Mutual Funds Beginner

Best gilt funds: Top-performing gilt mutual funds to invest in 2023

In the context of gilt fund investing, “gilt-edged” has come to mean “extremely reliable.” But what makes these funds so special? And what are the best ones out there? Wonder no more because here’s our list of the top performing gilt mutual funds to invest in this year.

What are gilt mutual funds?

Gilt funds are a type of debt fund that invests primarily in US government securities.
The dictionary defines “gilt” as “a thin covering of gold.” During the days of the British Raj, bond certificates had thin gold edges. That’s how these documents first got the name “gilt.” The gold is gone, but the name stuck.

Top-performing gilt mutual funds in 2023

Though the gilt mutual fund market is not as volatile as the rest of the market, preparing a list of the top-performing gilt mutual funds can be daunting. Below are some of the good ones (in random order):

  • ICICI Prudential Gilt Fund
  • SBI Magnum Gilt Fund
  • Edelweiss Government Securities Fund
  • DSP Government Securities Fund
  • Kotak Gilt Investment Fund
  • IDFC GSF Investment Fund
  • Nippon India Gilt Securities Fund
  • Aditya Birla Sun Life Government Securities Fund
  • Axis Gilt Fund
  • PGIM India Gilt Fund
  • HSBC Gilt Fund
  • UTI Gilt Fund
  • Canara Robeco Gilt Fund
  • Tata Gilt Securities Fund
  • HDFC Gilt Fund

We hope you use this list to kickstart your own research. Remember, there are no shortcuts to investing well.

Features of gilt mutual funds

As mentioned earlier, gilt mutual funds are seen as a reliable investment. But why exactly? What’s so special about them? And is there a downside? Here’s where we break it down for you.
1. Minimal risk: At least 80% of the funds are invested in government securities. The government assures payment on the maturity date as well as the periodic interest payments.
2. Lock-in period: Lock-in period refers to the time period that an investor has to stay invested. Partial or total exit is not permitted. Most gilt funds do not have a lock-in period.
3. Fluctuations in Net Asset Value (NAV): Changes in the overall market interest rates inversely affect the NAV of these funds. Since the funds invest mostly in fixed-interest government securities, when interest rates rise, the NAV decreases and vice versa.
4. Annual fees: The investor must pay the fund manager’s fees and incidental costs periodically. These will erode the returns on investment to some extent.
5. Taxable returns: The investor is liable to pay taxes on short-term capital gains (made within three years) and long-term capital gains (beyond three years).
6. Investment option for small investors: Government securities are not easily available, but gilt mutual funds open up the possibility for small investors.

In addition to all of this, there are a few more features that bear discussion. Let’s dig into them briefly before getting into the tax implications.


There are two types of gilt mutual funds:
1) Funds where the fund manager invests in government securities of varying maturity periods, and
2) Funds where the investments flow into government securities with the same maturity period.

You could take your pick based on your needs and plans as an investor.

Asset allocation

The Securities and Exchange Board of India (SEBI) mandates that this type of mutual fund invests at least 80% of assets in government bonds and securities.

Risk-reward ratio

The risk involved in this type of investment is pretty low, and the interest rate is quite high. That means it comes with a low risk-reward ratio, and that’s a good thing.

Taxability on gilt funds

As for taxation, there are two aspects one must consider in relation to gilt funds.

1. Long-term capital gains tax

A 20% tax applies when the investor holds on to this fund for more than three years. Long-term gains on gilt funds also attract indexation benefits.

2. Short-term capital gains tax:

If the fund is held for less than three years, it is a short-term capital gain. That means you have to pay tax on it as per your income tax slab.

3. Tax Deducted at Source (TDS)

Presently, there is no TDS for gilt funds.


Gilt mutual funds are a viable investment option for investors who are more concerned with the safety of their capital and are risk-averse. They make for a good investment when only a small percentage of your portfolio is allocated to them.


How long can I stay invested in gilt mutual funds?

Given the stable, low-risk nature of gilt mutual funds, staying invested in them should not pose problems. However, a host of other factors could influence you. Your current financial needs could be one such factor, market conditions could be favorable for exiting the fund to cash in on the profit that can be realized, etc. So, the period of stay is unique to each investor.

Are gilt mutual funds high risk?

Gilt mutual funds are relatively low risk in the medium or long term. That’s because they invest over 80% of the money in government securities. Only an unusual spike in interest rates in the market may increase the risk with this security.

How does one invest in gilt funds?

The procedure to follow for investing in gilt funds is the same as that of other stock market investments. First, confirm your Know Your Customer (KYC) status. Fulfilling KYC norms is statutory. You can key in your PAN card details on the CDSL or NSDL website to confirm your KYC status. If it has been verified, the screen will display the message: “MF – verified.” If not, it will say: “Pending.” Your broker, mutual fund distributor, or asset management company (AMC) will also be able to verify your status.

Applications can be made online through the broker’s portal. You will need to fill out a few forms.

Which gilt fund is best?

The best gilt fund may vary based on individual preferences and financial goals. It’s advisable to consult with a financial advisor or compare options from reliable sources.

Is it good to invest in gilt funds?

Investing in gilt funds can be a wise choice for risk-averse investors. They offer safety and potentially stable returns due to investments in government securities, making them suitable for conservative portfolios. However, returns may be lower than other funds. It’s crucial to align your investment goals and risk tolerance before considering gilt funds.

Are gilt mutual funds safe?

Gilt mutual funds are generally considered safe due to investments in government securities, minimizing credit risk. However, they can be subject to interest rate risk and may offer lower returns. Careful consideration is essential.

How do I choose a gilt mutual fund?

When choosing a gilt mutual fund, consider your investment horizon, expense ratio, and the fund manager’s track record. Diversify across funds for a balanced portfolio.

Disclaimer: Investing in mutual funds is subject to market risks. Please read all scheme-related documents carefully before investing. Potential returns from a mutual fund product are not guaranteed. Past performance is not indicative of future results. None of our articles are intended to and should be considered investment/financial advice from CoinSwitch.

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