Best Gilt Funds - Your 2025 Guide
Gilt funds are a kind of debt mutual fund, which will predominantly invest in securities issued by the Reserve Bank of India. With the economic uncertainty and varying interest rates in 2025, a high proportion of Indian investors are still searching to have a good share in their portfolios with the stable returns and high safety. Gilt mutual funds have earned the confidence of both new and old investors because of the governmental support and reduced credit risk.
Gilt funds can be one of the best sources of parking your money in the case you do not want to take a lot of risk. The assets of such funds are invested solely in the central and state governments securities and bonds, which almost eliminates the risk of default. These funds are trending among those investors interested in capital protection as well as small growth as of 2025.
Key highlights for 2025:
- Very secure due to holdings of government securities.
- Sensible to fluctuations in interest rates.
- Appealing as an investment in shaky stock markets.
- Appropriate to the medium-term and long-term objectives.
Should Gilt Funds be Invested in 2025?
The gilt funds are apt among some classes of investors, particularly the unstable financial environment of 2025. When you do not want to get involved in the credit risk, and you are willing to bear a certain degree of volatility associated with fluctuations in interest rates, then gilt funds can be a good choice.
Ideal for:
- The safety oriented conservative investor.
- Professionals who are approaching retirement or are retired and want to grow in a stable manner.
- The 3-5 years investor group.
- Investors who wished to have a non-pure equity portfolio.
Not ideal for:
- Investors with high or constant returns.
- People who fear changes in NAV are not comfortable with this.
In a Nutshell: What is the relevance of Gilt Funds in 2025?
- They are popular during uncertain times as they are supported by the government and are safe.
- New RBI monetary policies demonstrate their significance in portfolios.
- The fluctuations in interest rates in 2025 can be capital gain opportunities.
Which are the varieties of Gilt Funds?
The Indian market primarily provides two categories of gilt mutual funds in 2025:
Constant Maturity Gilt Funds:
These make investments of not less than 80 per cent of their assets on government securities that have a fixed maturity of ten years. The returns may vary, however, these funds are highly transparent and standardised.
Active Gilt Funds:
These are able to change the maturities depending on the strategy of the fund manager. They can invest in all types of government bonds having different maturity and attempt to maximise returns in different interest rate cycles.
Key features:
- The two alternatives are zero credit risk.
- Apposite in medium to long term investors.
- React differently to fluctuation in interest rates.
Did you know?
SEBI mutual fund guidelines state that the term Gilt can be applied only to funds that invest in government securities.
What 2025 has to Offer Before You Select a Gilt Fund?
Before investing in the most appropriate gilt funds, you need to consider some of its features and market speculations particularly this year.
Decision factors:
- RBA policy and interest rates.
- Average Maturity of the fund
- Fund Manager’s track record
- Expense Ratio
- Past 3- and 5-year returns
- Tracking error and the frequency of occasions that the fund rebalances the portfolio.
Risk factors:
- Interest Rate Risk: Gilt funds are quite sensitive to the fluctuations in interest rates. Bond market value decreases as the rates increase and this influences the NAV.
- Duration Risk: The more the maturity of the funds, the more volatile they are.
People Also Ask:
What will be the lowest amount that can be invested in gilt funds in 2025?
In India, most of the gilt mutual funds accept an investment between INR 500 and INR 1,000.
How are gilt funds taxed in 2025?
The gilt funds are subject to taxation as other debt funds; capital gains which are short run (below 3 years) are subject to tax as per your slab and long run capital gains (after 3 years) are taxed at 20 percent with indexation.
What is the Performance of the Best Gilt Funds in comparison to the other Debt Funds?
The comparison of gilt funds with other debt funds assists the investors make prudent decisions particularly by 2025 when the variations in performances have been increased by the policy changes.
| Fund Type | 3-Year CAGR (2022-2025) | Risk Profile | Key Advantage |
|---|---|---|---|
| Gilt Fund | 7.8 percent | Low to Medium | Zero credit risk. |
| Banking PSU | 6.7 percent | Low | Invests in PSU bank bonds. |
| Corporate Bond | 7.2 percent | Medium | More returns, a little risk. |
| Liquid Fund | 5.9 percent | Very Low | Short, instant access. |
Gilt funds tend to be more beneficial in capital appreciation when interest rates are decreasing but poor when the rates are rising.
Pros:
- Secure relative to the majority of the debt funds.
- Will work well in declining interest rate periods.
Cons:
- May does not do well during stable or increasing interest rates.
- In the short-run, NAV may be volatile.
Expert Insight:
A more balanced portfolio in a dynamic rate environment in 2025 suggests a mix of gilt funds and short-period debt funds as suggested by the financial planners.
The Question What are the best performing gilt funds in India (2025)?
The following list is the list of best-performing gilt funds which are based on their 3 years and 5 years CAGR returns, low expense ratio and a track record of the fund manager.
Fund Name AUM ([?] Crore) 3-year CAGR Expense Ratio Fund Manager
- SBI Magnum Gilt Fund 6,2208.3-0.39percentDinesh Ahuja
- ICICI prudential gilt fund 7,100 8.0 percent 0.45 percent Rahul Goswami.
