Bonds are fixed-income securities that help investors with portfolio diversification. It is a covenant between the investor and the issuer. The investor is paid interest for a specific time period until the maturity. At the end of the tenure, the investors receives their invested money back.
The bonds can be bought online as well as offline. If you wish to purchase online, you will need a DEMAT account where the bonds will be deposited. In an offline purchase, a certificate of holding is delivered to the registered address.
First, you will need to ensure the bond is over its lock-in period or make sure it does not have one. The bonds can be sold in the secondary market among investors before the date of maturity.
There are factors that determine the price of the bond at the time of sale, such as the interest rate in the market. If the interest is high, the market value of the bond will fall. Likewise, if the interest rate falls, the market value will be high.
A Demat account is not mandatory to purchase a sovereign bond. However, holding your securities in a Demat account makes selling easy. The investment market is growing as we speak, hence it is not possible to have a physical copy of all your investments and transactions. Therefore, Demat account prevents hassles and gives you a digital lay down of your investments in one place.
A Demat account is short for Dematerialized account. It is a trading account where all your investments are deposited. Since acquiring a physical copy every time you sell or purchase is not possible, a Demat account keeps track of all your activities as an investor. It converts securities from physical to digital form.
Managing a Demat account is a chargeable service. However, there are services like National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL) that offer a free Demat account.
In case you don’t have a Demat account, you can create one online before the purchase on In case you don’t have a Demat account, you can create one online before the purchase on www.bondsindia.com
An investor who lends money to an entity (corporate or government) and gets periodic interest is a bondholder. A bond is an agreement between investor and issuer that ensures the interest and principal is paid in timely fashion, as promised. Bonds are usually issued by governments, municipalities, and sovereign governments.
The maturity date is when the principal amount of the bond is due to be paid back to the investor. Until then, the interest is paid on the principal semi-annually and annually.
Face Value of the bond is nothing but the principal value of the bond. IT is the amount paid to the investor of the bond at the time of maturity. Sometime issuer can pay premium above the face value at the time of maturity.
The coupon rate is the interest percentage on the face value of the bond.
When the bond is traded for more than its par value, the bond is considered to be traded on par.
For example: The value of the premium is the difference between the price and the face value. If a security is trading at ₹102 with a face value of ₹100, the premium is ₹ 2.
When the bond price is below the par value, it is sold and traded at a discount price.
Interest or coupon payment is made on regular intervals. That is, annually or semi-annually.
An issuer of the bond is assigned with a credit rating based on their payment histories and assets, conducted by CRISIL, ICRA, etc, and more such independent credit rating agencies.
If the price of the yield increases, the bond price will go down. They are always inverse in nature.
When a company needs funds and wants to get listed on a stock exchange, they proffer IPO or initial public offering where they list their stocks and bonds for the first time in the primary stock market.
NCS is a short for non-convertible debentures. It is a debt instrument which earns an investor a regular source of income for a fixed period of time. When a company decides to raise long-term capital, it issues NCD.
NCD public issue is a corporate bond that a corporation issues, so they can raise money from a capital market. They are not similar to equity shares where shareholders have the ownerships of the company. They represent debt and are listed with BSE and NSE both.
A private company can issue Non-convertible debenture. They can issue secured and unsecured, both under the measures laid out by SEBI.
Any business who is in need of raising funds and meets the criteria:
Non-Convertible Debentures are usually of two types- Secured NCDs and unsecured NCDs. Secured NCDs are backed by assets while unsecured are not backed by company assets. Secured NCDs can be liquidated at the time of default, while unsecured cannot be reclaimed.
Not every company who rolls out NCDs will allow NRIs. It is on company’s discretion whether to let NRIs invest.
NCDs do not have a special provision for senior citizens, unfortunately.
Minimum investment amount in NCS is Rs.10,000.
Any Indian resident - individual or a company, public or private is eligible to enjoy the benefits of fixed deposits. You need not be a certain age or fall under an income bracket to pick fixed deposits as your investment stream.
There is no limit to how much you can invest in fixed deposits.
Some of the most interesting benefits of FDs are as follows:
The interest amount either gets incorporated with the fixed deposit periodically in case of reinvestment scheme and the fixed deposit gets credited in the savings account monthly or quarterly based on the scheme you choose.
Fixed deposits for senior citizens (people over the age of 60) have special benefits like higher rate of interest and earn monthly interest in the form of monthly income. Senior citizens can also start a fixed deposit with a partner who is not a senior citizen.
Premature withdrawal is possible nowadays with fixed deposits. An investor can either choose to withdraw the whole amount or partial amount depending on the urgency and earn interest on the amount they choose to keep in their savings account as fixed deposit. There will be a small penalty charged to you on the premature withdrawal.
If you choose to withdraw the entire amount completely, the bank or the financial institution pays you back the amount and the interest accumulated with lower rate of interest.
For individuals, the interest will not be deducted if the interest earned on fixed deposits is under 10,000 if the fixed deposit is held by a non-banking financial institution. If the Fixed deposit is with a bank, the threshold is 40,000 for senior citizens and 50,000 for non-senior citizens.
The TDS on fixed deposit interest is 20% for investors who don’t provide a credit card. For those with credit card it is 10%
Yes, the depositor can provide the name or names of nominees they want the funds to go to in case of the passing of the investor.
The TDS is deducted when the interest is credited to the account in case the interest exceeds the government specified limit of 10,000. Interest is applied on a quarterly basis for cumulative FDs and on a monthly basis of monthly interest payout FDs.
You can call 54EC Bonds, capital gains tax exemption Bonds. Investing in 54EC bonds enables investors to get exemptions from taxes under the section 54EC of the income tax act. If you have earned a long-term capital gains from a property that you have sold after a long time, you can invest in capital gains aka 54EC bonds.
Capital gain bonds are issued by the four public establishments such as REC, PFC, NHAI, and IRFC, whichever of these are instructed by the Government of India.
The people who can invest in 54EC bonds are:
Yes, as long as you are an Indian resident and within six months from the date of selling of property, you can invest in 54EC Bonds.
There are no other conditions to apply besides the fact that the bonds are locked for a period of five years. Hence, the investor should keep in mind the liquidity factor before investing.
54EC bonds are only available for those who have earned long-term capital gains on asset transfers. It is not for short-term capital gains. The property should be held with the owner for at least three years.
The lock-in period for 54EC bonds is five years. The bonds are non-transferrable and can only be redeemed after five years.
The bonds can be purchased on Stock exchange.
DEMAT account is not mandatory for 54EC bonds. A physical certificate will be issued to the investor if they don’t have or wish to open a DEMAT account.
Minimum investment is ₹10,000
The maximum investment to purchase 54EC bonds is ₹50,000,00. It means, 500 bonds.
The current interest rate for 54EC bonds is 5%.
54EC Bonds are rated by CRISIL and ICRA.
Yes, the interest rate on 54EC bonds are taxable.
The Bonds can be issued either in physical form or in your DEMAT account.
The interest on 54EC Bonds are paid annually.
Unfortunately, 54EC bonds or capital gain bonds are non-transferrable.
There will be no TDS deductions on 54EC Bonds.
The 54EC bonds will still remain exempted from taxation even after maturity.
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