Fixed Income Investments

Non-Convertible Debentures (NCDs) are fixed-income instruments that cannot be converted into equity shares of the issuing company. They offer a fixed rate of interest and are redeemed at face value upon maturity. NCDs are typically issued by companies to raise medium to long-term capital.

Credit ratings indicate the issuer’s ability to meet financial obligations. Higher-rated bonds (AAA, AA) have lower default risk but typically offer lower interest rates. Lower-rated bonds carry higher risk but offer higher returns as compensation. Investors should choose bonds based on their risk tolerance and investment goals.

Secured bonds are backed by specific assets of the issuer that can be claimed by bondholders if the issuer defaults. Unsecured bonds (debentures) are not backed by any collateral and rely solely on the issuer’s creditworthiness. Secured bonds generally offer lower interest rates due to their lower risk profile compared to unsecured bonds.

Interest income from bonds is taxable as “Income from Other Sources” at the investor’s applicable income tax slab rate. Tax Deducted at Source (TDS) is applicable at 10% if the interest exceeds ₹5,000 in a financial year. Some bonds like tax-free bonds issued by government entities offer tax exemption on interest income under Section 10(15) of the Income Tax Act.

Yes, most listed bonds can be sold in the secondary market before maturity. However, liquidity may vary, and you might sell at a premium or discount to the face value depending on prevailing interest rates and the issuer’s credit profile. Some bonds have lock-in periods during which they cannot be sold. Always check the bond’s terms before investing.