A bond can be defined as a debt investment, wherein money is loaned by an investor to a corporate or government entity, which borrows the funds for a specified time-frame at a variable or fixed interest rate. Companies, Municipalities, States and Sovereign Governments use the bond route to raise money and finance several projects and activities. Bond owners are debt holders or creditors of the issuer.

Capital Gain Bonds

As per provisions of Income Tax Act, 1961, any long term capital gains arising from transfer of any capital asset would be exempt from tax under section 54EC of the Act if:

  • The entire capital gain realized is invested within 6 months of the date of transfer in eligible bonds
  • Such investment is held for 3 years
  • To avail of capital gain exemption, the bonds so acquired cannot be transferred or converted into money or any loan or advance can be taken on security of such bond within 3 years from date of acquisition else, the benefit would be withdrawn
  • If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax.
  • The eligible bonds under Section 54 EC are RECL (Rural Electrification Corporation Ltd) and NHAI (National Highways Authority of India).
  • The maximum investment limit amount is Rs. 50 Lakhs.
  • The block period for the investment of these two companies is 3 years.
  • 100% risk free investment

Capital Gain be saved Under Sec 54EC or Sec 54F, if the land or property sold is non-agriculture. We deal in such bonds which qualify for Sec 54EC Bonds.

  • Tax can be saved under Section 54 EC by investing in bonds
  • Tax can be saved under Section 54 F by investment in New residential house

Rural Electrification Corporation Limited (REC) & National Highways Authority of India (NHAI) are permitted to issue capital gains bonds under Section 54 EC.

NHAI Capital Gain Bonds Series XII

The National Highways Authority of India(NHAI) is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental there to.

 

GOI Bonds

An investment avenue in which an investor loans money to an entity (government or corporate) that borrows funds for a defined period of time at a fixed interest rate. Bond market has not attracted retail investors to it. But in recent times, lackluster equity markets and low rate of interest have attracted retail investors towards bonds issued by corporate.

Advantage: the rate of interest is high. 
Disadvantage: no security, interest earned is taxable. So before investing in bonds do check the credibility of the company offering the bond and past record of the company.

8% RBI bonds

Bonds as issued by the Reserve Bank Of India (RBI). The rate of interest offered is 8 per cent, payable half yearly with cumulative and non-cumulative option available. Tenure is six years.

Advantages: safety, guaranteed return. 
Disadvantage: interest is taxable.

Government securities

Retail investors have not tapped this investment avenue as much as others. It is good for investors looking for reasonable returns with no risk of default as the securities the Government offers these securities. These securities can be held in a demat format. The market is limited so liquidity can be a problem. Investors need to have a thorough knowledge of this investment format to invest in them. Well, then if you are the one who prefer the comforts of safety to the greed of high returns all the above debt instruments are yours to invest in.

The 8% Government of India Savings (taxable) bonds, 2003 is a bond issued by the Reserve Bank of India (RBI) commencing April 21, 2003.

Since bonds are issued on behalf of the Government of India, it is the safest investment any investor can look for. However, interest on the bonds is taxable and it has a lock in of six years, which makes the bond less favourable over other investment options.

Perpetual Bonds

A perpetual bond is a financial instrument with no maturity date. For the issuer of these bonds, these become quasi equity, something that they need not repay as there is no maturity date.

The investor or the bond holder will get a fixed interest every year. Since the bonds have no maturity, the investor has to exit through secondary debt market in case of need.

When most people think about fixed deposits, the first thing that comes to their mind is approaching a bank to open a fixed deposit. However, that is not the only place where you can open fixed deposits. Many finance houses also offer investors the facility to open fixed deposits that offer interest rates that can be higher than what most banks offer.

The deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest is called Company Fixed Deposit.

These deposits are unsecured, i.e. if the company defaults, the investor cannot sell the collateral to recover his capital, thus making them a risky investment option.

We offer a range of Corporate Fixed Deposits varying in tenures, interest rates & institutions to suit your investment needs. The deposit schemes have been specially chosen from high-safety options to ensure that you enjoy the twin benefits of returns and protection.

Corporate Fixed Deposits are best suited for investors who want to earn fixed returns on their investments. Our rich menu of AAA and AA rated fixed deposits of varying tenures provide stability to your portfolio amid volatile markets.

