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Bonds are certificate of debts which are either issued by governments or organizations to raise funds. The certificates are usually interest bearing and they are more like loans where common men and women are lenders.
In India there are different types of bonds such as government securities, corporate bonds, commercial bonds, treasury bills, strips to name a few. Some bonds in India have fixed interest rates while others have floating interest rates. When we say fixed interest rates, the interest rates remain the same until the maturity period of the bond. Floating interest rates refer to interest rates that keep changing as the market interest rate changes.
In India, to be eligible to buy a bond, one has to be either an individual or a member of a Hindu Undivided Family. An individual can own a bond himself, as jointer owner with others, or for a minor as a legal guardian.
Types Of Bonds In India:
Some of the more popular bonds in India are as follows:
- 8 percent Savings Bond
The term of maturity of this bond is 6 years from the date of issue. The interest rate is 8 percent per annum
which is paid to the bond holder half yearly. The interest payment is taxable and once the bond matures, no interest accrues.
- Tax Saving Bonds
Infrastructure bonds are tax saving bonds and individuals can invest up to Rs 100,000 per year for a minimum period of 3 years.
- Capital Gains Bonds
These types of bonds are issued by large corporations and organizations. Gains made from sale of capital assets can be invested in these types of bonds within 6 months of the sale in order not to pay capital gains tax.
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