Bonds

A bond is a debt security, in which the authorised issuer – company, financial institution, or Government, offers regular or fixed payment of interest in return for the money borrowed by the said issuer. It is for a certain period of time. We offer a wide range of Bonds including Capital Gain Bonds (54EC), NCDs, RBI Bonds, Bonds by Government Companies, etc.

Primary Market & Secondary Market

Primary market transaction refers to where a bond is directly issued to the buyer from the issuer while in the Secondary market a buyer may purchase from an existing holder of a bond who is willing to sell. In the secondary market, we offer tradable NCDs and Tax-free bonds.

Capital Gain Bonds

These are bonds in which the profit arising from the sale of a property or any financial asset or any other capital gain from any asset can be invested. These bonds have a lock-in period of 5 years and one can invest in these bonds up to a maximum amount of Rs. 50 lakhs. Currently, these bonds are being issued by NHAI (National Highway Authority of India), REC (Rural Electrification Corporation Limited) Power Finance Corporation, and some more which are approved by GOI from time to time.

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GOI Floating Rate Savings Bonds, 2020 (Taxable)

Floating Rate Savings Bonds, 2020 (Taxable) are RBI Bonds, Sovereign guaranteed by the Government of India. RBI Bonds are bonds backed by the Government of India. These bonds are issued to raise funds to finance long term lending, economic develop, etc of the country. These bonds are non transferable and cannot be sold before maturity. These bonds are similar in all terms as their previous counterpart GOI (Taxable) Savings Bonds except that they now have a floating rate attached to them are only available as non-cumulative bonds with interest payable half-yearly.

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Non Convertible Debentures (NCD)

NCDs or Non-Convertible Debentures is the debt paper (debenture) that is issued by a company that wants to raise funds from the public for a specific period of time by paying fixed interest. They are secured against the assets of the issuing company by way of creating mortgages on the assets. NCDs cannot be converted into shares and on maturity, the principal amount along with the interest earned is credited to the investor Issuance of NCDs by companies are regulated by RBI under Issuance of Non-Convertible Debentures (Reserve Bank) Directions 2010, whereby it is mandatory of the companies to be rated by credit rating agencies and NCDs can only be issued if the companies have a minimum P-2 rating by CRISIL or equivalent rating by other agencies. However, it is advisable to purchase NCDs of companies with higher risk ratings like AAA, AA+, AA- and AA.

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Tax-Free Bonds

These bonds are mostly issued by the government and pay a fixed coupon rate (interest rate). They have a long-term maturity of 10, 15, or 20 years. Tax-Free Bonds are listed on the stock exchange and therefore can be traded freely (if held in dematerialized form). While the interest earned from these bonds is tax-free, any gain from the sale of these bonds on the stock market is taxable. Short-term capital gain is taxed at normal rates, however, the long-term capital gains are taxed at 10% without indexation and 20% with indexation, whichever is lower, as per Union Budget 2016.

For current offers in Primary and Secondary Markets, please contact our team.

 

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