Benefits of investing in Company Fixed Deposits:

  • High interest.
  • Short-term deposits.
  • Lock-in period is only 6 months.
  • No Income Tax is deducted at source if the interest income is up to Rs. 5,000 in one financial year.
  • Investment can be spread in more than one company, so that interest from one company does not exceed Rs. 5,000.
Corporate FDs
DEWAN HOUSING FINANCE ASHRAY DEPOSIT CUMULATIVE 8.45 % 3 years 0 month
BAJAJ FINANCE LTD. FIXED DEPOSIT CUMULATIVE 8.40 % 3 years 0 month
BAJAJ FINANCE LTD. FIXED DEPOSIT CUMULATIVE 8.15 % 2 years 0 month
DEWAN HOUSING FINANCE ASHRAY DEPOSIT CUMULATIVE 8.00 % 2 years 0 month
DEWAN HOUSING FINANCE ASHRAY DEPOSIT CUMULATIVE 7.70 % 1 year 0 month
BAJAJ FINANCE LTD. FIXED DEPOSIT CUMULATIVE 7.60 % 1 year 0 month

FMPs, are the equivalent of a fixed deposit in a bank, with a little difference. The FMPs returns are only indicated and not ‘guaranteed’, since the fund house knows the interest rate that it will earn on its investments, it can provide ‘indicative returns’ to investors. FMPs are debt schemes, where the corpus is invested in fixed-income securities.
FMPs are investment options for sure if you want to park your money for short term. They are more tax efficient and give better post-tax returns. Though returns are not 100% guaranteed, they are almost risk free

A debenture is a document that either creates a debt or acknowledges it, and it is without collateral. In corporate finance, this term is used for medium to long-term debt instrument used by large companies to borrow money. In some countries, the term is used interchangeably with bond, loan stock or note.

Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.

