Fixed-income investments are among the most trusted avenues in India, but they don’t all serve the same purpose. Some offer higher yields, others provide tax advantages, and a few are designed purely for capital preservation. But higher yields usually come with higher risk, and capital preservation might result in restricted growth. So, choosing one that might fit your goals best can be a bit challenging.
In this blog, we cover a list of the most popular fixed income investments in India; so, you can compare their returns, risks, and suitability before deciding which ones to include in your portfolio. Let’s get started.
What are Fixed Income Investments?
As their name suggests, fixed-income investments offer fixed returns at pre-decided time intervals. Meaning, you exactly know at what rate your money is growing and when you’ll be getting your invested capital back. The returns, particularly with assets like bonds can experience some movement, but the volatility is much lesser when compared to the equity markets.
Fixed income investments respond better to market or industry developments, ensuring stability throughout the investment period when compared to equities. This predictability makes them a safer option for people looking to preserve their principal while getting consistent returns.
So, let’s explore further reasons why you must always allocate fixed income investments to your portfolio.
Why Choose Fixed Income Investment Options?
Building a portfolio is not only about chasing returns, but also about mitigating risks and finding stability. The art of portfolio management lies in managing this risk-return trade-off. Smart allocation requires you to use fixed income options, which provide a safety net along with equities for better returns.
Here are some additional reasons why fixed-income investments are a must-have in your portfolio:
- Helps build a recurring and passive income stream
- Better post-tax efficiency (especially for HNIs)
- Diversifies and balances the volatility of equities and other risky investments in a portfolio
- Ideal for deploying idle cash without overexposure to equities
And since every investor’s requirement is different, it’s important to match the right instrument to the right goal. So, let’s explore the best fixed-income options that fit each of these needs.
Best Fixed Income Investments in India for 2025
These are some attractive options related to fixed income investments worth exploring in India.
Corporate Bonds
Corporate bonds are debt instruments through which private and public companies borrow money from investors in exchange for interest payments. Each bond carries a credit rating that helps investors determine the creditworthiness of the company issuing the bond. Investment-grade bonds are rated from AAA to BBB-. They offer 8% to 15% annual yields, and experience very low default rates when compared to other junk bonds (those rated below BBB-).
Government Bonds
Government bonds are considered one of the safest investment options out there. Bonds such as treasury bills, inflation-indexed bonds, and others fall under the government bond category. Currently, the benchmark for government bonds, the 10-year yield of G-secs, is yielding around 6.5%.
Whereas short-term government bonds like T-bills are offering as follows:
- 91 days: 5.4%
- 182 days: 5.5%
- 364 days: 5.8%
All government bonds are typically AAA rated and offer lower returns when compared to corporate bonds.
Fixed Deposits (FDs)
Fixed deposits are one of the most popular fixed-income choices in India, standing the test of time. They offer guaranteed returns at predetermined rates, which typically range from 6.5% to 7.5%, depending on the bank and tenure.
Investors opting for FDs generally have two choices:
- Cumulative FDs: Interest gets reinvested and compounds till maturity
- Non-cumulative FDs: Interest is paid monthly, quarterly, or annually.
But, you can still lock in FD returns of up to 8.5% even if you aren’t a senior citizen, with deposits of up to ₹5 lakh insured under DIGCG, just like traditional FDs. Small finance banks typically offer higher rates to attract depositors, though they carry slightly higher risk than traditional banks.
Public Provident Fund (PPF)
PPF is a government-backed savings scheme designed for long-term wealth creation. It currently offers an annual rate of around 7.1%, compounded annually. With a lock-in period of 15 years and tax benefits under Section 80C, it is ideal for conservative investors seeking assured growth alongside tax savings.
National Savings Certificates (NSC)
The NSC is another minor savings instrument endorsed by the Indian government. It yields returns of 7.7% per year, compounded annually, but paid only at maturity. NSCs are ideal for people wanting predictable returns with little risk, as they have a 5-year lock-in period and are eligible for Section 80C tax deductions.
Debt Mutual Funds
Debt mutual funds invest in fixed-income instruments, such as bonds, treasury bills, and commercial papers. Depending on the type, whether it’s liquid, short-term, gilt funds, or credit risk funds. The returns may range from 6% to 8% annually. While not guaranteed, they provide liquidity, professional management, and a good balance between safety and moderate returns.
RBI Floating Rate Savings Bonds
RBI floating rate savings bond stands out because its interest rate resets every six months, currently paying about 8.05% per annum. The rate is linked to the NSC return plus a spread of 0.35%. With a lock-in of 7 years (reduced for senior citizens based on age), they offer a secure yet flexible option for long-term investors.
Senior Citizens’ Savings Scheme (SCSS)
SCSS is designed particularly for retirees and has one of the highest fixed income yields at 8.2% per year. It has a 5-year lock-in period that can be extended by three additional years, and it is eligible for Section 80C tax deductions. Interest is paid quarterly, offering a consistent income stream for seniors seeking security and dependability.
Remember, the market is constantly evolving, and new options emerge through government schemes as well. Always pay attention to the news before making any investment decisions. Even if the investments are stable, there is always room for more returns if we analyze well. With that said, let’s analyze all the fixed income options side-by-side to find your ideal fit.
Risks and Returns of Fixed Income Investments
Let’s examine the risk and return associated with these investments to make an informed decision.
| Investment Option | Expected Returns (p.a.) | Risk Level | Key Points |
| Investment-grade Corporate Bonds | 8% – 15% | Moderate | Higher returns than government bonds but carry credit and default risk |
| Government Bonds | 6.5% | Very Low | Highly secure; long maturity, may have interest rate risk if sold early |
| Fixed Deposits (FDs) | 6.5% – 7.5% | Very Low | Stable returns, but fully taxable (except for specific tax-saver FDs for the principal amount); inflation risk remains |
| Public Provident Fund (PPF) | 7.1% (compounded yearly) | Very Low | Sovereign-backed, 15-year lock-in, tax-free returns |
| National Savings Certificates (NSC) | 7.7% | Very Low | 5-year lock-in, interest taxable in the final year (interest for years 1-4 is deemed reinvested and eligible for 80C deduction) |
| Debt Mutual Funds | 7% – 9% (varies) | Moderate | Market-linked, subject to interest rate and credit risk; more liquid |
| RBI Floating Rate Bonds | 8.05% (reset every 6 months) | Low | Sovereign guarantee, no maximum limit, 7-year lock-in |
| Senior Citizens’ Savings Scheme (SCSS) | 8.2% | Very Low | For 60+ investors, 5-year lock-in, taxable but eligible for 80C |
Investing in the Right Fixed Income Investment in India
The best fixed-income investments to include in your portfolio depends on your individual financial goals and risk appetite. A commonly followed asset-allocation guideline suggests aligning your fixed-income exposure with your age. For instance, if you are 30, around 30 percent of your money could be in fixed income securities, leaving the rest for equities and growth-focused options. At 60, it’s advised to flip that ratio.
The idea of increasing fixed-income allocation with age reflects how your ability to handle risk changes over time. In your 20s and 30s, higher earnings potential and a longer investment horizon allow you to take more equity exposure. But in your 50s and 60s, capital preservation and steady income become more important than aggressive growth. That’s why many investors gradually shift a larger share of their portfolio into stable fixed-income instruments as they age.
However, you should note that this idea does not work for everyone as portfolio allocation requires you to consider multiple factors. Furthermore, rather than investing all of your capital in one debt security, a well-built portfolio should at least have exposure to 2 to 3 high quality debt securities.
Always remember, a well-balanced approach will ensure your portfolio stays both steady and rewarding in the years ahead.
