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Listed bonds refer to the bonds that are issued by corporations and are listed on one or more stock exchanges in India. A bond issuer that issues bonds listed on a stock exchange must adhere to the SEBI standards mandated by the regulatory authority. The pertinent legislation pertaining to bonds are the SEBI (Issue and Listing of Non-Convertible Securities) legislation, 2021 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Non-compliant bonds may incur penalties from the regulator.

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All You Need to Know About Listed Bonds

Who Issues Listed Bonds?

Municipalities, public sector undertakings (PSUs), and the government are all able to sell bonds. Government bonds are backed by a Sovereign credit grade.

Benefits of Listed Bonds

Listed bonds have several benefits, as discussed below:

  • In terms of liquidity, listed bonds are better than unregistered bonds because they are easier to trade for one another.
  • They are easy to buy and sell as they are listed on stock exchanges like NSE and BSE.
  • Even the chances of default reduce as SEBI regulates listed bonds, while unlisted bonds are not.

How to Calculate Yields of Listed Bonds?

A yield is a number that shows the returns of any bond. Many times, it is referred to as Yield to Maturity (YTM). You receive interest payments based on the coupon rate. You can calculate the YTM using the below formula:

YTM = [Annual Interest + {(FV - Price) / Maturity}]/[(FV+Price)/2]

Where, YTM = Yield to Maturity Annual Interest = Coupon payment that you receive annually.

FV = Face Value Price = Current Market Price of the Bond Maturity = Number of years left till maturity

Let’s take an example to understand it better. Assume you invest in a bond having the following characteristicsLet’s take an example to understand it better. Assume you invest in a bond having the following characteristics:

Particulars Values
Face Value ₹1,000
Annual Coupon Rate 7%
Annual Interest Payout ₹70
Time to Maturity 5 Years
Current Market Value of the Bond ₹850

So, if we plug in all the values in the above formula, the YTM for the bond in the example works out to be 10.8%:

YTM = [70 + {(1000-850)/5}] / [(1000+850)/2]

However, if we change the bond's current market value to ₹1,100, then the YTM works out to be 4.8%. From this, we can understand the relationship between YTM and bond prices. As and when YTM increases, bond prices decrease and vice versa. Nevertheless, many individuals frequently conflate YTM with coupons. A coupon refers to a fixed rate that is applied to the face value of a bond at the time of purchase. On the other hand, the Yield to Maturity (YTM) is the current market rate of the bond, indicating the annualized return that an investor can expect to earn.

How Are Listed Bonds Taxed?

Bonds that are listed on the market are subject to the same tax treatment as other types of debt securities, with the exception of tax-saving bonds. The interest earned by investors on the listed bonds is subject to taxation based on their individual tax brackets.

If the bond is sold before its maturity, any profits resulting from the selling of the bond would be categorized as capital gains. Regarding listed bonds, if the duration of holding exceeds 12 months, any profits resulting from the sale of these bonds would be classified as long-term capital gains. Likewise, if the duration of holding a listed bond is 12 months or less, any profits obtained from selling those bonds would be classified as short-term capital gains.

For Short-Term Capital Gains (STCG), the profits are included in the investor's income and subject to taxation based on their individual tax brackets. Regarding long-term capital gains (LTCG), a tax rate of 10% is applied without the inclusion of indexation benefits, in addition to any applicable surcharge.

Starting April 1, 2023, the issuer will deduct 10% of the interest payment as tax at source (TDS).

Who Should Invest in Listed Bonds?

Individuals seeking higher risk and potential higher returns than fixed deposits may consider investing in listed bonds. Furthermore, individuals who are concerned about the integrity of their investments have the option to invest in listed bonds, which are regulated by SEBI. Alternatively, if you seek greater profits than those offered by listed bonds, you may engage in trading unlisted bonds.

Know About ISIN (International Securities Identification Number)

The ISIN (International Securities Identification Number) provided by the Bonds Directory is an essential element of the financial industry. An ISIN is an exclusive code allocated to every security, such as bonds, that allows for effortless identification and monitoring in the worldwide market. The Bonds Directory ISIN in India is crucial for optimizing the trading and settlement procedures of bonds, providing a uniform approach for referencing these financial instruments. This directory not only promotes efficient trading but also improves openness and accountability in the financial sector. The directory guarantees the accessibility and verification of crucial information, such as issuer details, maturity dates, and coupon rates, by giving a unique ISIN to each bond. This contributes to the overall integrity and efficiency of the Indian bond market.

FAQs about Listed Bonds

Listed bonds are those that are listed on exchanges such as NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) that help companies to raise capital from the public.
Yes, listed bonds are taxable where the gains made in the short-term are added to income and are taxed as per individual tax slab. In the case of long-term gains, they are taxed at 10% without indexation. Moreover, 10% of TDS (Tax Deducted at Source) applies.
Investors can invest directly via NSE in T-Bills (Treasury Bills) and Government of India dated bonds. You can do so by registering on the NSE go BID platform.
You can buy secured bonds in India through your Demat account with a BondsIndia secure broker.
TDS applies to RBI bonds if the interest amount goes beyond ₹10,000 in a given financial year.

Disclaimer: The facts and information on this page are for information and awareness purposes only. No information provided here is intended towards any specific user and should not be construed as investment advice or a recommendation of any kind whatsoever. You are requested to consult with your professional investment advisor or tax advisor for specific directions on any investments in any securities including the bonds mentioned on this page before making any investment decision. Wint Wealth shall not be liable for any losses incurred by you based on an investment decision utilizing the information on this page.


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