Know all about income funds India

Meaning of Income Funds

Income funds in India are those mutual funds which are class of debt funds and also gives one with a uniform flow of income. They invest in multiple assets classes. That classes are goverment securities, corporate bonds, certificate of deposits and money market instrument. They are controlled by proficient best fund managers in India and is a great mutual fund investment.

The 2 kinds of mutual funds can broadly fall into this class As per SEBI classification of mutual funds. The following 2 debt funds are income funds:

  1. Medium to Long Duration Fund- That invests in debt and money market instruments like the Macaulay Span of the fund is within 4-7 years.
  2. Long Duration Fund- It is an open-ended debt scheme that invests in debt and money market instruments like the Macaulay Duration of the fund is higher than 7 years.
  • Income funds in India are designate assets with a higher rate of interest.
  • It gives with a vast opportunity for the investors who want to receive income in the instant time duration.
  • The advantage of the diversification of funds is an extra benefit as it provides for investment in equities and bonds alike.
  • This creates a great dividend that both invests or distributes to the investors.
  • That actively seek to maintain the portfolio on the basis of the rate of interest movements.
  • They seek to create returns both in failing and expanding interest rate situations by controlling their portfolio actively.
  • They either produce interest income by keeping the instruments until maturity or control gains by trading them in the debt market. If the cost of the instrument returns adequately.

Must Read: Debt funds vs fixed deposits

List of best debt funds to invest in 2019

Who can invest in Income funds

Income funds in India essentially invest in government securities, government bonds, money market instruments and corporate bonds. Variations in rates of interest affect the fund considerably.

  • It’s more fit for investors who are slightly aggressive risk-seekers Also those looking to invest long-term.
  • The investors who have an investment time range of at least 4 years. Also, are ready to take a moderate volume of risk.
  • Even who want to have a regular and steady income.
  • Conservative investors who want to receive better returns than their traditional ports may hold of income funds.
  • These funds concentrate on creating income for the investors rather than money making.

As such, they are a magnificent source of financial gain for investors watching for a steady and stable income.

Must read: How to invest in a mutual fund

Working: Income funds

The Net Assets Value of Income fund is measured up in 4 points. Income funds in india try to fulfil returns both in failing and growing interested rate situations by active management of the portfolio. They may attend either of the 2 strategies:

  • Create interest income by handling the instruments until maturity
  • Control gains by trading them in the debt market if the cost of the instrument moves up high.

The fund manager tries to deliver greater returns. That have larger stability by allotting towards debt and money market instruments. Also, which are investment class and have relatively low levels of interest rate risk.
Historically, income funds have gained to create greater returns than conventional bank fixed deposits. Unlike the lock-in period in an FD, income funds give higher flexibility of redemption and withdrawal.

Advantages of Income Funds

  •  It has a high level of liquidity. One can withdraw or redeem money anytime not like fixed deposits that come with a set lock-in period.
  •  Have historically produced excellent returns than fixed deposits.
  • Seek to generate returns from the fluctuating rate of interest cycles because of actively managed funds. In FDs carry re-investment risk. When a deposit grows and is reinvested, one may fall in a low-interest rate government. Also, get lower returns than before.
  •  Gives immense versatility. Besides investing regularly one can even withdraw or redeem money systematically. Thus forming regular cash flow for oneself.
  • These funds are tax saving investments and are very tax efficient. Notably for those in the 20- 30% tax support. Long-term capital gains -for holds for 1 year, are taxed at 10% without indexation.

The set uses of income funds

  • When one creates a mutual fund portfolio, Take into consideration the investing 1 half of the one’s capital. When one has a time duration of about 2-3 years.
  •  One can use income funds to further give for a few monthly cash flows. By choosing for an SWP after 1st holding it for at minimum 2 years.
  • Use equity mutual funds with income funds in india for long-run asset allocation strategy to create good wealth. Go for the growth option.

Evaluation points in the income funds

income funds india

  • With the asset management company (AMC) meets several risks. Nothing could be greater than the loss of reliability. This is because a first-time investor nearly always falls to mutual fund investment through spoken communication.
  • There is an appeal to pick a fund that has performed well in the past years. Still, it is necessary to estimate how long the fund has been in work and how it has proved over market cycles.
  • An income fund in India that has worked well in the past year. It will repeat the good work in the current year in case the market positions continue to be similarly. Though, one can assess the fund manager’s skill based on returns made in the past, and how he has controlled volatility.
  • There are many risk assessment instruments that can track and estimate income funds, some of them are given below :
  1. Expense ratio– The investors should take the expense ratio of the fund into consideration. As its the fee of the fund house as well. They view all over cost and returns. They also subtract this fee from the returns investor earns. Thus, not more than 2.5% of nav all ratios as per the rules by SEBI.
  2. Standard deviation-It displays how much the fund returns have deviated from the average returns.
  3. Share Ratio– It’s a tool that uses for differentiating the mutual funds. One can only impose an income fund’s performance when one examines the returns in line with the risks.
  4.  Information Ratio: It is nothing but the benchmark return subtracted from the all over portfolio return.

Things to keep in mind while investing in Income Funds

  • The risk features of income funds depend on the kind of holdings. If the equity percentage is higher, the risk will also be extra. Equities and bond prices have an adverse correlation. Income funds investing in both stock and bonds markets give for a hurdle toward market risks.
  • Income funds give one the advantages of intensified interest if the investment range passes 1 year. This has been the trend for the last 10 years.
  • There are some short-term income funds by just a few days’ investment horizons. Here, investors may only want a safe place to leave their money at the short note.
  • Income funds continued for more than 3 years are directed to long-term capital gains tax. It is taxable at 20% with indexation advantage. Income funds, though, give raised returns later taxation to investors in the 30% tax slab.
  • The correct time to invest in income fund is when it been a fall in the rate of interest. As they make money by controlling the instrument. Till they mature or by trading them at the right time, the value of the income funds to fluctuate respectively.

