7 Debt Investment Options Which Give Decent Returns in India – 2022

The matters of money, especially investments are characteristically risky.

You put in money either in equity or debt instruments, hoping to earn significant returns. However, there is always a probability of  losing your principal amount.

Last year, the 10-year returns on India’s Nifty 50 index was just 9%.  In-depth analysis showed that an investor who made a fixed deposit (FD) at the start of the decade would have gained a similar pre-tax return as he/she would have made after investing in equity markets. Low-tax paying investors could only gain marginal returns from equities. 

Debt instruments refer to money lent out to companies as against equity instruments, which means you own some stake in the company.

Equity instruments include shares or stocks of a listed company that present a unit in the company’s ownership. It makes an investor a part-owner of the company.

Equity markets are risk-prone as returns are not guaranteed. Investors who want to invest in a non-volatile, fixed income instrument avenue should not opt for equity investments. 

In comparison, debt is borrowed capital that businesses use for growth. Debt instruments pay interest and the principal amount at the time of maturity. But you can attain interest monthly or quarterly as well.

Companies and governments often issue bonds for raising capital. Bonds investment may or may not be risk-free. Debt instruments are ideal for investors looking for safer options. Because when a company defaults, debt-investors are repaid on priority as compared to equity investors. 

 7 Debt Investment Options With Good Returns

Investment OptionIncomeNature of ReturnsRisk
Covered BondsFixed Income, TaxableHigh ReturnsHigh Risk
Debt Mutual FundVariable Income, TaxableModerate – high returnsModerate
Fixed DepositFixed Income, TaxableLowLow
Sukanya Samriddhi YojanaFixed Income, TaxableModerate – high returnsLow
PPFFixed Income, Non-taxableLowModerate
Treasury BillsFixed IncomeLowLow
Certificate of DepositFixed IncomeLowModerate

1. Covered Bonds

Risk: High 

Covered bonds are fixed-income debt securities that are now available for independent investors in India.

As of now, the bond investment platform to offer covered bonds is Wint Wealth. They are a new-league debt investment option,  which is carving a mark with investors. 

When an investor puts their money in a covered bond, the money is secured against a two-layer security blanket. Even if the company defaults, investors, get the promised returns via the underlying collateral.

However, like all other instruments, this instrument also has certain risks involved.

2. Debt Mutual Funds

Risk: Moderate
Returns: Moderate – high returns

A debt mutual fund basically invests in a culmination of corporate bonds, government bonds and other debt securities. Since this is a mutual fund, some portion may or may not be invested in equities and cash. However, majority is invested in debt securities.

The returns from debt funds are not very volatile, as compared to equity mutual funds and stocks, however, they can vary depending on the market.  

3. Fixed Deposits

Risk: Low

A fixed deposit is the preferred investment choice for most Indians. And though there are several investment options in the market, the FD still wins the buck.

A fixed deposit is an investment avenue offered by banks and Non-Banking Finance Companies (NBFCs).

Investors invest a set amount for a set time to earn a fixed interest rate. Investors can also opt for a regular interest payout option. However, returns from fixed deposits are taxable. Unless, you invest in a tax-saving fixed deposit scheme. 

4. Sukanya Samriddhi Yojana

Risk: Low
Returns: Moderate – high returns


Sukanya Samriddhi Yojana is a debt investment instrument that offers fixed returns. The scheme aims to support the needs of a girl child financially.

Investors can invest a minimum of INR 250 and a maximum of INR 1.5 lakhs in the system. The scheme allows withdrawals for higher education of the account holder to meet their child’s educational expenses.

It can be closed in case of marriage after the age of 18 years. This scheme falls under Section 80 ‘C’ of the Income Tax Act which means it is exempted from tax upto Rs. 1,50,000.

5. Public Provident Fund

Risk: Low

PPF is a debt instrument with fixed returns.

The interest amount on PPF is calculated monthly on the lowest balance between the close of the fifth day and the last day of every month, i.e. for interest calculation.

Thus, only the amount deposited into the account before the 5th of every month is considered. Investors must deposit between the 1st and 5th of the month to maximise their returns from PPF. Since the central government pays interest on PPF, it is a low risk option.

PPF also falls under Section 80 ‘C’ of the Income Tax Act and therefore attains tax exemption upto Rs. 1,50,000. However, it must be noted that PPF has a lock-in period of 15 years, hence it is not a liquid scheme. 

6. Treasury Bills

Risk: Low

Treasury bills are an investment instrument with relatively less risk, as these are are issued by the Government of India. They are not very popular in India, however, they are slowly gaining a little more traction. 

The bills bearing interest for the investor are offered for a short term, usually upto one year. The minimum amount to be invested is INR 25000 and can be increased in multiples of INR 25000.

Three types of bills of 91 days, 182 days, and 364 days are offered through auctions. 

7. Certificate of Deposit

Risk: Low

Commercial banks and some financial institutions are authorised to issue certificate of deposits. CDs have a fixed interest rate and a fixed term of investment. 

Minimum amount to be invested is INR 1 lakh for a given period which accrues interest as per prevailing rates. Once the interest rate is determined, the fluctuations have no bearing on these deposits ensuring guaranteed returns. However, premature withdrawal of funds attracts a penalty. 


These 7 investment avenues show that there are more options in India, along with fixed deposits and savings account. Today, there are relatively safe investment options that can give decent returns and also diversify your portfolio.

However, it is important to understand the avenue you are investing in before you allocate your money.

Happy Winting!  

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