Are debt funds as safe as they are made out to be? Also do debt funds also deduct TDS?
Yes debt funds are one of the safest investment options. Debt funds invest in government bonds and secure financial instruments offering secure returns just as bank fixed deposits offer a protection amount of Rs. 1 Lakhs for investments made. Also there is no tax deduction at source (TDS) on the gains made on investments in debt funds
Even though debt Mutual Funds are not considered to be as safe as bank Fixed Deposits, they are safer than some other fixed income investments such as Non-Convertible Debentures (NCD) and company deposits. Debt Mutual Funds are rated by rating agencies and you can use those ratings to choose the right fund. Read this blog post for more information - https://blog.bankbazaar.com/why-debt-mutual-funds-are-better-than-fixed-deposits/. If you are a resident Indian, there will be no Tax Deducted at Source (TDS) when you sell your debt Mutual Fund. However, a Non-Resident India, will have to pay TDS when debt Mutual Funds are redeemed.