5 best Income funds in india performing 

Income Funds are created to produce income from interests on investments. It could be short to medium term bonds with a maturity period of 3, 5 and 10 years that provide regular annualized returns, which make this fund less volatile. Following 5 best income funds for short-term investors. They are the date of 12 June 2019.

The name of the scheme3 year (Return %)5 year (Return %)10 year (Return %)
L&T Ultra Short Term Fund7.44%7.90%8.05%
Reliance Income Fund7.77%8.27%7.39%
Aditya Birla Sun Life Floating Rate Fund7.92%8.35%8.65%
Axis Banking & PSU Debt Fund7.97%8.23%
DSP Short Term Fund6.84%7.64%7.69%
  • L&T Ultra Short Term Fund

income funds india

An Open-ended ultra short debt scheme investing instruments. Like that the Macaulay span of the portfolio is within 3 months to 6 months. It was introduced on November 27, 1997. The fund managers of this scheme are Mr Jalpan Shah and Mr Vikas Garg. To create a reasonable and steady income and give liquidity to the unitholder. To accomplish this objective the scheme will invest predominantly in a fully diversified. Have an extremely liquid portfolio of money market instruments, government bonds and corporate debt. The scheme will not spend in equities or equity related instruments.

NAV (Rs)₹ 30.9754
Fund Size (Rs)₹ 3022.86 Cr
Expense Ratio (%)0.52%
BenchmarkCRISIL Liquid Fund Index
Found HouseL&T Mutual Fund
Category Average6.95%
  • Reliance Income Fund

income funds india
An open-ended medium-term debt scheme investing in instruments such that the Macaulay term of the portfolio is between 4 to 7 years. Mr Prashant Pimple operates 8 open-ended schemes of Reliance Mutual Fund. The fund will support 2-pronged strategies. Core and Tactical.
A core strategy to think means to long term way on interest rates and the yield curve.Tactical strategy to help out of short term changes in the market. The strategy will be executed through high-grade assets like GSecs/SDLs/Corporate Bonds. The strategy is to create alpha by actively using GSecs, IRF and IRS curve.

NAV (Rs)₹ 61.0674
Expense Ratio (%)1.62%
Fund Size (Rs)₹ 252.98 Cr
BenchmarkCRISIL 10 Year Gilt Index
Found HouseReliance Mutual Fund
Category Average8.14%
  • Aditya Birla Sun Life Floating Rate Fund

income funds india

This is Suitable for investors who need to invest money for a higher duration but favour less risky assets compared to equity funds. Fund Crisil rank was refreshed from 4 to 5 in the past quarter. To create regular income by investments in a portfolio containing largely of floating rate debt and money market instruments. The fund manager is Kaustubh Gupta. The Launch date is 30th March 2009.


NAV (Rs)₹ 233.2913
Fund Size (Rs)₹ 5841.17 Cr
Expense Ratio (%)0.38%
BenchmarkCRISIL 10 Year Gilt Index
Found HouseAditya Birla Sun Life Mutual Fund
Category Average5.58%
  • Axis Banking & PSU Debt Fund

income funds india

To create steady returns by investing mostly in debt & money market instruments issued by Banks- Public Sector Units & Public Financial Institutions. The Scheme shall try to create maximum returns with low credit risk. The fund manager is Aditya Pagaria. The launch date is 8th June 2012.

NAV (Rs)5.82%
Expense Ratio (%)0.55%
Fund Size (Rs)₹ 6450.73 Cr
BenchmarkCRISIL 10 Year Gilt Index
Found HouseAxis Mutual Fund
Category Average7.64%
  • DSP Short Term Fund

income funds india


The fund managers Saurabh Bhatia and Laukik Bagwe have been consistently growing the DSP mutual funds. This mutual fund was introduced on 9th September 2002. The primary investment objective of the Scheme is to try to create returns comparable with risk from a portfolio framed of money market securities and/or debt securities. Investment in Debt and Money Market instruments duration of the portfolio is within 1-3 years.

NAV (Rs)₹ 31.9472
Expense Ratio (%)0.99%
Fund Size (Rs)₹ 2611.8 Cr
BenchmarkCRISIL 10 Year Gilt Index
Found HouseDSP BlackRock Mutual Fund
Category Average7.21%

All of the above are the best income funds with all the details mentioned. Along with the investment objective of each fund and also talks about the fund manager and the date on which scheme is launched.


Income funds are usually used as the end point for target-date funds. As every target-date fund addresses and reaches its target date. It becomes extra related to the fund provider’s income fund. At some point past the target date, the target-date fund may be mixed into the income fund. That will then be held by all investors whose target dates are some time in the history of funds.

For income fund service log into our website WealthBucket. We also have many services that allow you not only to invest in Income funds in India but also in many equity fundssmall-cap funds or multi-cap funds, Short Term Mutual Funds and many more. You can either call us on +91 8750005655 or email us at [email protected]. For any support or assistance in any of the activity realted to mutual funds do ask. Our expert team is will guide in all the procedures. Satisfying Customers demand is our priority.

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By |2020-02-03T04:53:21+00:00June 13th, 2019|Debt Fund|0 Comments

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This article has been posted by Pulkit Jain - the founder of WealthBucket - To raise awareness about Mutual Funds Investments. WealthBucket has made investing in Mutual Funds an easy, quick and welcome process, in India. An interactive online platform providing Trustworthy and sincere services to all its clients.