Recurring Deposits
POST OFFICE RECURRING DEPOSIT SCHEME 71,023 /- 6.90 % 5 YEARS
Issuer Department of Posts
Institution GOVT / GOVT BACKED
Min Application Amount INR. 10/- and in multiples of INR. 5/- thereafter
Max Application Amount No limit.
Tax Treatment of Income Taxable returns, no tax deduction at source
Tax Benefit on Investment Not Applicable
Withdrawal Partial withdrawal facility available
Effective Annual Interest Rate 7.12 %
Specifications
  • Any individual (a single adult or two adults jointly) can open an account.
  • Advance Deposits earn rebate.
  • Four defaults are allowed.
  • Defaults can be paid within two months.
  • Premature closure allowed after three years.
  • Pay Roll Savings Scheme is also available for employees of various Establishments.
Pros Guaranteed returns
Cons Taxable returns
MIP
POST OFFICE MONTHLY INCOME SCHEME 589 /- 7.30 % 5 YEARS
Issuer Department of Posts
Institution GOVT / GOVT BACKED
Min Application Amount Rs.1500/-
Max Application Amount Rs. 4.50 lakhs in a single account and Rs.9 lakhs in a joint account.
Tax Treatment of Income Taxable returns, no tax deduction at source
Tax Benefit on Investment N.A.
Withdrawal Available with penalty
Effective Annual Interest Rate 7.55 %
Specifications
  • No Bonus admissible on maturity in the accounts opened on or after 1st Dec 2011.
  • The maturity Period of Monthly Income Accounts to be opened on or after 1st Dec 2011 shall be 5 years.
  • Premature encashment facility after one year.
  • Account can be opened by an individual, two/three adults jointly, and a minor through a guardian.
  • A minor having attained 10 years of age can open an account in his/her own name directly.
  • Non-Resident Indian / HUF cannot open an Account. Minors have a separate limit of investment of Rs.3 lakhs and the same is not clubbed with the limit of guardian.
  • A separate account is opened for each deposit.
  • Any number of accounts can be opened subject to the maximum prescribed limit.
  • Facility of automatic credit of monthly interest to saving account if accounts are at the same post office.
  • Facility of premature closure of account after 1 year to 3 years @ 2.00% discount.
  • Facility of reinvestment on maturity of an account.
  • Interest not withdrawn does not carry any interest.
  • Maturity proceeds not drawn are eligible to earn savings account interest rate for a maximum period of two years.
  • Account is transferable to any Post Office in India, free of cost.
  • Nomination facility is available.
  • Rebate under section 80 C is not admissible.
Pros Most suitable scheme for senior citizens and for those who need regular monthly income.
Cons Deduction of 1% if account is closed prematurely at any time after three years.
NSC
NATIONAL SAVINGS CERTIFICATES VIII 145,202 /- 7.60 % 5 YEARS
Issuer Department of Post
Institution GOVT / GOVT BACKED
Min Application Amount 100
Max Application Amount No maximum limit for investment
Tax Treatment of Income Taxable returns
Tax Benefit on Investment Tax benefit available under section 80C of Income Tax Act
Withdrawal Not Available
Effective Annual Interest Rate 7.74 %
Specifications
  • Certificates can be kept as collateral security to get loan from banks.
  • Investment up to INR 1,00,000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act.
Pros Returns are higher than prevailing bank FDs, tax benefit also available
Cons taxable returns, lockin period
Senior Citizen
SENIOR CITIZEN SAVINGS SCHEME 2,087 /- 8.10 % 5 YEARS
Issuer Department of Posts
Institution GOVT / GOVT BACKED
Min Application Amount 1,000/-
Max Application Amount 15,00,000/-
Tax Treatment of Income Taxable returns, no tax deduction at source
Tax Benefit on Investment Amount invested upto one lac qualifies for tax benefit under section 80C of Income Tax Act
Withdrawal No withdrawal permitted before the expiry of a period of five years from the date of opening of the account.
Effective Annual Interest Rate 8.35 %
Specifications
  • A new avenue of investment and return for Senior Citizen.
  • The account may be opened by an individual, Who has attained age of 60 years or above on the date of opening of the account. Who has attained the age 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement.
  • No age limit for the retired personnel of Defence services provided they fulfill other specified conditions.
  • The account may be opened in individual capacity or jointly with spouse.
  • Non-resident Indians (NRIs) and Hindu Undivided Family (HUF) are not eligible to open an account.
  • The depositor may extend the account for a further period of 3 years.
Pros Guaranteed income for senior citizens/retired people
Cons Taxable returns, Partial withdrawal not allowed
Term Deposit
POST OFFICE TIME DEPOSIT ACCOUNT 144,285 /- 7.40 % 5 YEARS
PERIOD RATE OF INTEREST EFFECTIVE ANNUAL INTEREST RATE MATURITY VALUE
1 YEAR 6.60 % 6.77 % 106,765 /-
2 YEARS 6.70 % 6.87 % 114,212 /-
3 YEARS 6.90 % 7.08 % 122,781 /-
5 YEARS 7.40 % 7.61 % 144,285 /-
Issuer Department of Posts
Institution GOVT / GOVT BACKED
Min Application Amount INR.200/- and in multiples of INR. 200/- thereafter
Max Application Amount No limit.
Tax Treatment of Income Interest is taxable
Tax Benefit on Investment Tax benefit under section 80C available for 5 year term deposit
Withdrawal Available
Effective Annual Interest Rate 7.61 %
Specifications
  • Any individual (a single adult or two adults jointly) can open an account.
  • Group Accounts, Institutional Accounts and Misc. account not permissible.
  • Trust, Regimental Fund or Welfare Fund not permissible to invest.
  • 1 Year, 2 Year, 3 Year and 5 Year Time Deposit can be opened.
  • In case of premature closure of 1 year, 2 Year, 3 Year or 5 Year account on or after 01.12.2011, if the deposit is withdrawn after 6 months but before the expiry of one year from the date of deposit, simple interest at the rate applicable to from time to time to post office savings account shall be payable.
  • In case of premature closure of 2 year, 3 year or 5 year account on or after 01.12.2011, if the deposit is withdrawn after the expiry of one year from the date of deposit, interest on such deposits shall be calculated at the rate, which shall be one per cent less than the rate specified for a period of deposit of 1 year, 2 year or 3 years as mentioned in the concerned table given under Rule 7 of Post office Time Deposit Rules.
  • Rate of interest – 8.20%, 8.20%, 8.30%, 8.40% compounded quarterly for 1,2,3 & 5 years TD account respectively.
  • The investment in the case of 5 years TD qualify for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.
Pros Guaranteed returns
Cons Returns are taxable, Not suitable for investors in high tax bracket
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