Fixed Deposits

These Bonds help in saving Capital Gains tax applicable on the gains from sale of property (held for more than 3 years). Under Section 54 EC of Income Tax, 1961 an investor need not pay any tax on any long-term capital gains arising on sale of any asset, if the capital gain amount is invested in these Bonds within 6 months from the date of sale of the Asset.

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

Key Features

• AAA rated.
• Interest is taxable although no TDS is deducted.
• Lock-in of 3 years and non- transferable.
• Minimum investment-1 Bond amounting to ` 10,000/- and maximum investment-500 Bonds amounting to ` 50 lakhs in a financial year.
• Rate of Interest 5.25% p.a. payable annually.
• Bonds can be held in Demat /Physical Form.
• Facility of Payment of Interest and Redemption through NECS.
• The Bonds will automatically redeem after expiry of three years.

Capital Gains Bond Forms Form 15 G | Form 15 H

The 8% Government of India Savings (taxable) bonds, 2003 is a bond issued by the Reserve Bank of India (RBI) commencing April 21, 2003. The bonds are available for purchase by individuals on tap i.e. you can buy them as and when required. As the name indicates, the rate of interest offered on the bond is 8% per annum. Interest is taxable in the hands of the investor.

Key Features

• The bonds are open to investment by individuals (including joint holdings) and Hindu undivided families/ charitable institutions/universities. There is no investment ceiling on these bonds by these investors. However, non resident Indians (NRIs) are not eligible to invest in these bonds.
• The bonds will be issued at par and for a minimum amount of Rs.1,000 (face value) and in multiples thereof.
• The bonds will have a maturity of six years, carrying an interest at 8% per annum. Interest on non-cumulative bonds will be payable at half-yearly intervals. Interest on cumulative bonds will be compounded with half-yearly rests and will be payable on maturity along with the principal. The cumulative value of Rs.1,000 at the end of six years will be Rs.1,601.

GOI Bond Application Form

Non-convertible debentures are simply regular debentures, cannot be converted into equity shares of the liable company. They are debentures without the convertibility feature attached to them. As a result, they usually carry higher interest rates than their convertible counterparts.

NCDs offers high returns with moderate risk while giving you the flexibility of choosing between short and long tenures.

An NCD can be both secured as well as unsecured. For secured debentures, which are backed by assets, in case the issuer is not able to fulfil its obligation, the assets are liquidated to repay the investors holding the debentures.

Secured NCDs offer lower interest rates compared with unsecured ones. If you want a regular income from NCDs, you can pick those that pay interest on a monthly, quarterly or annual basis. If you just want to grow your wealth, you can opt for cumulative option where the interest earned is reinvested and paid at maturity.

Companies seeking to raise money through NCDs have to get their issue rated by agencies such as CRISIL, ICRA, CARE and Fitch Ratings. NCDs with higher ratings are safer as this means the issuer has the ability to service its debt on time and carries lower default risk.

Tax free bonds have emerged as highly popular investment option among investors due to the taxation benefit that they offer. These bonds, generally issued by Government backed entities, are exempt from taxation on the interest income received from such instruments under the Income Tax Act, 1961. Some of the public undertakings which raise funds through issue of tax free bonds are IRFC, PFC, NHAI, HUDCO, REC, NTPC, NHPC, Indian Renewable Energy Development Agency (IREDA) etc.