- HDFC Gilt Fund 5,475 7.9 percent 0.43 percent Subramanian Venkat
- Axis Gilt Fund 3,330 7.7 percent 0.42 percent Hardik Shah.
- IDFC Gilt Fund 3,600 7.8 percent 0.38 percent Suyash Choudhary.
The major characteristics of these best gilt funds:
- Stay in government securities as safe as possible.
- Portfolios that are run professionally.
- Open reporting and regular updates.
What are the Advantages and Disadvantages of Gilt Funds Investment in 2025?
Informed decision is taking sides. There are several factors that are even more applicable in 2025 because of changes in the economy and regulation.
Pros
- Maximum safety of mutual funds because of its holding of securities exclusively in government.
- Capital gains in falling interest rates environment.
- Disclosure and transparency.
- No default risk
Cons
- Subject to fluctuations in the interest rate.
- Decreased returns as compared to risky debt funds under a rising rate condition.
- No certainty of fixed returns.
People Also Ask:
Are gilt funds risk free?
Gilt funds have no credit risk, but have no interest rate risk. Interest rates can increase and NAVs are likely to fall.
What is the frequency of my review of my gilt fund investment?
It is a good idea to periodically review your holdings within gilt funds at least at least every 6-12 months in 2025.
Which Investment Strategy is the most effective with Gilt Funds?
The effective application of gilt funds comes under a large asset allocation plan. The majority of advisors propose the following strategies in 2025:
- Goal-based Investing: Invest with fund in gilt as a safing measure in the 3-5-year wealth preservation or as a part of children education, retirement, etc.
- Interest Rate Play: Invest more in gilt funds when interest rates are expected to be as low as they can.
- Diversification: Add other debt and hybrid funds to risk.
- Systematic Investment Plan (SIP): Minimizes timing risk and flattens returns.
Suggested allocation:
Conservative investors may have a reasonable 30-60 percent in gilt funds, which is dependent on the portfolio risk.
Did You Know?
Total assets in gilt funds almost doubled in India between 2022 and 2025, which is also a sign of increased popularity of gilt funds both among retail and institutional investors.
What are the things to look out at when investing in Gilt funds in 2025?
Gilt funds are very beneficial, but there are several trends and cautions that are peculiar to 2025.
- Monetary Policy of RBI: The performance of funds will respond swiftly to the announcements of the Reserve Bank.
- Macroeconomic Volatility: NAVs are influenced by extreme changes in interest rates.
- Expense Ratio: Lower expenses work wonders in the long run; direct plans are to be preferred to regular plans.
People Also Ask:
Can I lose money in a gilt fund?
Yes, when you redeem in an environment of increasing interest rates, you can make losses of short term capital.
Is it possible to withdraw anytime out of a gilt fund?
The majority of the open-ended gilt funds have the option of redemption on any business day, where exit loads could potentially be incurred.
What is the way to begin investing in the best gilt funds in 2025?
It is easy to start and it is predominantly online in 2025.
- Open an account with any AMC or platform with mutual fund.
- Complete your KYC online
- Select how you would like to invest in the gilt fund (lump sum or SIP).
- Track the performance and keep abreast with market developments.
Did You Know?
Your net banking allows you to connect your investment in gilt fund and transact instantly and hence it becomes easier than ever to get liquidity.
Summary of the Gilt Funds (2025) Quick Recap - Takeaways.
- Gilt funds are the safest among the mutual funds because they only invest in government securities.
- Most appropriate to the conservative investor or when the market is fluctuating a lot and acting as a portfolio diversifier.
- The changes in interest rates should also be observed carefully because it directly affects returns.
- The major funds in 2025 will be SBI Magnum Gilt, HDFC Gilt, ICICI Prudential Gilt, Axis Gilt and IDFC Gilt Funds.
- Couple gilt funds with other short term or hybrid funds so as to have a balanced performance.
People also ask questions that are frequently asked.
Q.What is the most appropriate gilt fund to invest in the year 2025?
A.The best options based on performance and fund management in the next 3 years are SBI Magnum Gilt Fund, HDFC Gilt Fund, and ICICI Prudential Gilt Fund.
Q.What is the expected gilt fund payback in India?
A.The 3-year CAGR of the top gilt funds is between 7.7 percent and 8.3 percent on average as of 2025.
Q.Are there lock-in period of gilt funds?
A.No, the majority of open-ended gilt funds do not have a lock-in period. You are able to redeem any time but look at exit loads.
Q.How much tax will there be on gilt fund gains in 2025?
A.Gains that are realized in less than 3 years are subject to taxation as per your slab. Any long-term gain (above 3 years) attracts 20 percent tax after indexation.
Q.Will gilt funds be safe in the event of RBI altering repo rates?
A.Gilt funds are not subject to credit risks but their NAV fluctuates with a change in the rate policy by the RBI.
Sources
- SEBI List of Categories of Mutual Funds.
- RBI Policy Announcements 2025
- Value Research Mutual Fund Ratings.
- Morningstar India Reports
