservative investment approach and are seeking a secure place for your funds, gilt funds can be a good match.
Deciding whether gilt funds are a good investment option for you depends on your investment goals, risk tolerance, and understanding of how these funds operate. Gilt funds invest primarily in government securities, which are known for their high credit quality. Here are some important aspects to consider:
- Risk Profile: While gilt funds are considered low risk in terms of credit risk, they are susceptible to interest rate risk. If interest rates rise, the value of the bonds in the fund can fall, and vice versa.
- Investment Horizon: Gilt funds are more suitable for medium to long-term horizons. Due to their sensitivity to interest rate changes, they can be volatile in the short term.
- Financial Goals: If your objective is to invest in a low-credit-risk instrument and you are comfortable with the interest rate risk, gilt funds might align with your goals.
Gilt funds may be suitable for specific types of investors based on their investment profile:
- Risk-Averse Investors: If you are averse to high credit risk but can manage interest rate risk, gilt funds could be a suitable choice.
- Medium to Long-term Investors: These funds are ideal for investors who have a medium to long-term investment horizon, allowing them to ride out interest rate volatility.
- Conservative Investors Seeking Government Securities: If you prefer investments in government securities due to their high credit safety, gilt funds can be a good option.
- Investors Looking for Diversification: For those looking to diversify their portfolio beyond corporate debt and equities, gilt funds offer a different risk-return profile.
- Investors with an Understanding of Interest Rate Movements: If you have a grasp of macroeconomic factors, particularly interest rate movements, and can strategically enter and exit investments, gilt funds might be appropriate.
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FAQs
Gilt Funds invest your money primarily in Government Securities (G-Secs), which are debt instruments issued by the central and state governments. These funds aim to offer a secure investment avenue, as they're backed by the government, making them relatively low-risk. They seek to generate returns through interest income from these securities, suitable if you're looking for safety along with modest returns.
Gilt Funds are typically invested in a variety of government securities, including treasury bills, government bonds, and state development loans. These investments are considered safe because they're backed by the government, reducing the risk of default. The funds may invest across different maturities, from short to long-term, depending on the fund manager's outlook on interest rates.
Gilt Funds can give profit primarily through interest income generated from government securities. While the returns on these funds are generally lower compared to equity funds due to their lower risk profile, they can still offer attractive returns, especially in a falling interest rate environment when the price of older, higher-yielding securities tends to increase.
No, Gilt Funds are not tax-free. The returns from these funds are subject to taxation. If you hold your investments for less than three years, the gains are taxed as short-term capital gains according to your income tax slab. For holdings over three years, gains are taxed as long-term capital gains at 20% with indexation benefits.
Profits from Gilt Funds are taxed depending on the holding period. Short-term capital gains (if the investment is sold within three years) are taxed according to your income tax slab rates. Long-term capital gains (for investments held for more than three years) benefit from a lower tax rate of 20% with indexation, which adjusts the purchase cost for inflation, reducing the taxable gain.
To choose the best Gilt Fund, consider factors such as the fund's past performance, expense ratio, and the fund manager's experience in managing debt funds. Also, look at the fund's duration and how it aligns with your investment horizon and interest rate outlook. Since these funds invest in government securities, credit risk is low, but interest rate risk should be considered, especially for long-duration funds.
No, it's not necessary to open a demat account to invest in Gilt Funds. You can directly invest through the AMC's website or through online investment platforms that allow you to buy and sell fund units without a demat account. However, having a demat account might be convenient if you already invest in other securities and wish to consolidate your investments.
Both lumpsum and SIP (Systematic Investment Plan) have their advantages in Gilt Funds, depending on your investment goal and market outlook. Lump Sum investments can be beneficial when interest rates are expected to decline, as bond prices move inversely to interest rates. SIPs are suitable for averaging the cost of investment over time, reducing the impact of market timing and interest rate volatility.
To start an Gilt Fund SIP online, follow these 4 steps:
- Open Demat Account
- Choose the Gilt Fund you wish to invest in.
- Choose the SIP option, specifying the amount and SIP date
- Set up an auto-pay via bank account to automate the SIP payments
Yes, you can sell or redeem your units in Gilt Funds at any time. However, it's important to consider the market conditions as the NAV (Net Asset Value) of the fund will fluctuate based on interest rate movements. Immediate selling might not always be advantageous, depending on the current bond prices and interest rates.
No, Gilt Funds do not have a lock-in period, allowing you flexibility in managing your investment according to your liquidity needs and market outlook. This makes them an attractive option for you if looking for safer debt investments without the restrictions of a lock-in period.
The primary risk associated with Gilt Funds is interest rate risk. As interest rates rise, the prices of existing bonds (with lower interest rates) tend to fall, affecting the fund's NAV negatively. However, since Gilt Funds invest in government securities, there's minimal credit risk, making them one of the safer investment options within the debt category.
While Gilt Funds are considered safe due to their investment in government securities, they are not 100% risk-free. Interest rate fluctuations can impact the fund's returns, making them subject to market volatility. However, the credit risk is very low, as the chances of a government default are minimal, making them a relatively secure investment option compared to other types of mutual funds.
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