A bond is a type of security under which the issuer owes the holder a debt, and is obliged – depending on the terms – to repay the principal of the bond at the maturity date as well as interest over a specified amount of time. Interest is usually payable at fixed intervals.
Different types
of Bonds to choose from
Zero coupon bonds, also known as discount bonds, do not pay any interest to the bondholders. Instead, you get a large discount on the face value of the bond. On maturity, the bondholder receives the face value of his investment.
Government Security (G-Sec) is a trade able instrument issued by the Central Government or the State Governments. It acknowledges the Government's debt obligation.
A corporate bond is a type of debt security that is issued by a firm and sold to investors. The company gets the capital it needs and in return the investor.
SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of Government of India.
Tax-free bonds are issued by a government enterprise to raise funds for a particular purpose. One example of these bonds is the municipal bonds issued by municipal corporations. They offer a fixed interest rate and rarely default, hence are a low-risk investment avenue.
Capital gain bonds or 54EC bonds are the fixed income instruments that provide capital gains tax exemption under section 54EC to the investors. The tax liability on long-term capital gains from sale of immovable property can be reduced by purchasing 54EC bonds.
A source of raising funds for governmental projects and plans, RBI Bonds are far safer than any other source of investment since they are issued by the Reserve Bank of India on the behalf of the Government of India.