What are Corporate Bond Funds
Corporate bond funds are open-ended debt mutual funds, which invest primarily in highly rated corporate bonds. As per SEBI guidelines, corporate bond funds have to invest at least 80% of their total assets in corporate bonds rated AA+ and above.
Why Invest in Corporate Bond Funds
- Lower credit risk due to exposure to highest-rated corporate bonds
- Top-rated corporate bonds offer higher yields than government bonds with same maturity profiles
- Have lower interest rate risk than long and medium term bond funds
- Usually generates higher returns than fixed deposits
Table of Best Corporate Bond Funds (Regular Plans)
| Fund Name | Returns (%) | |||
| 1 year | 3 year | 5 year | 10 year | |
| Baroda BNP Paribas Corporate Bond Fund | 8.44 | 7.94 | 5.46 | 6.05 |
| ICICI Prudential Corporate Bond Fund | 8.03 | 7.88 | 6.42 | 7.50 |
| Nippon India Corporate Bond Fund | 7.85 | 7.85 | 6.50 | 7.24 |
| Aditya Birla Sun Life Corporate Bond Fund | 7.37 | 7.77 | 6.27 | 7.65 |
| HDFC Corporate Bond Fund | 7.37 | 7.73 | 6.08 | 7.59 |
| Franklin India Corporate Debt Fund | 8.97 | 7.73 | 5.98 | 7.24 |
| Kotak Corporate Bond Fund | 7.88 | 7.69 | 6.08 | 7.33 |
| Axis Corporate Bond Fund | 8.01 | 7.63 | 6.04 | – |
| UTI Corporate Bond Fund | 7.83 | 7.57 | 5.88 | – |
| HSBC Corporate Bond Fund | 8.01 | 7.52 | 5.74 | 7.27 |
Data as on December 9, 2025
Risks of Investing in Corporate Bond Funds
- Portfolios with longer maturities may increase the interest rate risk during rising interest rate regime
- Exposure of up to 20% in bonds and other debt securities rated below the highest credit ratings might adversely impact returns during credit events
Taxation of Corporate Bond Funds held by Individual Investors
For investments made before April 1, 2023: LTCG tax @ 12.5% will apply on the capital gains. However, the LTCG component will not be eligible for claiming rebate under Section 87A of the Income Tax (IT) Act.
For investments made on April 1, 2023 & after: Capital gains realised would be taxed as per the tax slab of the investor but can be used for claiming rebate under Section 87A of the IT Act.
Explore Investment Options:
| Bonds | Types of Bonds | Bonds vs FD |
| Corporate Bonds | Tax Free Bonds | Capital Gain Bonds |
| Government Bonds | Zero Coupon Bonds | Floating Rate Bonds |
Who should invest in Corporate Bond Funds
- Investors seeking to benefit from highest rated corporate bonds with investment horizons of 1-4 years
- Those seeking higher returns with lower volatility
- Those seeking higher rate of returns than government bonds with lower interest rate risk
You may be interested in:
Best Floater Funds
Top Ultra Short Duration Bond Fund
Top Dynamic Bond Funds