Best Bonds to Invest in for Fixed Returns.
Best Bonds to Invest in for Fixed Returns.
Types of Bonds
Government Bonds
Issued by governments.
Corporate Bonds
Issued by companies.
Municipal Bonds
Issued by local governments.
Convertible Bonds
Can convert to stock.
High-Yield Bonds
Offer higher interest.
Zero-Coupon Bonds
No periodic interest payments.
Types of Bonds
Government Bonds
Issued by governments.
Corporate Bonds
Issued by companies.
Convertible Bonds
Can convert to stock.
Municipal Bonds
Issued by local governments.
High-Yield Bonds
Offer higher interest.
Zero-Coupon Bonds
No periodic interest payments.
Benefits of Bonds
Benefits of Bonds
Income Generation
Bonds offer predictable income via regular interest payments, appealing to income-focused investors, retirees and those valuing stable cash flow.
Capital Preservation
Bonds ensure capital preservation with the principal repaid at maturity, offering safety and security to investors seeking stability.
Diversification
Bonds offer diversification within an investment portfolio, balancing the risk of equity investments.
Risk Management
Bonds help manage risk in investment portfolios by providing stability and acting as a hedge against equity market downturns.
Liquidity
Bonds trade in liquid secondary markets facilitating easy buying and selling, thus providing investors with liquidity as needed.
Income Generation
Bonds offer predictable income via regular interest payments, appealing to income-focused investors, retirees and those valuing stable cash flow.
Capital Preservation
Bonds ensure capital preservation with the principal repaid at maturity, offering safety and security to investors seeking stability.
Diversification
Bonds offer diversification within an investment portfolio, balancing the risk of equity investments.
Risk Management
Bonds help manage risk in investment portfolios by providing stability and acting as a hedge against equity market downturns.
Liquidity
Bonds trade in liquid secondary markets facilitating easy buying and selling, thus providing investors with liquidity as needed.
Bond Structure at a Glance
- Issuer: The borrower, it could be a government or a company.
- Face Value: The amount of money the issuer promises to pay back when the bond matures.
- Coupon Rate: The interest rate the issuer promises to pay periodically to the bondholder.
- Maturity Date: The date when the issuer pays back the face value of the bond.
- Yield: The overall return on investment for the bondholder, considering both interest payments and any change in the bond's price.
Risks Associated with Bonds
- Interest Rate Risk
- Credit Risk
- Inflation Risk
- Call Risk
- Liquidity Risk
Investment Success Factors
Issuer Creditworthiness
Research and Due Diligence
Coupon Rate vs. Market Rate
Tax Implications
Credit Rating
Liquidity
Issuer Creditworthiness
Coupon Rate vs. Market Rate
Credit Rating
Research and Due Diligence
Tax Implications
Liquidity
Issuer Creditworthiness
Credit Rating
Tax Implications
Coupon Rate vs. Market Rate
Research and Due Diligence
Liquidity
Tax Guide for Investors
Interest Income
- For Resident Individuals, HUFs, and Resident Indian Corporates: Interest income from bonds is taxed according to the individual’s income tax slab rates, added to their total income and taxed accordingly.
- For Non-Resident Individuals and Foreign Corporates: Interest income from bonds is subject to Tax Deducted at Source (TDS), with rates varying based on bond type and provisions of Double Taxation Avoidance Agreements (DTAA) between India and the investor’s country.
Capital Gains
Always treated as Short -term Capital gain and taxable at slab rates (Full consideration received- Cost of Acquisition)
Capital Gains
- Taxation of Capital Gains on Sale of Bonds: Capital gains from bond sales are categorized as short-term or long-term based on holding periods.
- Short-term Capital Gains (STCG): Bonds held up to 36 months (24 months for listed bonds) are subject to short-term capital gains tax at applicable income tax slab rates.
- Long-term Capital Gains (LTCG): Bonds held over 36 months (24 months for listed bonds) are taxed at 10% without indexation or 20% with indexation for listed bonds and 20% with indexation for unlisted bonds.
Tax-Saving Bonds
- Taxation of Interest Income from Tax-Saving Bonds: Interest income from specific tax-saving bonds may qualify for deductions under Section 80CCF of the Income Tax Act subject to prescribed limits and conditions.
Tax Deducted at Source (TDS)
TDS on Interest Income: Financial institutions may deduct TDS on bond interest income usually at a rate of 10% subject to variation based on bond type and investor tax status.
Bonds Offerings
